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x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2015
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-36149
(Exact name of registrant as specified in its charter)
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Delaware | 46-5188282 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
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1166 Avenue of the Americas New York, New York 10036 |
(212) 826-1100 | |
(Address of principal executive offices) | Registrants Telephone Number |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Name of each exchange on which registered | |
Units, each consisting of one share of Common Stock, $0.0001 par value, and one Warrant to purchase Common Stock |
Nasdaq Capital Market | |
Common Stock, $0.0001 par value | Nasdaq Capital Market | |
Warrants to Purchase Common Stock | Nasdaq Capital Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15 of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrants knowledge, in any amendment to this form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) |
Accelerated filer x | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
As of June 30, 2015 (last business day of the registrants most recently completed second fiscal quarter), the aggregate market value of the common stock held by non-affiliates of the Company (without admitting that any person whose shares are not included in such calculation is an affiliate) was approximately $494,735,250 based on its last reported sales price of $10.41 on NASDAQ Stock Market LLC.
As of January 12, 2016 there were 62,531,250 shares of Companys common stock, par value $0.0001 per share, issued and outstanding.
Portions of the registrants Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders have been incorporated by reference into Part III of this report.
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References to the Company, our, us or we refer to WL Ross Holding Corp., a blank check company incorporated in Delaware on March 24, 2014. References to our Sponsor refer to WL Ross Sponsor LLC, an affiliate of Mr. Wilbur L. Ross, Jr., our Chairman and Chief Executive Officer. References to WL Ross refers to WL Ross & Co. LLC, an affiliate of our Sponsor. References to our IPO refer to the initial public offering of WL Ross Holding Corp.
This Annual Report contains statements that are forward-looking and as such are not historical facts. This includes, without limitation, statements under Managements Discussion and Analysis of Financial Condition and Results of Operations regarding our financial position, business strategy and the plans and objectives of management for future operations. These statements constitute projections, forecasts and forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of performance. They involve known and unknown risks, uncertainties, assumptions and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these statements. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Annual Report, words such as anticipate, believe, estimate, expect, intend, should, strive, plan, intend, estimate, anticipate, and similar expressions identify forward-looking statements. When we discuss our strategies or plans, we are making projections, forecasts or forward-looking statements. Such statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results and stockholders value will be affected by a variety of risks and factors, including, without limitation, international, national and local economic conditions, merger, acquisition and business combination risks, financing risks, geo-political risks, acts of terror or war, and those risk factors described under Item 1A Risk Factors. Many of the risks and factors that will determine these results and stockholder values are beyond our ability to control or predict.
All such forward-looking statements speak only as of the date of this Annual Report. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this Special Note Regarding Forward-Looking Statements section.
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ITEM 1. | BUSINESS |
We are a blank check development stage company organized under the laws of the State of Delaware on March 24, 2014. We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or assets (a Business Combination). We have reviewed, and continue to review, a number of opportunities to enter into a Business Combination with an operating business. Accordingly, we are not able to conclusively determine at this time whether we will complete a Business Combination with any of the target companies that we have reviewed or with whose management we have had discussions, or with any other target company, or the likelihood thereof. We also have neither engaged in any operations nor generated any revenue to date. Based on our business activities, we are a shell company as defined under the Exchange Act because we have no operations and nominal assets consisting solely of cash and/or cash equivalents.
On March 24, 2014, our Sponsor, WL Ross Sponsor LLC, a Delaware limited liability company, purchased an aggregate of 14,375,000 founder shares (Founder Shares), for an aggregate purchase price of $25,000 or approximately $0.002 per share.
Our registration statement on Form S-1 (File No. 333-195854) was declared effective on June 5, 2014 and on June 11, 2014 we consummated our IPO of 50,025,000 units (the Public Units) of the Company, including 6,525,000 Units issued pursuant to the full exercise of the underwriters over-allotment option. Each such unit (Unit) consists of one share of common stock of the Company, par value $0.0001 per share (Common Stock), and one warrant of the Company (Warrant), whereby each Warrant entitles the holder thereof to purchase one-half of a share of Common Stock at an exercise price of $5.75 per half share of Common Stock. The Public Units were sold at a price of $10.00 per share, generating gross proceeds to us of $500,250,000. Immediately prior to the pricing of our IPO, on June 5, 2014, our Sponsor forfeited 1,868,750 Founder Shares so that the remaining Founder Shares represent 20.0% of the outstanding shares upon completion of our IPO.
Simultaneously with the commencement of our IPO on June 5, 2014, we completed the private sale of 22,400,000 warrants (the Private Placement Warrants) at a purchase price of $0.50 per Private Placement Warrant, to our Sponsor, generating gross proceeds to us of $11,200,000. The Private Placement Warrants are identical to the warrants sold as part of the Public Units in our IPO, except that our Sponsor has agreed not to transfer, assign or sell any of the Private Placement Warrants (except to certain permitted transferees) until 30 days after the completion of our initial Business Combination. The Private Placement Warrants are also not redeemable by us so long as they are held by our Sponsor or its permitted transferees.
A total of $500,250,000, comprised of approximately $489,050,000 of the proceeds from our IPO, including approximately $18,309,150 of the underwriters deferred discount, and the proceeds of the sale of the Private Placement Warrants were placed in a trust account (the Trust Account) maintained by Continental Stock Transfer & Trust Company, acting as trustee. These funds will not be released until the earlier of our completion of our initial Business Combination or our liquidation, although we may withdraw the interest earned on the funds held in our Trust Account to pay franchise and income taxes.
On August 4, 2014, we announced that the holders of our Units may elect to separately trade the Common Stock and warrants included in the Units commencing on August 5, 2014 on the Nasdaq Capital Market under the symbols WLRH and WLRHW, respectively. Each Unit consists of one share of Common Stock, $0.0001 par value per share, and one warrant to purchase one-half of one share of Common Stock. Those Units not separated will continue to trade on the Nasdaq Capital Market under the symbol WLRHU.
On March 26, 2015, we issued a convertible promissory note (the Convertible Note) to our Sponsor that provides for our Sponsor to loan us up to $300,000 for ongoing expenses. The Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of our Sponsor, any amounts outstanding under the Convertible Note may be converted into warrants to purchase shares of Common Stock at a conversion price of $0.60 per warrant. Each warrant will entitle our Sponsor to purchase one-half of one share of Common Stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants. On
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April 16, 2015, we borrowed the total proceeds of $300,000 from the Convertible Note entered with our Sponsor. As of December 31, 2015, the outstanding balance of the Convertible Note was $310,644.
On January 5, 2016, we issued another convertible promissory note (the Second Convertible Note) to our Sponsor that provides for our Sponsor to loan us up to $425,000 for ongoing expenses. The Second Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of our Sponsor, any amounts outstanding under the Second Convertible Note may be converted into warrants to purchase shares of Common Stock at a conversion price of $0.50 per warrant. Each warrant will entitle our Sponsor to purchase one-half of one share of Common Stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants. On January 5, 2016, we borrowed the total proceeds of $425,000 from the Second Convertible Note entered with our Sponsor.
While we may pursue an acquisition opportunity in any business industry or sector, we intend to capitalize on the ability of our management team to identify, acquire and operate a business that is experiencing underperformance or distress, operating in an industry undergoing a period of dislocation, as members of our management did in the banking and auto industries and/or is involved in a structurally complex or special situation, which we call value-oriented investment opportunities.
Our acquisition and value creation strategy will be to identify, acquire and, after an initial Business Combination, to build a company in an industry that complements the experience and expertise of our management team and is undergoing either distress or a certain degree of dislocation. Our acquisition selection process will leverage our teams network of industry, private equity sponsor and lending community relationships, as well as relationships with management teams of public and private companies, investment bankers, restructuring advisers, attorneys and accountants that we believe should provide us with a number of Business Combination opportunities.
In addition, we intend to utilize the networks and industry experience of Mr. Wilbur L. Ross, Jr., the Founder, Chairman and Chief Strategy Officer of WL Ross, and other members of the WL Ross management team in seeking an initial Business Combination. Over the course of their careers, the members of our management team and our Board of Directors (our Board) have developed a broad network of contacts and corporate relationships that we believe will serve as a useful source of investment opportunities. This network has been developed through our management teams:
| combined history of over 70 years in the private equity and restructuring advisory business; |
| experience in sourcing, structuring, acquiring, operating, developing, growing, financing and selling businesses; |
| relationships with sellers, financing providers and target management teams; and |
| experience in executing transactions under varying economic and financial market conditions. |
This network provides our management team with a robust and consistent flow of investment opportunities. We believe that the network of contacts and relationships of our management team will provide us with an important source of investment opportunities. In addition, we anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment market participants, private equity groups, investment banking firms, consultants, accounting firms and large business enterprises. Members of our management team will communicate with their networks of relationships to articulate the parameters for our search for a target company and a potential Business Combination.
Consistent with this strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses, including value-oriented investment opportunities. We will use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into an initial Business Combination with a target business that does not meet these criteria and guidelines. We intend to seek to acquire companies that we believe:
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| Are Well Positioned within Industries Undergoing a Period of Dislocation. Whole industries or sub-segments within industries routinely undergo periods of dislocation, often due to non-recurring macro-economic forces or disturbances, and our management team has a track record of contrarian investing in such industries and sectors, including banking institutions, basic building materials, financial services, metals and mining and transportation. We believe that the perceived risks inherent in these investment opportunities are often greater than the actual risks, and we believe that we are able to analyze and estimate the size of the actual risks through our diligence process. Within dislocated industries, we intend to target companies that have leading market shares, low-cost operations relative to peers or the ability to attain low-cost operations, defensible competitive characteristics or high barriers to entry, entrenched positions with customers and high potential returns on net assets where our capital and sponsorship can assist companies during periods of dislocation. |
| Offer Opportunities to Create Investment Platforms for Consolidation or Growth. Our management team has an aggregate of over 70 years of experience creating platform investments and often consolidating meaningful portions of large industries. Mr. Ross and our management team have previously applied this investment strategy, creating horizontally and vertically integrated platforms, in industries such as steel, coal, automotive component parts and marine transportation. We intend to capitalize on their history of analyzing global macro-economic trends and industry-wide investment themes in the context of potentially creating investment platforms for consolidation or growth. |
| Have Significant Situational or Structural Complexity, which Allows for Attractive Entry Point Valuations. We believe that our management team has expertise undertaking complex transactions and providing flexible, long-term capital solutions, which often enable us to distinguish ourselves from other financial buyers. We believe that situational or structural complexity often hides compelling value that competitors may lack the time, inclination or ability to uncover. Our management team has historically capitalized on such investment situations, which have often taken the form of business, regulatory or legal complexity. We believe that successful private equity investing in complex special situations requires investment structuring expertise, which Mr. Ross and our management team have developed through their experience investing in approximately 158 portfolio companies. We intend to leverage the operational experience and financial acumen of our management team and the investment team of WL Ross to identify structurally complex opportunities where we believe we have the ability to unlock value for the benefit of our stockholders. |
| Are Underperforming Their Potential Peak Operational and/or Financial Performance Capabilities. Companies underperform operationally and financially for various reasons, including due to cost mismanagement, weak relationships with organized labor groups, poorly strategized market positioning, capital investment misallocation, capital structure inefficiencies and ineffective management teams. We believe that given our management teams experience with value-oriented investing, we are well-positioned to identify investment situations where additional capital investment, effective sponsorship, board of directors supervision and, often, a new management team, will potentially result in improvements in operational and/or financial performance. |
| Offer a Value Proposition that is Not Recognized by the Market. Our management team and the investment professionals of WL Ross typically conduct substantial due diligence with respect to potential acquisition targets, with a goal to uncover value that is unrecognized by the market and would allow us to invest in companies and buy assets at prices that we believe to be below intrinsic value. Our due diligence process typically involves an in-depth analysis of the targets industry, including competitive positioning and barriers to entry; a strategic, operational and technical review; an analysis of downside protection and alternative channels through which we can realize value; a detailed historical and projected financial review focusing on revenue potential and earnings margins, which is done in concert with a stress test of projected financials; and, often, a quality of earnings review; capital structure analysis; and an evaluation of a companys management team and their financial incentives. |
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These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial Business Combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant.
The NASDAQ rules require that an initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in our Trust Account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of our signing a definitive agreement in connection with an initial Business Combination. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of the Financial Industry Regulatory Authority, or FINRA, with respect to the satisfaction of such criteria. We do not intend to purchase multiple businesses in unrelated industries in conjunction with an initial Business Combination.
We anticipate structuring an initial Business Combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure an initial Business Combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or shareholders or for other reasons, but we will only complete such Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the Business Combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the Business Combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to an initial Business Combination could own less than a majority of our outstanding shares subsequent to an initial Business Combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If the Business Combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses.
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In evaluating any prospective target business, we expect to conduct a thorough due diligence review which will encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial, operational, legal and other information which will be made available to us. We will also utilize our operational and capital planning experience. The chart below summarizes the origination, investment management and value creation strategy that Mr. Ross, our Chairman and Chief Executive Officer, has developed for WL Ross, an affiliate of our Sponsor, and which we would seek to replicate as components of our investment process.
Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to another entity pursuant to which such officer or director is required to present a Business Combination opportunity to such entity. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular Business Combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to an initial Business Combination. Accordingly, if any of our officers or directors becomes aware of a Business Combination opportunity which is suitable for an entity to which he or she has then current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such Business Combination opportunity to such entity, and only present it to us if such entity rejects the opportunity. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our Business Combination. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
Our Sponsor, executive officers and directors have agreed, pursuant to written agreements with us, except as set forth in the next sentence, not to participate in the formation of, or become an officer or director of, any other blank check company until we have entered into a definitive agreement regarding an initial Business Combination or we have failed to complete an initial Business Combination within 24 months after the closing of our IPO (June 11, 2016). None of our officers or directors has been involved with any blank check companies or special purpose acquisition corporations in the past, other than NBNK Investments PLC, a blank
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check company publicly traded on the AIM in the United Kingdom focusing on the financial services sector in the United Kingdom with an aggregate amount of assets of approximately £20 million.
We believe our management teams significant operating and transaction experience and relationships with companies will provide us with a substantial number of potential Business Combination targets. Over the course of their careers, the members of our management team have developed a broad network of contacts and corporate relationships around the world. This network has grown through the activities of our management team sourcing, acquiring, financing and selling businesses, our management teams relationships with sellers, financing sources and target management teams and the experience of our management team in executing transactions under varying economic and financial market conditions.
In addition, members of our management team have developed contacts from serving on the boards of directors of several companies, including Air Lease Corporation; Amalgamated Bank; Arcelor Mittal; Assured Guaranty; BankUnited Inc. (NYSE: BKU); Bank of Cyprus Public Co Ltd.; Compaigne Europeene des Wagons; DSS Holdings GP Limited; DSS Holdings LP; EXCO Resources, Inc. (NYSE: XCO); Governor and Company of the Bank of Ireland (ISE: BKIR); The Greenbrier Companies, Inc. (NYSE: GMX); Insuratex; International Automotive Components Group; International Coal Group; International Textile Group; Montpelier Re Holdings Ltd.; Nautical Bulk Holding Limited; Navigator Holdings Ltd. (NYSE: NVGS); NBNK Investments PLC (AIM: NBNK); OCM, Ltd.; Ocwen Financial Corp. (NYSE: OCN); Ohizumi Manufacturing Co., Ltd.; PB Materials Holdings, Inc.; Plascar Industria de Componentes Plasticos LTDA.; Sun Bancorp (NASDAQ: SNBC); and Talmer Bancorp (NASDAQ: TLMR).
This network provides our management team with a robust and consistent flow of investment opportunities which are proprietary or where a limited group of investors were invited to participate in the sale process. We believe that the network of contacts and relationships of our management team will provide us with important sources of investment opportunities. In addition, we anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment market participants, private equity funds and large business enterprises seeking to divest non-core assets or divisions.
We are not prohibited from pursuing an initial Business Combination with a company that is affiliated with our Sponsor, executive officers or directors, or making the acquisition through a joint venture or other form of shared ownership with our Sponsor, executive officers or directors. In the event we seek to complete an initial Business Combination with a target that is affiliated with our Sponsor, executive officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking or accounting firm that is a member of FINRA that such an initial Business Combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
As more fully discussed in the section entitled Business Conflicts of Interest, below, if any of our executive officers becomes aware of a Business Combination opportunity that falls within the line of business of any entity to which he or she has pre-existing fiduciary or contractual obligations, he or she may be required to present such Business Combination opportunity to such entity prior to presenting such Business Combination opportunity to us. All of our executive officers currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
We believe our structure will make us an attractive Business Combination partner to target businesses. As an existing public company, we offer a target business an alternative to the traditional initial public offering through a merger or other Business Combination. In this situation, the owners of the target business would exchange their shares of stock in the target business for shares of our stock or for a combination of shares of our stock and cash, allowing us to tailor the consideration to the specific needs of the sellers. Although there are various costs and obligations associated with being a public company, we believe target businesses will find this method a more certain and cost effective method to becoming a public company than the typical initial public offering. In a typical initial public offering, there are additional expenses incurred in marketing, road show and public reporting efforts that may not be present to the same extent in connection with a Business Combination with us.
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Furthermore, once a proposed Business Combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters ability to complete the offering, as well as general market conditions, which could prevent the offering from occurring. Once public, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with stockholders interests. It can offer further benefits by augmenting a companys profile among potential new customers and vendors and aid in attracting talented employees.
We are an emerging growth company, as defined in the JOBS Act. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of Common Stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
With funds available for a Business Combination in the amount of $482,338,647 as of December 31, 2015, assuming no redemptions and after payment of up to $18,309,150 of deferred underwriting fees, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt ratio. Because we are able to complete our Business Combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can be no assurance it will be available to us.
We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time. We intend to effectuate an initial Business Combination using cash from the proceeds of our IPO and the sale of the Private Placement Warrants, our capital stock, debt or a combination of these as the consideration to be paid in an initial Business Combination. We may seek to complete an 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 an initial Business Combination is paid for using stock or debt securities, or not all of the funds released from our Trust Account are used for payment of the consideration in connection with our Business Combination or used for redemptions of purchases of Common Stock, we may apply the balance of the cash released to us from our Trust Account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing an initial Business Combination, to fund the purchase of other companies or for working capital.
We have reviewed, and continue to review, a number of opportunities to enter into a Business Combination with an operating business. Accordingly, we are not able to conclusively determine at this time whether we will complete a Business Combination with any of the target companies that we have reviewed or with whose management we have had discussions, or with any other target company, or the likelihood thereof. We anticipate that additional target business candidates will be brought to our attention from various unaffiliated sources, including investment bankers, venture capital funds, private equity funds, leveraged buyout funds, management buyout funds and other members of the financial community. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read our prospectus and know what types of businesses we are targeting. Members of our management team, including Mr. Ross, are employed by WL Ross. WL Ross is continuously made aware of potential business opportunities, one or more of which we may desire to pursue, for a Business Combination. While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any formal basis, we may
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engage these firms or other individuals in the future, in which event we may pay a finders fee, consulting fee or other compensation to be determined in an arms length negotiation based on the terms of the transaction. In no event, however, will our Sponsor, our officers or directors or 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 closing of an initial Business Combination other than the reimbursement of any out-of-pocket expenses or the repayment of loans that we may receive from time to time to fund our working capital needs.
We may seek to raise additional funds through a private offering of debt or equity securities in order to fund our working capital needs or in connection with the completion of an initial Business Combination, and we may effectuate an initial Business Combination using the proceeds of such offering rather than using the amounts held in our Trust Account.
Prior to our IPO, we had granted our Sponsor the option to purchase, simultaneously with the consummation of an initial Business Combination, up to an additional 10,000,000 shares of Common Stock at a price of $10.00 per share. The proceeds of the sale of such shares will not be deposited into our Trust Account, the shares will not be eligible for redemption from our Trust Account nor will they be eligible to vote upon the initial Business Combination. Our Sponsor may assign this option to one or more of its affiliated investment funds to satisfy their co-investment rights in an initial Business Combination. Subject to compliance with applicable securities laws, we would complete such financing only simultaneously with the completion of our Business Combination.
In the case of an initial Business Combination funded with assets other than our 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 or applicable stock exchange rules, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately or through loans in connection with an initial Business Combination. At this time, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities or otherwise in connection with an initial Business Combination.
The NASDAQ rules require that an initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in our Trust Account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of our signing a definitive agreement in connection with an initial Business Combination. The fair market value of the target or targets will be determined by our Board based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation or value of comparable businesses. If our Board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from independent investment banking firm that is a member of FINRA, with respect to the satisfaction of such criteria. We do not intend to purchase multiple businesses in unrelated industries in conjunction with an initial Business Combination. Subject to this requirement, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate an initial Business Combination with another blank check company or a similar company with nominal operations.
In any case, we will only complete an initial Business Combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be valued for purposes of the 80% of net assets test.
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To the extent we effect our 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 a thorough due diligence review which will encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial, operational, legal 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 an 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 our 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.
For an indefinite period of time after the completion of an initial Business Combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete Business Combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. If we complete our Business Combination with only a single entity, our lack of diversification may:
| subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after an initial Business Combination, and |
| cause us to depend on the marketing and sale of a single product or limited number of products or services. |
Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our Business Combination with that business, our assessment of the target business management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. While it is possible that one or more of our directors will remain associated in some capacity with us following our Business Combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our Business Combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of an initial Business Combination. Following a Business Combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.
We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the Securities and Exchange Commission (the SEC). However, we will seek stockholder approval if it is required by law or applicable stock exchange rule, or we may decide to seek stockholder approval for business or other legal reasons. Presented in the table below is a graphic explanation of the types of initial Business Combinations we may consider and whether stockholder approval is currently required under Delaware law for each type of transaction.
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Type of Transaction | Whether Stockholder Approval is Required |
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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 |
Under NASDAQs listing rules, stockholder approval would be required for an initial Business Combination if, for example:
| we issue Common Stock that will be equal to or in excess of 20% of the number of shares of Common Stock then outstanding (other than in a public offering); |
| any of our directors, officers or substantial shareholders (as defined by NASDAQ rules) has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the target business or assets to be acquired or otherwise and the present or potential issuance of Common Stock could result in an increase in outstanding Common Stock or voting power of 5% or more; or |
| the issuance or potential issuance of Common Stock will result in our undergoing a change of control. |
In the event we seek stockholder approval of our Business Combination and we do not conduct redemptions in connection with our Business Combination pursuant to the tender offer rules, our Sponsor, directors, officers, advisors or their respective affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of an initial Business Combination. However, they have no current commitments, plans or intentions to engage in any such transactions and they will not make any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act of 1934 (the Exchange Act). Such a purchase may 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. None of the funds in our Trust Account will be used to purchase shares in such transactions. We have adopted an insider trading policy which requires insiders to: (i) refrain from purchasing shares during certain blackout periods and when they are in possession of any material non-public information and (ii) to clear all trades with our legal counsel prior to execution. We cannot currently determine whether our insiders will make such purchases pursuant to a Rule 10b5-1 plan, as it will be dependent upon several factors, including but not limited to, the timing and size of such purchases. Depending on such circumstances, our insiders may either make such purchases pursuant to a Rule 10b5-1 plan or determine that such a plan is not necessary.
In the event that our Sponsor, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will be required to comply with such rules.
The purpose of such purchases would be to (i) vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval of the Business Combination or (ii) to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our Business Combination, where it appears that such requirement would otherwise not be met. This may result in the completion of our Business Combination that may not otherwise have been possible.
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In addition, if such purchases are made, the public float of Common Stock may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our Sponsor, officers, directors and/or their affiliates anticipate that they may identify the stockholders with whom our Sponsor, officers, directors or their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with an initial Business Combination. To the extent that our Sponsor, officers, directors, advisors or their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of our Trust Account or vote against the Business Combination. Our Sponsor, officers, directors, advisors or their affiliates will only purchase shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.
Any purchases by our Sponsor, officers, directors and/or their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our Sponsor, officers, directors and/or their affiliates will not make purchases of Common Stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act.
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Common Stock upon the completion of an initial Business Combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in our Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in our Trust Account as of December 31, 2015 is approximately $10.00 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. Our Sponsor has entered into a letter agreement with us, pursuant to which it has agreed to waive its redemption rights with respect to its Founder Shares and any public shares it may hold in connection with the completion of our Business Combination.
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Common Stock upon the completion of an initial Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed Business Combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under the law or stock exchange listing requirement. Asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding Common Stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by law or stock exchange listing requirement or we choose to seek stockholder approval for business or other legal reasons.
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
| conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and |
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| file tender offer documents with the SEC prior to completing an initial Business Combination which 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. |
Upon the public announcement of our Business Combination, we or our Sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of Common Stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act. At this time, no such plan currently exists.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete an initial Business Combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares which are not purchased by our Sponsor, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SECs penny stock rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to an initial Business Combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial Business Combination.
If, however, stockholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
| conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and |
| file proxy materials with the SEC. |
In the event that we seek stockholder approval of an initial Business Combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the initial Business Combination.
If we seek stockholder approval, we will complete an initial Business Combination only if a majority of the outstanding shares of Common Stock voted are voted in favor of the Business Combination. In such case, our Sponsor has agreed to vote its Founder Shares and any public shares purchased during or after our IPO in favor of an initial Business Combination. Each public stockholder may elect to redeem their public shares irrespective of whether they vote for or against the proposed transaction. In addition, our Sponsor has entered into a letter agreement with us, pursuant to which it has agreed to waive its redemption rights with respect to its Founder Shares and public shares in connection with the completion of a Business Combination.
Our amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SECs penny stock rules). Redemptions of our public shares may also be subject to a higher net tangible asset test or cash requirement pursuant to an agreement relating to an initial Business Combination. For example, the proposed Business Combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed Business Combination. In the event the aggregate cash consideration we would be required to pay for all shares of Common Stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed Business Combination exceed the aggregate amount of cash available to us, we will not complete the Business Combination or redeem any shares, and all shares of Common Stock submitted for redemption will be returned to the holders thereof.
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Notwithstanding the foregoing, if we seek stockholder approval of an initial Business Combination and we do not conduct redemptions in connection with our Business Combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), is restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in our IPO, which we refer to as the Excess Shares. We believe this restriction discourages stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed Business Combination 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 15% of the shares sold in our IPO could threaten to exercise its redemption rights if such holders shares are not purchased by us or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders ability to redeem no more than 15% of the shares sold in our IPO, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our Business Combination, particularly in connection with a Business Combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders ability to vote all of their shares (including Excess Shares) for or against our Business Combination.
We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in street name, to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents or proxy materials mailed to such holders, or up to two business days prior to the vote on the proposal to approve the Business Combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically using Depository Trust Companys DWAC (Deposit/Withdrawal At Custodian) System, at the holders option. The tender offer or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with an initial Business Combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements. Accordingly, a public stockholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two days prior to the vote on the Business Combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker $35.00 and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
The foregoing is different from the procedures used by many blank check companies. In order to perfect redemption rights in connection with their Business Combinations, many blank check companies would distribute proxy materials for the stockholders vote on an initial Business Combination, and a holder could simply vote against a proposed Business Combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the Business Combination was approved, we would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had an option window after the completion of the Business Combination during which he or she could monitor the price of our stock in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to us for cancellation. As a result, the redemption rights, to which stockholders were aware they needed to commit before the stockholder meeting, would become option rights surviving past the completion of the Business Combination until the redeeming holder delivered its certificate. The
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requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holders election to redeem is irrevocable once the Business Combination is approved.
Any request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the tender offer materials or the date of the stockholder meeting set forth in our proxy materials, as applicable. Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our Business Combination.
If an 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 our Trust Account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares. If our initial proposed Business Combination is not completed, we may continue to try to complete a Business Combination with a different target until 24 months from the closing of our IPO (June 11, 2016).
Our Sponsor, executive officers and directors have agreed, and our amended and restated certificate of incorporation provides, that we will have only 24 months from the closing of our IPO (June 11, 2016) to complete an initial Business Combination. If we are unable to complete our Business Combination within such 24-month period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in our Trust Account, including interest (which interest shall be net of taxes payable, and less up to $50,000 of interest to pay dissolution expenses) divided by the number of then outstanding public shares, 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 (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our Business Combination within the 24-month time period.
Our Sponsor has entered into a letter agreement with us, pursuant to which it has waived its rights to liquidating distributions from our Trust Account with respect to its Founder Shares if we fail to complete an initial Business Combination within 24 months from the closing of our IPO (June 11, 2016). However, if our Sponsor acquires public shares in or after our IPO, it will be entitled to liquidating distributions from our Trust Account with respect to such public shares if we fail to complete an initial Business Combination within the allotted 24-month time period.
Our Sponsor, executive officers and directors have agreed, pursuant to written agreements with us, that they will not propose any amendment to our amended and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete an initial Business Combination within 24 months from the closing of our IPO (June 11, 2016), unless we provide our public stockholders with the opportunity to redeem their shares of Common Stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in our Trust Account, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SECs penny stock rules).
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $10,000 of proceeds held outside our Trust Account as of December 31, 2015, although we cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued
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in our Trust Account not required to pay taxes, we may request the trustee to release to us an additional amount of up to $50,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds from our IPO and issuance of Private Placements, other than the proceeds deposited in our Trust Account, and without taking into account interest, if any, earned on our Trust Account, the per-share redemption amount received by stockholders upon our dissolution would be approximately $10.00 as of December 31, 2015. The proceeds deposited in our Trust Account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual per-share redemption amount received by stockholders will not be substantially less than $10.00. Under Section 281(b) of the Delaware General Corporation Law (the DGCL), our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors claims.
Although we have and will continue to seek to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in our Trust Account for the benefit of our public stockholders, there is no guarantee that they have or will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against our 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 our Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in our Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third partys engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against our Trust Account for any reason. In order to protect the amounts held in our Trust Account, our Sponsor has agreed that it 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 amount of funds in our Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in our Trust Account as of the date of the liquidation of our Trust Account, due to reductions in value of the trust assets other than due to the failure to obtain such waiver, in each case net of the amount of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to our Trust Account and except as to any claims under our indemnity of the underwriters of our IPO 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, then our Sponsor will not be responsible to the extent of any liability for such third-party claims. We cannot assure you, however, that our Sponsor would be able to satisfy those obligations. None of our other officers will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in our Trust Account are reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in our Trust Account as of the date of the liquidation of our Trust Account, due to reductions in value of the trust assets other than due to the failure to obtain such waiver, in each case net of the amount of interest which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take
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legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so in any particular instance. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be substantially less than $10.00 per share.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our Business Combination within 24 months from the completion of our IPO (June 11, 2016) may be considered a liquidation distribution under Delaware law. If we comply with certain procedures set forth in Section 280 of the DGCL intended to ensure that we make reasonable provision for all claims against us, including a 60-day notice period during which any third-party claims can be brought against us, a 90-day period during which we may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to our stockholders, any liability of our stockholders with respect to a liquidating distribution is limited to the lesser of our stockholders pro rata share of the claim or the amount distributed to our stockholders, and any liability of our stockholders would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our Business Combination within 24 months from our IPO, is not considered a liquidation distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidation distribution. If we are unable to complete our Business Combination within 24 months from our IPO, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in our Trust Account, including interest (net of the amount of interest which may be withdrawn to pay taxes and less up to $50,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, 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 (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following our 24th month and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we have and will continue to seek to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in our Trust Account.
As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to our Trust Account is remote. Further, our Sponsor may be liable only to the extent necessary to ensure that the amounts in our Trust Account are not reduced below (i) $10.00 per public share or (ii) such lesser amount per public share held in our Trust Account as of the date of the liquidation of our Trust Account, due to reductions in value of the trust assets other than due to the failure to obtain such waiver, in each case net of the amount of interest withdrawn to
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pay taxes and less any per-share amounts distributed from our Trust Account to our public stockholders in the event we are unable to complete our Business Combination within 24 months from the completion of our IPO (June 11, 2016) and will not be liable as to any claims under our indemnity of the underwriters of our IPO 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, our Sponsor will not be responsible to the extent of any liability for such third-party claims.
If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in our 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 our Trust Account, we cannot assure you we will be able to return $10.00 per share to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a preferential transfer or a fraudulent conveyance. As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. Furthermore, 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 our 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 our Trust Account only in the event of the redemption of our public shares if we do not complete our Business Combination within 24 months from the completion of our IPO (June 11, 2016) or if they redeem their respective shares for cash upon the completion of the initial Business Combination. In no other circumstances will a stockholder have any right or interest of any kind to or in our Trust Account. In the event we seek stockholder approval in connection with an initial Business Combination, a stockholder voting in connection with the Business Combination alone will not result in such stockholder redeeming its shares for an applicable pro rata share of our Trust Account. Such stockholder must have also exercised its redemption rights described above.
Our amended and restated certificate of incorporation contains certain requirements and restrictions relating to our IPO that will apply to us until the consummation of an initial Business Combination. If we seek to amend any provisions of our amended and restated certificate of incorporation relating to stockholders rights or pre-Business Combination activity, we will provide dissenting public stockholders with the opportunity to redeem their public shares in connection with any such vote. Our Sponsor has agreed to waive any redemption rights with respect to its Founder Shares and public shares in connection with the completion of an initial Business Combination. Specifically, our amended and restated certificate of incorporation provides, among other things, that:
| prior to the consummation of an initial Business Combination, we shall either (1) seek stockholder approval of an initial Business Combination at a meeting called for such purpose at which stockholders may seek to redeem their shares, regardless of whether they vote for or against the proposed Business Combination, into their pro rata share of the aggregate amount then on deposit in our Trust Account, including interest (which interest shall be net of taxes payable) or (2) provide our public stockholders with the opportunity to tender their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in our Trust Account, including interest (which interest shall be net of taxes payable) in each case subject to the limitations described herein; |
| we will consummate an initial Business Combination only if we have net tangible assets of at least $5,000,001 upon such consummation 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; |
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| if an initial Business Combination is not consummated within 24 months from the completion of our IPO, then our existence will terminate and we will distribute all amounts in our Trust Account; and |
| prior to an initial Business Combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from our Trust Account or (ii) vote on any initial Business Combination. |
These provisions cannot be amended without the approval of holders of 65% of Common Stock. In the event we seek stockholder approval in connection with an initial Business Combination, our amended and restated certificate of incorporation will provide that we may consummate an initial Business Combination only if approved by a majority of the shares of Common Stock voted by our stockholders at a duly held stockholders meeting.
In identifying, evaluating and selecting a target business for our 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. While we believe there may be numerous potential target businesses that we could acquire, our ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives many of these competitors an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for an initial Business Combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial Business Combination.
If we succeed in effecting an initial Business Combination, there will be, in all likelihood, intense competition from competitors of the target business. Subsequent to an initial Business Combination, we may not have the resources or ability to compete effectively.
WL Ross manages several investment vehicles. One of these investment vehicles together with certain affiliates, holds a controlling interest in NBNK Investments PLC, a blank check company publicly traded on the AIM with an aggregate amount of assets of approximately £20 million. NBNK is organized in the United Kingdom and is focused on making an investment in the financial services sector in the United Kingdom. Other funds managed by WL Ross or its affiliates may also compete with us for investment opportunities in such industries and sectors as banking institutions, financial services, metals and mining and transportation. If these funds decide to pursue any such opportunity, we may be precluded from procuring such opportunities. Conversely, WL Ross and certain of its affiliates, including us and our Sponsor, may be precluded from pursuing a Business Combination it would otherwise deem attractive as a result of a non-competition agreement running for a period of approximately one more year not to own or acquire any equity interest in, manage or operate anywhere in the United States, the origination, underwriting and servicing of mortgage loans for multifamily apartment properties, affordable multifamily housing, seniors housing and other multifamily and healthcare properties pursuant to programs administered by government agencies. In addition, investment ideas generated within WL Ross, including by Mr. Ross and other persons who may make decisions for us, may be suitable for both us and for a current or future WL Ross fund, may participate, and may be directed to such investment vehicle rather than to us. Neither WL Ross nor members of our management team who are also employed by WL Ross have any obligation to present us with any opportunity for a potential Business Combination of which they become aware. WL Ross and/or our management, in their capacities as officers or managing directors of WL Ross or in their other endeavors, may choose to present potential Business Combinations to the related entities described above, current or future WL Ross investment vehicles, or third parties, before they present such opportunities to us.
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In addition, our independent directors may have pre-existing duties or obligations that prevent them from presenting otherwise suitable target businesses to us. Our independent directors will be under no obligation to present opportunities of which they become aware to us, unless such opportunity was expressly offered to the independent director solely in his or her capacity as a director of the Company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
Our Sponsor has agreed that it 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 amount of funds in our Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in our Trust Account as of the date of the liquidation of our Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to our Trust Account and except as to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our Sponsor has sufficient funds to satisfy their indemnity obligations and believe that our Sponsors only assets are securities of our company and, therefore, our Sponsor may not be able to satisfy those obligations. We have not asked our Sponsor to reserve for such eventuality. We believe the likelihood of our Sponsor having to indemnify our Trust Account is limited because we will endeavor to have all vendors, service providers (other than our independent auditors), and prospective target businesses as well as other entities execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in our Trust Account.
We currently have four executive officers. Members of our management team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed an initial Business Combination. The amount of time that Mr. Ross or any other members of our management will devote in any time period will vary based on whether a target business has been selected for an initial Business Combination and the current stage of the Business Combination process. Accordingly, once a suitable target business to acquire has been located, management will spend more time investigating such target business and negotiating and processing the Business Combination (and consequently spend more time on our affairs) than had been spent prior to locating a suitable target business. We presently expect our executive officers to devote such amount of time as they reasonably believe is necessary to our business. We do not intend to have any full time employees prior to the closing of an initial Business Combination.
Our units, Common Stock and warrants are registered under the Exchange Act and as a result we have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. The public may read and copy any material we file with the SEC at the SECs Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at: http://www.sec.gov. The contents of these websites are not incorporated into this filing. Further, our references to the URLs for these websites are intended to be inactive textual references only.
We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our Business Combination. In accordance with the requirements of the Exchange Act, this Annual Report contains financial statements audited and reported on by our independent registered public accountants.
We will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to stockholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with or reconciled to United States GAAP or IFRS. A particular target business identified by us as a potential acquisition candidate may not have the necessary financial statements. To the extent that this requirement cannot be met,
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we may not be able to acquire the proposed target business. While this may limit the pool of potential acquisition candidates, we do not believe that this limitation will be material.
We are required to evaluate our internal control procedures for the fiscal year ending December 31, 2015 as required by the Sarbanes-Oxley Act. Since we have not been deemed to be a large accelerated filer or an accelerated filer, we are not required to have our internal control procedures audited. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of Common Stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to emerging growth company shall have the meaning associated with it in the JOBS Act.
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ITEM 1A. | RISK FACTORS |
Certain factors may have a material adverse effect on our business, financial condition and results of operations. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business or results of operations.
We are a development stage blank check company with no operating results, and did not commence operations until obtaining funding through our IPO. Because we have no operating history, and have no operating results, you have no basis upon which to evaluate our ability to achieve our business objective of completing an initial Business Combination with one or more target businesses. We have no current plans, arrangements or understandings with any prospective target business concerning a Business Combination and may be unable to complete our Business Combination. If we fail to complete our Business Combination, we will never generate any operating revenues.
We may not hold a stockholder vote to approve an initial Business Combination unless the Business Combination would require stockholder approval under applicable state law or the rules of NASDAQ or if we decide to hold a stockholder vote for business or other reasons. For instance, the NASDAQ rules currently allow us to engage in a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any Business Combination. Therefore, if we were structuring a Business Combination that required us to issue more than 20% of our outstanding shares, we would seek stockholder approval of such Business Combination. However, except as required by law, the decision as to whether we will seek stockholder approval of a proposed Business Combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Accordingly, we may consummate an initial Business Combination even if holders of a majority of the outstanding shares of Common Stock do not approve of the Business Combination we consummate.
Unlike many other blank check companies in which our Sponsor agree to vote their Founder Shares in accordance with the majority of the votes cast by the public stockholders in connection with an initial Business Combination, our Sponsor has agreed to vote its Founder Shares, as well as any public shares purchased during or after our IPO, in favor of an initial Business Combination. Our Sponsor owned 20.0% of our outstanding shares of Common Stock immediately following the completion of our IPO. In addition, an affiliate of Invesco Ltd., WL Ross ultimate parent purchased 2,500,000 units in our IPO. Accordingly, if we seek stockholder approval of an initial Business Combination, it is more likely that the necessary stockholder approval will be received than would be the case if our Sponsor agreed to vote its Founder Shares in accordance with the majority of the votes cast by our public stockholders.
Since our Board may complete a Business Combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the Business Combination, unless we seek such stockholder vote. Accordingly, your only opportunity to affect the investment decision regarding a potential
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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 an initial Business Combination.
We may seek to enter into a Business Combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with the Business Combination. Furthermore, in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SECs penny stock rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to an initial Business Combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemption and the related Business Combination and may instead search for an alternate Business Combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into a Business Combination transaction with us.
At the time we enter into an agreement for an initial Business Combination, we will not know how many stockholders may exercise their redemption rights, and therefore will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our Business Combination agreement requires us to use a portion of the cash in our Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in our Trust Account to meet such requirements, or arrange for third party financing. In addition, if a larger number of shares are submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in our Trust Account or arrange for third party financing. Raising additional third party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. The above considerations may limit our ability to complete the most desirable Business Combination available to us or optimize our capital structure.
If our Business Combination agreement requires us to use a portion of the cash in our Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that an initial Business Combination may not be completed in the required time is increased. If we are not able to complete an initial Business Combination, you would not receive your pro rata portion of our Trust Account until we liquidate our Trust Account. If you are in need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a discount to the pro rata amount per share in our Trust Account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.
Any potential target business with which we enter into negotiations concerning a Business Combination will be aware that we must complete an initial Business Combination within 24 months from the closing of our
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IPO. Consequently, such target business may obtain leverage over us in negotiating a Business Combination, knowing that if we do not complete an initial Business Combination with that particular target business, we may be unable to complete an initial Business Combination with any target business. This risk will increase as we get closer to the timeframe described above. In addition, we may have limited time to conduct due diligence and may enter into an initial Business Combination on terms that we would have rejected upon a more comprehensive investigation.
Our Sponsor, executive officers and directors have agreed, and our amended and restated certificate of incorporation provides, that we must complete an initial Business Combination within 24 months from the closing of our IPO (June 11, 2016). We may not be able to find a suitable target business and complete an initial Business Combination within such time period. If we have not completed an initial Business Combination within such time period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in our Trust Account, including interest (which interest shall be net of taxes payable, and less up to $50,000 of interest to pay dissolution expenses) divided by the number of then outstanding public shares, 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 (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
If we seek stockholder approval of an initial Business Combination and we do not conduct redemptions in connection with our Business Combination pursuant to the tender offer rules, our Sponsor, directors, executive officers, advisors or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of an initial Business Combination, although they are under no obligation to do so. Such a purchase may 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 our Sponsor, directors, executive officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval of the Business Combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our Business Combination, where it appears that such requirement would otherwise not be met. This may result in the completion of our Business Combination that may not otherwise have been possible.
In addition, if such purchases are made, the public float of Common Stock and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our Business Combination. Despite our compliance with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that
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we will furnish to holders of our public shares in connection with an initial Business Combination will describe the various procedures that must be complied with in order to validly tender or redeem public shares. In the event that a stockholder fails to comply with these procedures, its shares may not be redeemed.
Our public stockholders will be entitled to receive funds from our Trust Account only upon the earlier to occur of: (i) our completion of an initial Business Combination, and then only in connection with those shares of Common Stock that such stockholder properly elected to redeem, subject to the limitations described herein, and (ii) the redemption of our public shares if we are unable to complete an initial Business Combination within 24 months from the closing of our IPO (June 11, 2016), subject to applicable law and as further described herein. In addition, if we are unable to complete an initial Business Combination within 24 months from the closing of our IPO (June 11, 2016) 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, public stockholders may be forced to wait beyond 24 months from the closing of our IPO before they receive funds from our Trust Account. In no other circumstances will a public stockholder have any right or interest of any kind in our Trust Account. Accordingly, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss.
We cannot assure you that our securities will continue to be listed on NASDAQ in the future or prior to an initial Business Combination. In order to continue listing our securities on NASDAQ prior to an initial Business Combination, we must maintain certain financial, distribution and stock price levels. Generally, a company must maintain a minimum amount in stockholders equity (generally $2,500,000) and a minimum number of holders of our securities (generally 300 round-lot holders). Following Robert S. Millers resignation from our Board on August 13, 2015, our Board no longer has a majority of independent directors as required by NASDAQ Marketplace Rule 5605(b)(1) and the audit committee of our Board no longer has three members as required by NASDAQ Marketplace Rule 5605(c)(2). Our Board has appointed Robert C. Dinerstein to serve as an independent director on our Board, Audit Committee, and Compensation Committee, effective as of January 15, 2016, at which time we will regain compliance with both the majority independent board requirement and the audit committee membership requirement, within the cure periods as communicated to us by NASDAQ, so that we can continue to list our securities on the NASDAQ Stock Market. We did not hold an annual meeting of the stockholders by December 31, 2015 as required by NASDAQ Marketplace Rule 5620(a). To regain compliance so that we can continue to list our securities on the NASDAQ Stock Market, we have scheduled the 2015 annual meeting of the stockholders for February 11, 2016, within the cure period as communicated to us by NASDAQ. Additionally, in connection with an initial Business Combination, we will be required to demonstrate compliance with NASDAQs initial listing requirements, which are more rigorous than NASDAQs continued listing requirements, in order to continue to maintain the listing of our securities on NASDAQ. For instance, our stock price would generally be required to be at least $4 per share and our stockholders equity would generally be required to be at least $5 million. We cannot assure you that we will be able to meet those initial listing requirements at that time.
If NASDAQ delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
| a limited availability of market quotations for our securities; |
| reduced liquidity for our securities; |
| a determination that Common Stock is a penny stock which will require brokers trading in Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
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| a limited amount of news and analyst coverage; and |
| a decreased ability to issue additional securities or obtain additional financing in the future. |
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as covered securities. Our units and Common Stock and warrants are listed on NASDAQ, our units, Common Stock and warrants are covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the state of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on NASDAQ, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.
Because we have net tangible assets in excess of $5,000,000 and have filed a Current Report on Form 8-K, including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC to protect stockholders in blank check companies, such as Rule 419. Accordingly, stockholders will not be afforded the benefits or protections of those rules. Among other things, this means our units became immediately tradable and we have a longer period of time to complete our Business Combination than do companies subject to Rule 419. Moreover, if we were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in our Trust Account to us unless and until the funds in our Trust Account were released to us in connection with our completion of an initial Business Combination.
If we seek stockholder approval of an initial Business Combination and we do not conduct redemptions in connection with an initial Business Combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to Excess Shares. However, we would not be restricting our stockholders ability to vote all of their shares (including Excess Shares) for or against our Business Combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our Business Combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our Business Combination. And as a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your stock in open market transactions, potentially at a loss.
We expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge than we do, and our financial resources will be relatively limited when contrasted
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with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire with the net proceeds of our IPO and the sale of the Private Placement Warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, if we are obligated to pay cash for the shares of Common Stock redeemed and, in the event we seek stockholder approval of our Business Combination, we make purchases of Common Stock, we will potentially reduce the resources available to us for an initial 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 an initial Business Combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against us that our Sponsor is unable to indemnify (as described below)), and our warrants will expire worthless.
As of December 31, 2015, we have $10,000 available to us outside the Trust Account to fund our working capital requirements. We have issued convertible notes to our Sponsor on two occasions, March 26, 2015 and January 5, 2016, that provide for our Sponsor to loan us up to $300,000 and $425,000, respectively, for ongoing expenses. The funds currently available to us outside of our Trust Account may still not be sufficient to allow us to operate for at least the 24 months after the completion of our IPO (June 11, 2016) assuming that an initial Business Combination is not completed during that time. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a no-shop provision (a provision in letters of intent designed to keep target businesses from shopping around for transactions with other companies on terms more favorable to such target businesses) with respect to a particular proposed Business Combination, although we do not have any current intention to do so. If we entered into a letter of intent where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we are unable to complete an initial Business Combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account and our warrants will expire worthless.
We are a development stage blank check company, and as we have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement, there is a risk that we will be unable to continue as a going concern and consummate an initial Business Combination. If we do not complete an initial Business Combination by June 11, 2016, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable, and less up to $50,000 of interest to pay dissolution expenses) divided by the number of then outstanding public shares, 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 (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. 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 Public Offering. In addition if we fail to complete an initial Business Combination by June 11, 2016, there will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless.
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As of December 31, 2015, we have $10,000 available to us outside our Trust Account to fund our working capital requirements. If we are required to seek additional capital, we would need to borrow funds from our Sponsor, management team or other third parties to operate or may be forced to liquidate. Neither our Sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside our Trust Account or from funds released to us upon completion of an initial Business Combination. If we are unable to complete an initial Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate our Trust Account. Consequently, our public stockholders may only receive approximately $10.00 per share on our redemption of our public shares, and our warrants will expire worthless.
Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will surface all material issues that may be present inside a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination debt financing. Accordingly, any stockholders who choose to remain stockholders following the Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the tender offer materials or proxy statement relating to the Business Combination contained an actionable material misstatement or material omission.
Our placing of funds in our Trust Account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in our 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 our 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 our Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in our Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third partys engagement would be significantly more beneficial to us than any alternative.
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Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against our Trust Account for any reason. Upon redemption of our public shares, if we are unable to complete our Business Combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our Business Combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.00 per share initially held in our Trust Account, due to claims of such creditors. Our Sponsor has agreed that it 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 amount of funds in our Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in our Trust Account as of the date of the liquidation of our Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to our Trust Account and except as to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our Sponsor has sufficient funds to satisfy their indemnity obligations and believe that our Sponsors only assets are securities of our company and, therefore, our Sponsor may not be able to satisfy those obligations. We have not asked our Sponsor to reserve for such eventuality.
In the event that the proceeds in our Trust Account are reduced below the lesser of (i) $10.00 per share or (ii) other than due to the failure to obtain such waiver such lesser amount per share held in our Trust Account as of the date of the liquidation of our Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its 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 independent directors choose not to enforce these indemnification obligations, the amount of funds in our Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.
If, after we distribute the proceeds in our 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. In addition, our Board 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 our Trust Account prior to addressing the claims of creditors.
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If, before distributing the proceeds in our 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 our 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 our Trust Account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
| restrictions on the nature of our investments, and |
| restrictions on the issuance of securities, each of which may make it difficult for us to complete our Business Combination. |
In addition, we may have imposed upon us burdensome requirements, including:
| registration as an investment company; |
| adoption of a specific form of corporate structure; and |
| reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations. |
We do not believe that our anticipated principal activities will subject us to the Investment Company Act. The proceeds held in our Trust Account may be invested by the trustee only in United States government treasury bills with a maturity of 180 days or less or in money market funds investing solely in United States Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act. Because the investment of the proceeds will be restricted to these instruments, we believe we will meet the requirements for the exemption provided in Rule 3a-1 promulgated under the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to consummate a Business Combination. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete a Business Combination. If we are unable to complete an initial Business Combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against us that our Sponsor is unable to indemnify), and our warrants will expire worthless.
We are subject to laws, regulations and rules enacted by national, regional and local governments and NASDAQ. In particular, we are required to comply with certain SEC, NASDAQ and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations and rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations and rules, as interpreted and applied, could have a material adverse effect on our business and results of operations.
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Under the Delaware General Corporation Law, or DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete an initial Business Combination within 24 months from the closing of the completion of our IPO (June 11, 2016) may be considered a liquidation distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholders pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following the 24th month from the closing of our IPO in the event we do not complete our Business Combination and, therefore, we do not intend to comply with those procedures.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, 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 likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete an initial Business Combination within 24 months from the closing of our IPO is not considered a liquidation distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidation distribution.
We are not registering the shares of Common Stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed, as soon as practicable, but in no event later than fifteen (15) business days after the closing of an initial Business Combination, to use our best efforts to file a registration statement under the Securities Act covering such shares and maintain a current prospectus relating to the Common Stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, we would be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or
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qualified under the securities laws of the state of the exercising holder, unless an exemption is available. Notwithstanding the above, if Common Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a covered security under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement or register or qualify the shares under blue sky laws. In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants under the Securities Act or applicable state securities laws. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and expire worthless. 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 of Common Stock included in the units. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying shares of Common Stock for sale under all applicable state securities laws.
Pursuant to an agreement that was entered into concurrently with the issuance and sale of the securities in our IPO, our Sponsor and its permitted transferees can demand that we register the Founder Shares and privately placed shares of Common Stock, if any, and holders of our Private Placement Warrants and their permitted transferees can demand that we register the Private Placement Warrants and the shares of Common Stock issuable upon exercise of the Private Placement Warrants. We will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of Common Stock. In addition, the existence of the registration rights may make an 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 Common Stock that is expected when the securities owned by our Sponsor, holders of our Private Placement Warrants or their respective permitted transferees are registered.
We will seek to complete a Business Combination with an operating company that has experienced financial difficulties or has been perceived to have limited growth prospects, but may also pursue acquisition opportunities with other characteristics, except that we will not, under our amended and restated certificate of incorporation, be permitted to effectuate our Business Combination with another blank check company or similar company with nominal operations. Because we have not executed or consummated any definitive agreements with any identified business combination target, there is no basis to evaluate the possible merits or risks of any particular target businesss operations, results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete our Business Combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our units will ultimately prove to be more favorable to stockholders than a direct investment, if such opportunity were available, in a Business Combination target. Accordingly, any stockholders who choose to remain stockholders following the Business
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Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the tender offer materials or proxy statement relating to the Business Combination contained an actionable material misstatement or material omission.
Although we intend to focus on identifying Business Combination candidates among value-oriented investment opportunities, and we will not initially actively seek to identify Business Combination candidates in good financial condition (which may be outside our managements area of expertise), we will consider a Business Combination outside of value-oriented investment opportunities if a Business Combination candidate is presented to us and we determine that such candidate offers an attractive investment opportunity for our company or we are unable to identify a suitable candidate from among value-oriented investment opportunities after having expended a reasonable amount of time and effort in an attempt to do so. Although our management will endeavor to evaluate the risks inherent in any particular Business Combination candidate, we cannot assure you that we will adequately ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our units will not ultimately prove to be less favorable to stockholders than a direct investment, if an opportunity were available, in a Business Combination candidate.
In the event we elect to pursue an investment outside of value-oriented investment opportunities, our managements expertise may not be directly applicable to its evaluation or operation, and the information contained herein regarding value-oriented investment opportunities would not be relevant to an understanding of the business that we elect to acquire.
Although we have identified general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into an initial Business Combination will not have all of these positive attributes. If we complete an 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. In addition, 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 stockholder approval of the transaction is required by law, or we decide to obtain stockholder approval for business or other legal reasons, it may be more difficult for us to attain stockholder approval of an initial Business Combination if the target business does not meet our general criteria and guidelines. If we are unable to complete an initial Business Combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account and our warrants will expire worthless.
To the extent we complete an initial Business Combination with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include volatile revenues or earnings and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
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Unless we complete our Business Combination with an affiliated entity, we are not required to obtain an opinion from an independent investment banking or accounting firm that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our Board, who will determine fair market value 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 an initial Business Combination.
Our amended and restated certificate of incorporation authorizes the issuance of up to 200,000,000 shares of Common Stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. As of December 31, 2015, there are 101,006,250 authorized but unissued shares of Common Stock available for issuance, which amount takes into account shares reserved for issuance upon exercise of outstanding warrants. We may issue a substantial number of additional shares of common or preferred stock to complete an initial Business Combination or under an employee incentive plan after completion of an initial Business Combination, however our amended and restated certificate of incorporation provides, among other things, that prior to an initial Business Combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from our Trust Account or (ii) vote on any initial Business Combination. The issuance of additional shares of Common Stock or preferred stock:
| may significantly dilute the equity interest of current stockholders; |
| may subordinate the rights of holders of Common Stock if preferred stock is issued with rights senior to those afforded Common Stock; |
| could cause a change in control if a substantial number of Common Stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and |
| may adversely affect prevailing market prices for our units, Common Stock and/or warrants. |
We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If we decide not to complete a specific initial Business Combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete an initial Business Combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete an initial Business Combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against us that our Sponsor is unable to indemnify), and our warrants will expire worthless.
Our operations are dependent upon a relatively small group of individuals and, in particular, Mr. Ross and our other executive officers and directors. We believe that our success depends on the continued service of our
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executive officers and directors, at least until we have completed our Business Combination. In addition, our executive officers and directors are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying potential Business Combinations and monitoring the related due diligence. Moreover, certain of our executive officers and directors have time and attention requirements for private investment funds of which WL Ross is the investment manager. We do not have an employment agreement with, or key-man insurance on the life of, any of our directors or executive officers. The unexpected loss of the services of one or more of our directors or executive officers could have a detrimental effect on us.
Our ability to successfully effect our 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 our 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 our Business Combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.
Our key personnel may be able to remain with us after the completion of our Business Combination only if they are able to negotiate employment or consulting agreements in connection with the Business Combination. Such negotiations would take place simultaneously with the negotiation of the Business Combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the Business Combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us after the completion of our Business Combination will not be the determining factor in our decision as to whether or not we will proceed with any potential Business Combination. There is no certainty, however, that any of our key personnel will remain with us after the completion of our Business Combination. We cannot assure you that any of our key personnel will remain in senior management or advisory positions with us. The determination as to whether any of our key personnel will remain with us will be made at the time of an initial Business Combination.
When evaluating the desirability of effecting an initial Business Combination with a prospective target business, our ability to assess the target businesss management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the targets management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the targets management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any stockholders who choose to remain stockholders following the Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the tender offer materials or proxy statement relating to the Business Combination contained an actionable material misstatement or material omission.
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The officers and directors of an acquisition candidate may resign upon completion of an initial Business Combination. The departure of a Business Combination 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 completion of an initial 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 an initial Business Combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place.
Our executive officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a Business Combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our Business Combination. Each of our executive officers is engaged in several other business endeavors for which he may be entitled to substantial compensation and our executive officers are not obligated to contribute any specific number of hours per week to our affairs. In particular, our executive officers and directors are employed by WL Ross, which is the investment manager to various private investment funds which make investments in securities or other interests of or relating to companies experiencing financial distress, including companies in bankruptcy or reorganization proceedings and companies in distressed industries. Our independent directors also serve as officers and board members for other entities. If our executive officers and directors other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete an initial Business Combination.
Until we consummate an initial Business Combination, we intend to engage in the business of identifying and combining with one or more businesses. Our Sponsor and executive officers and directors are, or may in the future become, affiliated with entities that are engaged in a similar business. Moreover, certain of our executive officers and directors have time and attention requirements for private investment funds of which WL Ross is the investment manager.
Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties. Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
We have not adopted a policy that expressly prohibits our directors, executive 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. In fact, we may enter into a Business Combination with a target business that is affiliated with our Sponsor, our directors or executive officers. 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.
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In particular, WL Ross and affiliates of Mr. Ross and our Sponsor have invested in industries as diverse as banking institutions, building materials, financial services, industrials, metals and mining and transportation. These companies generally have been value-oriented investment opportunities. As a result, there may be substantial overlap between companies that would be a suitable Business Combination for us and companies that would make an attractive target for such other affiliates.
In light of the involvement of our Sponsor, executive officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our Sponsor, executive officers and directors. Our directors also serve as officers and board members for other entities. Such entities may compete with us for Business Combination opportunities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria for a Business Combination and such transaction was approved by a majority of our disinterested directors. Despite our agreement to obtain an opinion from an independent investment banking firm regarding the fairness to our company from a financial point of view of a Business Combination with one or more domestic or international businesses affiliated with our executive officers, directors or existing holders, potential conflicts of interest still may exist and, as a result, the terms of the Business Combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest.
On March 24, 2014, our Sponsor purchased an aggregate of 14,375,000 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.002 per share. Immediately prior to the pricing of our IPO, on June 5, 2014, our Sponsor forfeited 1,868,750 Founder Shares so that the remaining Founder Shares represent 20.0% of the outstanding shares upon completion of our IPO. The Founder Shares will be worthless if we do not complete an initial Business Combination. In addition, also simultaneously with the commencement of our IPO on June 5, 2014, our Sponsor purchased an aggregate of 22,400,000 Private Placement Warrants, each exercisable for one-half of one share of Common Stock at $5.75 per half share, for a purchase price of $11,200,000, or $0.50 per warrant, that will also be worthless if we do not complete a Business Combination.
The Founder Shares are identical to the shares of Common Stock included in the units sold in our IPO. However, the holders have agreed (A) to vote any shares owned by them in favor of any proposed Business Combination and (B) not to redeem any shares in connection with a stockholder vote to approve a proposed initial Business Combination.
On March 26, 2015, we issued the Convertible Note to our Sponsor that provides for our Sponsor to loan us up to $300,000 for ongoing expenses. The Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of our Sponsor, any amounts outstanding under the Convertible Note may be converted into warrants to purchase shares of Common Stock at a conversion price of $0.60 per warrant. Each warrant will entitle our Sponsor to purchase one-half of one share of Common Stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants. On April 16, 2015, we borrowed the total proceeds of $300,000 from the Convertible Note entered with our Sponsor. As of December 31, 2015, the outstanding balance of the Convertible Note was $310,644.
On January 5, 2016, we issued the Second Convertible Note to our Sponsor that provides for our Sponsor to loan us up to $425,000 for ongoing expenses. The Second Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of our Sponsor, any amounts outstanding under the Second Convertible Note may be converted into warrants to purchase shares of Common Stock at a conversion price of $0.50 per warrant. Each warrant will entitle our Sponsor to purchase one-half of one share of Common Stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants. On January 5, 2016, we borrowed the total proceeds of $425,000 from the Second Convertible Note entered with our Sponsor.
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The personal and financial interests of our executive officers and directors may influence their motivation in identifying and selecting a target Business Combination, completing an initial Business Combination and influencing the operation of the business following the initial Business Combination.
At the closing of an initial Business Combination, our Sponsor, executive officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred in connection with activities on our behalf. These financial interests of our Sponsor, executive officers and directors may influence their motivation in identifying and selecting a target Business Combination and completing an initial Business Combination.
Although we currently have no commitments to issue any additional notes or other debt securities, or to otherwise incur outstanding debt, we may choose to incur substantial debt to complete our Business Combination. We have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in our Trust Account. As such, no issuance of debt will affect the per-share amount available for redemption from our Trust Account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:
| default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations; |
| acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; |
| our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; |
| our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding; |
| our inability to pay dividends on 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 Common Stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; |
| limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; |
| increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and |
| limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
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As of December 31, 2015, the net proceeds for our IPO and the sale of Private Placement Warrants provided us with approximately $482,338,647 that we may use to complete our Business Combination (excluding up to approximately $18,309,150 of deferred underwriting commissions being held in our Trust Account).
We may effectuate our Business Combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuate our Business Combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing an initial Business Combination with only a single entity our lack of diversification may subject us to numerous economic, competitive and regulatory risks. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several Business Combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:
| solely dependent upon the performance of a single business, property or asset, or |
| dependent upon the development or market acceptance of a single or limited number of products, processes or services. |
This lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our Business Combination.
If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other Business Combinations, which may make it more difficult for us, and delay our ability, to complete an initial Business Combination. With multiple Business Combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.
In pursuing our acquisition strategy, we may seek to effectuate an initial Business Combination with a privately held company. By definition, very little public information exists about private companies, and we could be required to make our decision on whether to pursue a potential initial Business Combination on the basis of limited information, which may result in a Business Combination with a company that is not as profitable as we suspected, if at all.
We may structure a Business Combination so that the post-transaction company in which our public stockholders own shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target
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sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-transaction company owns 50% or more of the voting securities of 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. For example, we could pursue a transaction in which we issue a substantial number of new shares of Common Stock in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of Common Stock, our stockholders immediately prior to such transaction could own less than a majority of our outstanding shares of Common Stock subsequent to such transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of our stock than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain our control of the target business.
Our amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (such that we are not subject to the SECs penny stock rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to an initial Business Combination. As a result, we may be able to complete our Business Combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of an 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 our Sponsor, officers, directors, advisors or their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of Common Stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed Business Combination exceed the aggregate amount of cash available to us, we will not complete the Business Combination or redeem any shares, all shares of Common Stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate Business Combination.
The exercise price of the public warrants is higher than is typical in many similar blank check companies in the past. 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 $5.75 per half share, or $11.50 per whole share. As a result, the warrants are less likely to ever be in the money and more likely to expire worthless.
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 charter or governing instruments in order to effectuate an initial Business Combination.
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Some other blank check companies have a provision in their charter which prohibits the amendment of certain of its provisions, including those which relate to a companys pre-Business Combination activity, without approval by a certain percentage of the companys stockholders. In those companies, amendment of these provisions requires approval by between 90% and 100% of the companys public stockholders. Our amended and restated certificate of incorporation provides that any of its provisions related to pre-Business Combination activity (including the requirement to deposit proceeds of our IPO and the sale of Private Placement Warrants into our Trust Account and not release such amounts except in specified circumstances, and to provide redemption rights to public stockholders as described herein) may be amended if approved by holders of 65% of Common Stock, and corresponding provisions of the trust agreement governing the release of funds from our Trust Account may be amended if approved by holders of 65% of Common Stock. In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of Common Stock, subject to applicable provisions of the DGCL or applicable stock exchange rules. Our Sponsor, who owned 20.0% of Common Stock upon the closing of our IPO, will participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner it chooses. This influence would increase to the extent our Sponsor exercises its option to invest up to an additional $100,000,000 to purchase shares. As a result, we may be able to amend the provisions of our amended and restated certificate of incorporation which govern our pre-Business Combination behavior more easily than some other blank check companies, and this may increase our ability to complete a Business Combination with which you do not agree. Our stockholders may pursue remedies against us for any breach of our amended and restated certificate of incorporation.
Our Sponsor, executive officers and directors have agreed, pursuant to written agreements with us, that they will not propose any amendment to our amended and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete an initial Business Combination within 24 months from the closing of our IPO (June 11, 2016), unless we provide our public stockholders with the opportunity to redeem their shares of Common Stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in our Trust Account, including interest (net of the interest which may be withdrawn to pay taxes) divided by the number of then outstanding public shares. These agreements are contained in letter agreements that we have entered into with our Sponsor, executive officers and directors filed as exhibits to this Form 10-K. Our public stockholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies against our Sponsor, executive officers and directors for any breach of these agreements. As a result, in the event of a breach, our public stockholders would need to pursue a stockholder derivative action, subject to applicable law.
Although we believe that the net proceeds of our IPO, the sale of the Private Placement Warrants, the Convertible Note, and the Second Convertible Note will be sufficient to allow us to complete an initial Business Combination, because we have not executed or consummated any definitive agreements with any identified business combination target we cannot ascertain the capital requirements for any particular transaction. If the net proceeds of our IPO and the sale of the Private Placement Warrants prove to be insufficient, either because of the size of an initial Business Combination, the depletion of the available net proceeds in search of a target business, the obligation to repurchase for cash a significant number of shares from stockholders who elect redemption in connection with an initial Business Combination or the terms of negotiated transactions to purchase shares in connection with an initial Business Combination, we may be required to seek additional financing or to abandon the proposed Business Combination. We cannot assure you
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that such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete an initial Business Combination, we would be compelled to either restructure the transaction or abandon that particular Business Combination and seek an alternative target business candidate. In addition, even if we do not need additional financing to complete our Business Combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after our Business Combination. If we are unable to complete an initial Business Combination, our public stockholders may only receive approximately $10.00 per share on the liquidation of our Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against us that our Sponsor is unable to indemnify), and our warrants will expire worthless.
Since the closing of our IPO, our Sponsor has owned 20.0% of our issued and outstanding shares of Common Stock. In addition, an affiliate of Invesco Ltd., WL Ross ultimate parent had purchased 2,500,000 units in our IPO. Accordingly, it may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended and restated certificate of incorporation. If our Sponsor purchases any additional shares of Common Stock in the aftermarket or in privately negotiated transactions, this would increase its control. We have granted our Sponsor the option to purchase, simultaneously with the consummation of an initial Business Combination, up to an additional 10,000,000 shares of Common Stock at a price of $10.00 per share. The proceeds of the sale of such shares will not be deposited into our Trust Account, the shares will not be eligible for redemption from our Trust Account nor will they be eligible to vote upon the initial Business Combination. Our Sponsor may assign this option to one or more of its affiliated investment funds to satisfy their co-investment rights in an initial Business Combination.
In addition, our Board, whose members were elected by our Sponsor, is and 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. We may not hold an annual meeting of stockholders to elect new directors prior to the completion of our Business Combination, in which case all of the current directors will continue in office until at least the completion of the Business Combination. If there is an annual meeting, as a consequence of our staggered Board, not all members of our Board will be considered for election and our Sponsor, because of its ownership position, will have considerable influence regarding the outcome. Accordingly, our Sponsor will continue to exert control at least until the completion of our Business Combination.
Our warrants were 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 65% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of Common Stock purchasable upon exercise of a warrant.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of Common Stock equals or exceeds $24.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders. If and when the
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warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants. None of the Private Placement Warrants will be redeemable by us so long as they are held by their initial purchasers or their permitted transferees.
We issued warrants to purchase 25,012,500 shares of Common Stock as part of our IPO and simultaneously with the commencement of our IPO on June 5, 2014, we issued an aggregate of 22,400,000 Private Placement Warrants to our Sponsor, each exercisable to purchase one-half of one share of Common Stock at $5.75 per half share. On March 26, 2015, we issued the Convertible Note to our Sponsor that, at the option of our Sponsor, may be converted into warrants to purchase shares of Common Stock at a conversion price of $0.60 per warrant, exercisable to purchase one-half of one share of Common Stock at $5.75 per half share. On January 5, 2016, we issued the Second Convertible Note to our Sponsor that, at the option of our Sponsor, may be converted into warrants to purchase shares of Common Stock at a conversion price of $0.50 per warrant, exercisable to purchase one-half of one share of Common Stock at $5.75 per half share. In addition, prior to consummating an initial Business Combination, nothing prevents us from issuing additional securities in a private placement so long as they do not participate in any manner in the Trust Account or vote as a class with the Common Stock on a Business Combination. To the extent we issue shares of Common Stock to effectuate a business transaction, 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 Common Stock and reduce the value of the shares of Common Stock issued to complete the business transaction. Therefore, our warrants may make it more difficult to effectuate a business transaction or increase the cost of acquiring the target business.
The Private Placement Warrants are identical to the warrants sold as part of the units in our IPO except that, so long as they are held by our Sponsor or its 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 Sponsor until 30 days after the completion of an initial Business Combination and (iii) they may be exercised by the holders on a cashless basis.
Each warrant is exercisable for one-half of one share of Common Stock. Warrants may be exercised only for a whole number of shares of Common Stock. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of shares of Common Stock to be issued to the warrant holder. As a result, warrant holders who did not purchase an even number of warrants must sell any odd number of warrants in order to obtain full value from the fractional interest that will not be issued. This is different from other offerings similar to ours whose units include one share of Common Stock and one warrant to purchase one whole share. We have established the components of the units in this way in order to reduce the dilutive effect of the warrants upon completion of a Business Combination since the warrants will be exercisable in the aggregate for half of the number of shares compared to units that each contain a warrant to purchase one whole share, thus making us, we believe, a more attractive merger partner for target businesses. Nevertheless, this unit structure may cause our units to be worth less than if it included a warrant to purchase one whole share.
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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 may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or international financing reporting standards, or IFRS, depending on the circumstances and the historical financial statements may be required to 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 complete an initial Business Combination within the prescribed time frame.
We are an emerging growth company within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of Common Stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the year ending December 31, 2015. Since we have not been deemed to be a large accelerated filer or an accelerated filer, we are not required to comply with the
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independent registered public accounting firm attestation requirement on our internal control over financial reporting. Further, for as long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. 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 our 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 control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.
Our amended and restated certificate of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include a staggered Board and the ability of our Board to designate the terms of and issue new series of preferred shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
If we effect an initial Business Combination with a company located in the United States but with operations or opportunities outside of the United States, we would be subject to any special considerations or risks associated with companies operating in an international setting, including any of the following:
| costs and difficulties inherent in managing cross-border business operations; |
| rules and regulations regarding currency redemption; |
| complex corporate withholding taxes on individuals; |
| laws governing the manner in which future Business Combinations may be effected; |
| tariffs and trade barriers; |
| regulations related to customs and import/export matters; |
| longer payment cycles; |
| tax issues, such as tax law changes and variations in tax laws as compared to the United States; |
| currency fluctuations and exchange controls; |
| rates of inflation; |
| challenges in collecting accounts receivable; |
| cultural and language differences; |
| employment regulations; |
| crime, strikes, riots, civil disturbances, terrorist attacks and wars; and |
| deterioration of political relations with the United States. |
We may not be able to adequately address these additional risks. If we were unable to do so, our operations might suffer, which may adversely impact our results of operations and financial condition.
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ITEM 2. | PROPERTIES |
We currently maintain our principal executive offices at 1166 Avenue of the Americas, New York, New York 10036. The cost for this space is included in the $10,000 per month fee that we pay an affiliate of our Sponsor for certain office space, utilities, and general office, receptionist and secretarial support. We believe, based on fees for similar services in the New York metropolitan area, that the fee charged by our Sponsor is at least as favorable as we could have obtained from an unaffiliated person. We consider our current office space, combined with the other office space otherwise available to our executive officers, adequate for our current operations.
On March 26, 2015, our Sponsor irrevocably and unconditionally waived the $10,000 per month payment obligations for the period beginning on January 1, 2015 and ending on December 31, 2015. On January 13, 2016, our Sponsor irrevocably and unconditionally waived the $10,000 per month payment obligations for the period beginning on January 1, 2016 and ending on December 31, 2016.
ITEM 3. | LEGAL PROCEEDINGS |
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us or any of our officers and directors in their corporate capacity.
ITEM 4. | MINE SAFETY DISCLOSURE |
Not applicable.
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ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Our units, each of which consist of one share of Common Stock, par value $0.0001 per share, and one warrant to purchase one-half of one share of Common Stock, began trading on NASDAQ under the symbol WLRHU on June 6, 2014. On August 4, 2014, we announced that holders of our units could elect to separately trade the Common Stock and the warrants included in the units, or to continue to trade the units without separating them. On August 5, 2014, the Common Stock and warrants began trading on NASDAQ under the symbols WLRH and WLRHW, respectively. Each warrant entitles the holder to purchase one-half of one share of Common Stock at a price of $5.75 per half share, subject to adjustments as described in our final prospectus filed with the SEC on June 5, 2014. Warrants may only be exercised for a whole number of shares of Common Stock and will become exercisable 30 days after the completion of an initial Business Combination. Our warrants will expire five years after the completion of an initial Business Combination or earlier upon redemption or liquidation as described in our prospectus.
The following table sets forth, for the calendar quarter indicated, the high and low sales prices per unit, Common Stock and warrants as reported on the NASDAQ for the period from January 1, 2015 through December 31, 2015.
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Units (WLRHU) | Common Stock (WLRH) | Warrants (WLRHW) | ||||||||||||||||||||||
Fiscal 2015: | High | Low | High | Low | High | Low | ||||||||||||||||||
Quarter ended 3/31/2015 | $ | 11.60 | $ | 10.28 | $ | 10.45 | $ | 9.83 | $ | 1.35 | $ | 0.48 | ||||||||||||
Quarter ended 6/30/2015 | $ | 12.17 | $ | 10.40 | $ | 10.89 | $ | 9.99 | $ | 2.50 | $ | 0.63 | ||||||||||||
Quarter ended 9/30/2015 | $ | 11.48 | $ | 10.44 | $ | 10.58 | $ | 10.06 | $ | 1.09 | $ | 0.61 | ||||||||||||
Quarter ended 12/31/2015 | $ | 11.47 | $ | 8.64 | $ | 10.49 | $ | 9.80 | $ | 0.92 | $ | 0.21 |
On January 12, 2016, there was 1 record holder and approximately 990 beneficial holders of our units, 2 record holders and approximately 1,000 beneficial holders of our separately traded Common Stock, and 2 record holders and approximately 306 beneficial holders of our separately traded warrants.
We have not paid any cash dividends on Common Stock to date and do not intend to pay cash dividends prior to the completion of an initial Business Combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of an initial Business Combination. The payment of any cash dividends subsequent to an initial Business Combination will be within the discretion of our Board at such time. In addition, our Board is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, if we incur any indebtedness in connection with our Business Combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
None.
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The graph below compares the cumulative total return for our units from January 1, 2015, through December 31, 2015 with the comparable cumulative return of three indices: the S&P 500 Index, the Dow Jones Industrial Average Index and NASDAQ. The graph assumes $100 invested on January 2, 2015 in our units and $100 invested at that same time in each of the three listed indices.
On March 24, 2014, our Sponsor purchased an aggregate of 14,375,000 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.002 per share. Immediately prior to the pricing of our IPO, on June 5, 2014, our Sponsor forfeited 1,868,750 Founder Shares so that the remaining Founder Shares represented 20.0% of the outstanding shares upon completion of our IPO.
On June 5, 2014, simultaneously with the commencement of our IPO, we consummated a sale of 22,400,000 Private Placement Warrants at a price of $0.50 per Private Placement Warrant, generating total proceeds of $11,200,000. The Private Placement Warrants, which were purchased by our Sponsor, are substantially similar to the warrants underlying the units issued in our IPO, except that if held by the original holder or their permitted assign, they (i) may be exercised for cash or on a cashless basis, (ii) are not subject to being called for redemption and (iii) subject to certain limited exceptions, will be subject to transfer restrictions until 30 days following the consummation of our Business Combination. If the Private Placement Warrants are held by holders other than our initial holders, the Private Placement Warrants will be redeemable by us and exercisable by the holders on the same basis as the Warrants.
On March 26, 2015, we issued the Convertible Note to our Sponsor that provides for our Sponsor to loan us up to $300,000 for ongoing expenses. The Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of our Sponsor, any amounts outstanding under the Convertible Note may be converted into warrants to purchase shares of Common Stock at a conversion price of $0.60 per warrant. Each warrant will entitle our Sponsor to purchase one-half of one share of Common Stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants previously issued to our Sponsor. On April 16, 2015, we borrowed the total proceeds of $300,000 from the Convertible Note entered with our Sponsor. As of December 31, 2015, the outstanding balance of the Convertible Note was $310,644.
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On January 5, 2016, we issued the Second Convertible Note to our Sponsor that provides for our Sponsor to loan us up to $425,000 for ongoing expenses. The Second Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of our Sponsor, any amounts outstanding under the Second Convertible Note may be converted into warrants to purchase shares of Common Stock at a conversion price of $0.50 per warrant. Each warrant will entitle our Sponsor to purchase one-half of one share of Common Stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants. On January 5, 2016, we borrowed the total proceeds of $425,000 from the Second Convertible Note entered with our Sponsor.
The sale of the above securities were deemed to be exempt from registration under the Securities Act of 1933, as amended (the Securities Act), in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
On June 5, 2014, our registration statement on Form S-1 (File No. 333-195854) was declared effective by the Securities and Exchange Commission for our IPO pursuant to which we sold an aggregate 50,025,000 units at an offering price to the public of $10.00 per unit for an aggregate offering price of $500,250,000, with each unit consisting of one share of Common Stock and one Warrant. Each Warrant entitles the holder thereof to purchase one-half of one share of Common Stock at a price of $5.75 per half share. Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated acted as book runners (the Underwriters). Our IPO did not terminate before all of the securities registered in the registration statement were sold. On June 11, 2014, we closed the sale of such units, resulting in net proceeds to us of $500,250,000.
We paid a total of approximately $9,204,600 in underwriting discounts and commissions and approximately $960,000 for other costs and expenses related to our IPO. In addition, the Underwriters agreed to defer approximately $18,309,150 in underwriting discounts and commissions, which amount will be payable upon consummation of our Business Combination, if consummated. We also repaid the $350,000 in loans made to us by our Sponsor to cover expenses related to the IPO. As of December 31, 2015, we accrued $68,000 payable to an affiliate of our Sponsor pursuant to the terms of our Administrative Services Agreement. No payments were made by us to directors, officers or persons owning ten percent or more of Common Stock or to their associates, or to our affiliates. There has been no material change in the planned use of proceeds from our IPO as described in our final Form 10-K filed with the Securities and Exchange Commission on March 31, 2015.
Net proceeds of $500,250,000 from our IPO and simultaneous sale of the Private Placement Warrants including $18,309,150 of deferred underwriting commissions are being held our a Trust Account in the United States maintained by Continental Stock Transfer & Trust Company, acting as trustee, 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 any open ended investment company that holds itself out as a money market fund selected by us meeting the conditions of paragraphs (e)(2), (e)(3) and (e)(4) of Rule 2a-7 of the 1940 Act, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the Trust Account as described below.
The amount of proceeds not deposited in the Trust Account was $1,095,400. In addition, interest income on the funds held in the Trust Account may be released to us to pay our franchise and income tax obligations.
Our Sponsor, executive officers and directors have agreed, and our amended and restated certificate of incorporation provides, that we will have only 24 months from the completion of our IPO (June 11, 2016) to complete an initial Business Combination. If we are unable to complete our Business Combination within such 24-month period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in our Trust Account, including interest (less up to $50,000 of interest to pay dissolution expenses (which interest shall be net of taxes payable) divided by the number of then outstanding public shares, 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 (iii) as promptly as reasonably possible following such redemption, subject to
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the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
As of December 31, 2015, after giving effect to our IPO and our operations subsequent thereto, approximately $500,647,797 was held in the Trust Account and we had approximately $10,000 of unrestricted cash available to us for our activities in connection with identifying and conducting due diligence of a suitable Business Combination, and for general corporate matters.
ITEM 6. | SELECTED FINANCIAL DATA |
The following table summarizes the relevant financial data for our business and should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and our audited financial statements, and the notes and schedules related thereto, which are included in this Annual Report on Form 10-K.
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Year ended December 31, 2015 |
For the Period March 24, 2014 (Inception) through December 31, 2014 |
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Loss from operations | $ | (776,412 | ) | $ | (1,102,732 | ) | ||
Interest income | 443,800 | 65,646 | ||||||
Loss before provision for taxes | (332,612 | ) | (1,037,086 | ) | ||||
Provision for income taxes | | | ||||||
Net loss | $ | (332,612 | ) | $ | (1,037,086 | ) | ||
Per Share Data: |
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Net loss per common share basic and diluted | $ | (0.02 | ) | $ | (.07 | ) | ||
Weighted average number of common shares outstanding basic and diluted | 14,846,923 | 14,619,097 |
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As of December 31, 2015 |
As of December 31, 2014 |
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Working capital(1) | $ | 481,631,552 | $ | 481,964,164 | ||||
Total assets(2) | $ | 500,706,451 | $ | 501,269,689 | ||||
Total liabilities | $ | 19,074,899 | $ | 19,305,525 | ||||
Value of Common Stock that may be redeemed in connection with an initial Business Combination ($10.00 per share) |
$ | 476,631,550 | $ | 476,964,160 | ||||
Stockholders equity(3) | $ | 5,000,002 | $ | 5,000,004 |
(1) | For 2015, includes $500,647,797 held in trust from the proceeds of our IPO and the sale of the private placement warrants, plus $10,000 in cash held outside of our Trust Account, plus $48,654 of other assets, less $765,749 of current liabilities, less $18,309,150 of deferred offering costs. For 2014, includes $500,315,646 held in trust from the proceeds of our IPO and the sale of the private placement warrants, plus $801,415 in cash held outside of our Trust Account, plus $152,628 of other assets, less $996,375 of current liabilities, less $18,309,150 of deferred offering costs. |
(2) | For 2015, includes $500,647,797 held in trust from the proceeds of our IPO and the sale of the private placement warrants, plus $10,000 in cash held outside of our Trust Account, plus $48,654 of other assets as of December 31, 2015. For 2014, includes $500,315,646 held in trust from the proceeds of our IPO and the sale of the private placement warrants, plus $801,415 in cash held outside of our Trust Account, plus $152,628 of other assets as of December 31, 2014. |
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(3) | For 2015, excludes 47,663,155 shares of Common Stock purchased in the public market, which are subject to redemption in connection with an initial Business Combination (approximately $10.00 per shares). For 2014, excludes 47,696,416 shares of Common Stock purchased in the public market, which are subject to redemption in connection with an initial Business Combination (approximately $10.00 per shares). |
As of December 31, 2015 and December 31, 2014 the total assets amount includes approximately $500,647,797 and $500,315,646 being held in the Trust Account, $482,338,647 and $482,006,496 of which, respectively, is available to us for the purposes of consummating a Business Combination within the time period described in this Annual Report, with $18,309,150 in deferred underwriting fees payable upon consummation of a Business Combination and the remaining $10,000 and $801,415 as of December 31, 2015 and December 31, 2014, respectively, being available to us for general working capital purposes. If a Business Combination is not so consummated, we will be dissolved and the proceeds held in the Trust Account will be distributed solely to our public stockholders.
If we seek stockholder approval of any Business Combination, we will offer holders of our Public Shares the right to have his, her or its Public Shares converted to cash (subject to the limitations described elsewhere in this Annual Report) regardless of whether such stockholder votes for or against such proposed Business Combination. We will close an initial Business Combination only if we have net tangible assets of at least $5,000,001 upon such closing 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. Accordingly, public stockholders owning 47,663,155 shares sold in the IPO may exercise their conversion rights at an initial per share conversion price of $10.00 (not taking into account taxes that may be due or interest earned on the Trust Account) and we could still close a proposed Business Combination so long as a majority of shares voted at the meeting are voted in favor of the proposed Business Combination. Notwithstanding the foregoing, a public stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a group will be restricted from seeking conversion rights with respect to more than 20% of the Public Shares. Generally, in this context, a stockholder will be deemed to be acting in concert or as a group with another stockholder when such stockholders agree to act together for the purpose of acquiring, voting, holding or disposing of our equity securities.
ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion should be read in conjunction with our financial statements and the notes thereto included elsewhere in this Form 10-K.
This Form 10-K contains forward-looking statements regarding the plans and objectives of management for future operations. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. 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, estimate, believe, intend or project or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that these projections included in these forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.
We have based the forward-looking statements included in this annual report on Form 10-K on the beliefs and assumptions of management and information available to us on the date of this annual report on Form 10-K, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
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We are a blank check company incorporated on March 24, 2014 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more businesses (Business Combination). We intend to effectuate our Business Combination using cash from the proceeds of a public offering (our IPO) and the sale of the Private Placement Warrants that occurred simultaneously with the completion of our IPO (the Private Placement Warrants), our capital stock, debt or a combination of cash, stock and debt.
As indicated in the accompanying financial statements, at December 31, 2015, we had approximately $10,000 in cash and deferred offering costs of $18,309,150. Further, we expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial Business Combination will be successful.
For the year ended December 31, 2015, we had a net loss of $332,612. Our entire activity through December 31, 2015 was the identification of a target company for an initial Business Combination. Subsequent to December 31, 2015, our activities mainly consisted of identifying and evaluating prospective acquisition candidates for a Business Combination. We believe that we have sufficient funds available to complete our efforts to effect a Business Combination with an operating business by June 11, 2016.
As indicated by the accompanying financial statements, at December 31, 2015, we had approximately $10,000 in cash and deferred offering costs of $18,309,150. Further, we expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete an initial Business Combination will be successful.
For the period from March 24, 2014 to December 31, 2014, we had a net loss of $1,037,086. Our entire activity from March 24, 2014 to December 31, 2014 was the identification of a target company for an initial Business Combination. Subsequent to December 31, 2015, our activities mainly consisted of identifying and evaluating prospective acquisition candidates for a Business Combination. We believe that we have sufficient funds available to complete our efforts to effect a Business Combination with an operating business by June 11, 2016.
Prior to our IPO, on March 24, 2014, our Sponsor purchased an aggregate of 14,375,000 Founder Shares for an aggregate purchase price of $25,000, or approximately $0.002 per share. Immediately prior to the pricing of our IPO, on June 5, 2014, our Sponsor forfeited 1,868,750 Founder Shares so that the remaining Founder Shares represented 20.0% of the outstanding shares upon completion of our IPO. On June 11, 2014, we consummated our IPO of 50,025,000 units (which includes the full exercise of the underwriters over-allotment option) at a price of $10.00 per unit generating gross proceeds of $500,250,000 before underwriting discounts and expenses. Simultaneously with the commencement of our IPO, on June 5, 2014, we consummated the private sale of an aggregate of 22,400,000 Private Placement Warrants, each exercisable to purchase one-half of one share of Common Stock at $5.75 per half share, to our Sponsor, at a price of $0.50 per Private Placement Warrant, generating proceeds, before expenses, of $11,200,000. We received net proceeds from our IPO and the sale of the Private Placement Warrants of approximately $501,345,400, net of the non-deferred portion of the underwriting commissions of $9,204,600 and offering costs and other expenses of approximately $900,000. The amount of proceeds not deposited in the Trust Account (defined below) was $1,095,400 at closing of our IPO. In addition, interest income on the funds held in the Trust Account may be released to us to pay our franchise and income tax obligations. For a description of the proceeds generated in our IPO and a discussion of the use of such proceeds, we refer you to Note 3 of the financial statements included in Item 8 of this Report.
As of December 31, 2015, investment securities in our Trust Account consisted of $499,848,764 invested in U.S. government treasury bills with a maturity of 140 days or less and $799,033 in a money market fund. As of December 31, 2014, investment securities in our Trust Account consisted of $500,151,393 invested in U.S. government treasury bills with a maturity of 169 days or less and $164,253 held in cash.
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As of December 31, 2015, we had cash held outside of our Trust Accounts, of $10,000, which is available to fund our working capital requirements. As of December 31, 2014, we had cash held outside of our Trust Accounts, of $801,415, which is available to fund our working capital requirements.
We intend to use substantially all of the funds held in our Trust Account, including interest (which interest shall be net of taxes payable) to consummate our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to consummate our Business Combination, the remaining proceeds held in our Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategy.
On March 26, 2015, we issued the Convertible Note to our Sponsor that provides for our Sponsor to loan us up to $300,000 for ongoing expenses. The Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of our Sponsor, any amounts outstanding under the Convertible Note may be converted into warrants to purchase shares of Common Stock at a conversion price of $0.60 per warrant. Each warrant will entitle our Sponsor to purchase one-half of one share of Common Stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants previously issued to our Sponsor. On April 16, 2015, we borrowed the total proceeds of $300,000 from the Convertible Note entered with our Sponsor. As of December 31, 2015, the outstanding balance of the Convertible Note was $310,644.
On January 5, 2016, we issued the Second Convertible Note to our Sponsor that provides for our Sponsor to loan us up to $425,000 for ongoing expenses. The Second Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of our Sponsor, any amounts outstanding under the Second Convertible Note may be converted into warrants to purchase shares of Common Stock at a conversion price of $0.50 per warrant. Each warrant will entitle our Sponsor to purchase one-half of one share of Common Stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants. On January 5, 2016, we borrowed the total proceeds of $425,000 from the Second Convertible Note entered with our Sponsor.
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or enter into any non-financial agreements involving assets.
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than an administrative agreement to pay an affiliate of our Sponsor a monthly fee of $10,000. This amount covers secretarial and administrative services provided to members of our management team by our Sponsor, members of our Sponsor, and our management team or their affiliates. Upon completion of a Business Combination or our liquidation, we will cease paying this monthly fee.
On March 26, 2015, our Sponsor irrevocably and unconditionally waived the $10,000 per month payment obligations for the period beginning on January 1, 2015 and ending on December 31, 2015. On January 13, 2016, our Sponsor irrevocably and unconditionally waived the $10,000 per month payment obligations for the period beginning on January 1, 2016 and ending on December 31, 2016.
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:
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We comply with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A Expenses of Offering. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to our IPO and were charged to stockholders equity upon the completion of our IPO. Accordingly, at December 31, 2015, offering costs totaling approximately $28,473,750 (including $27,513,750 in underwriters fees) have been charged to stockholders equity.
All of the 50,025,000 common shares sold as part of the units in our IPO contain a redemption feature which allows for the redemption of common shares under our Liquidation or Tender Offer/Stockholder Approval provisions. In accordance with ASC 480, redemption provisions not solely within our control require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entitys equity instruments, are excluded from the provisions of ASC 480. Although we did not specify a maximum redemption threshold, our charter provides that in no event will we redeem our Public Shares in an amount that would cause our net tangible assets (stockholders equity) to be less than $5,000,001.
We recognize changes in redemption value immediately as they occur and adjusts the carrying value of the security to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable Common Stock are affected by charges against accumulated deficit.
Accordingly, at December 31, 2015, 47,663,155 of the 50,025,000 Public Shares were classified outside of permanent equity at its redemption value.
Accordingly, at December 31, 2014, 47,696,416 of the 50,025,000 Public Shares were classified outside of permanent equity at its redemption value.
Net loss per common share is computed by dividing net loss applicable to Common Stockholders by the weighted average number of shares of Common Stock outstanding during the period, plus to the extent dilutive the incremental number of shares of Common Stock to settle warrants, as calculated using the treasury stock method. At December 31, 2015, we did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into Common Stock and then share in our earnings under the treasury stock method. As a result, diluted loss per common share is the same as basic loss per common share for the period.
Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company adopted FASB Accounting Standards Update No. 2014-10 (ASU No. 2014-10) to Topic 915, which eliminated certain financial reporting requirements of companies previously identified as Development Stage Entities (Topic 915). The amendments in ASU No. 2014-10 simplify the accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs, by eliminating the requirement for development stage entities to present inception-to-date information in the statements of operations, cash flows, and stockholders equity.
The Company adopted FASB Accounting Standards Update No. 2014-15, which provided guidance on managements responsibility in evaluating whether there is substantial doubt about a companys ability to continue as a going concern within one year from the date the financial statements are issued and to provide related footnote disclosures.
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As of December 31, 2015, the Companys financial statements have been presented to conform with the reporting and disclosure requirements of the above standards.
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES AND MARKET RISKS |
Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices and/or equity prices. To date, our efforts have been limited to organizational activities and activities relating to our IPO and the identification of a target business. As of December 31, 2015, approximately $482,338,647 (excluding approximately $18,309,150 of deferred underwriting discounts) was held in trust for the purposes of consummating a Business Combination. The proceeds held in trust (including the deferred underwriting discounts) consist of $499,848,764 invested in U.S. government treasury bills with a maturity of 161 days or less and $799,033 held in a money market fund. We have neither engaged in any operations nor generated any revenues. As the proceeds from our IPO held in trust have been invested in short term investments, we are subject to market risk primarily through the effect of changes in interest rates on government securities. However, due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk. As of December 31, 2015, the effective annualized interest rate payable on our investments was approximately 0.12%.
We have not engaged in any hedging activities since our inception on March 24, 2014. We do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
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ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
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The following table presents selected unaudited quarterly financial data of the Company for the year ended December 31, 2015.
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2015 | Year Ended December 31, 2015 |
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First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
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Operating Expenses: |
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Professional fees and other expenses | $ | (165,820 | ) | $ | (86,426 | ) | $ | (78,013 | ) | $ | (255,509 | ) | $ | (585,768 | ) | |||||
State franchise taxes, other than income tax |
(43,890 | ) | (46,110 | ) | (45,000 | ) | (45,000 | ) | (180,000 | ) | ||||||||||
Interest on Sponsor convertible note | | (3,082 | ) | (3,781 | ) | (3,781 | ) | (10,644 | ) | |||||||||||
Loss from operations | (209,710 | ) | (135,618 | ) | (126,794 | ) | (304,290 | ) | (776,412 | ) | ||||||||||
Other Income: |
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Interest income T-Bills | 83,095 | 100,353 | 97,743 | 162,609 | 443,800 | |||||||||||||||
Net Income (Loss) | $ | (126,615 | ) | $ | (35,265 | ) | $ | (29,051 | ) | $ | (141,681 | ) | $ | (332,612 | ) | |||||
Income (Loss) per common share: |
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Basic and diluted | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.02 | ) | |||||
Weighted Average shares outstanding: |
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Basic and diluted | 14,834,975 | 14,847,535 | 14,851,054 | 14,854,081 | 14,846,923 | |||||||||||||||
Balance Sheet Data (at period end) |
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Cash | $ | 614,334 | $ | 263,591 | $ | 229,666 | $ | 10,000 | $ | 10,000 | ||||||||||
Prepaid Expenses | 157,827 | 118,343 | 87,755 | 48,654 | 48,654 | |||||||||||||||
Investments and cash held in Trust Account | 500,398,741 | 500,443,270 | 500,513,100 | 500,647,797 | 500,647,797 | |||||||||||||||
Total Assets | 501,170,902 | 500,825,204 | 500,830,521 | 500,706,451 | 500,706,451 | |||||||||||||||
Deferred Underwriting Fee | 18,309,150 | 18,309,150 | 18,309,150 | 18,309,150 | 18,309,150 | |||||||||||||||
Total Liabilities | 19,333,353 | 19,022,920 | 19,057,288 | 19,074,899 | 19,074,899 | |||||||||||||||
Common Stock subject to possible redemption | 476,837,540 | 476,802,280 | 476,773,230 | 476,631,550 | 476,631,550 | |||||||||||||||
Total stockholders equity | $ | 5,000,009 | $ | 5,000,004 | $ | 5,000,003 | $ | 5,000,002 | $ | 5,000,002 |
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The Board of Directors and Stockholders
WL Ross Holding Corp.:
We have audited the accompanying balance sheets of WL Ross Holding Corp. (the Company) as of December 31, 2015 and 2014, and the related statements of operations, stockholders equity and cash flows for the year ended December 31, 2015 and for the period from March 24, 2014 (inception) to December 31, 2014. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide 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 WL Ross Holding Corp. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for year ended December 31, 2015 and for the period from March 24, 2014 (inception) to December 31, 2014, in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company will cease all operations, except for the purpose of winding up, redeem all public shares outstanding and dissolve and liquidate in the event that the Company does not consummate an initial business combination by June 11, 2016. Additionally, the Company has suffered recurring losses from operations and has negative working capital. These conditions raise substantial doubt about its ability to continue as a going concern. Managements plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ KPMG LLP
New York, New York
January 14, 2016
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WL ROSS HOLDING CORP.
BALANCE SHEETS
December 31, 2015
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December 31, 2015 |
December 31, 2014 |
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ASSETS: |
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Current assets: |
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Cash | $ | 10,000 | $ | 801,415 | ||||
Prepaid expenses | 48,654 | 152,628 | ||||||
Total current assets | 58,654 | 954,043 | ||||||
Noncurrent assets: |
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Investments and cash held in Trust Account | 500,647,797 | 500,315,646 | ||||||
Total assets | $ | 500,706,451 | $ | 501,269,689 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accrued expenses | $ | 386,811 | $ | 856,821 | ||||
Sponsor convertible note | 310,644 | | ||||||
State franchise tax accrual | 68,294 | 139,554 | ||||||
Total current liabilities | 765,749 | 996,375 | ||||||
Other liabilities: |
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Deferred underwriting compensation | 18,309,150 | 18,309,150 | ||||||
Total liabilities | 19,074,899 | 19,305,525 | ||||||
Common stock subject to possible redemption; 47,663,155 and 47,696,416 shares at December 31, 2015 and December 31, 2014, respectively (at redemption value of $10.00 per share) | 476,631,550 | 476,964,160 | ||||||
Stockholders equity: |
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized, none issued or outstanding | | | ||||||
Common stock, $0.0001 par value; 200,000,000 shares authorized, 14,868,095 and 14,834,834 shares issued and outstanding (excluding 47,663,155 and 47,696,416 subject to possible redemption) at December 31, 2015 and December 31, 2014, respectively | 1,486 | 1,483 | ||||||
Additional paid-in-capital | 6,368,214 | 6,035,607 | ||||||
Accumulated deficit | (1,369,698 | ) | (1,037,086 | ) | ||||
Total stockholders equity | 5,000,002 | 5,000,004 | ||||||
Total liabilities and stockholders equity | $ | 500,706,451 | $ | 501,269,689 |
See accompanying notes to financial statements.
F-1
WL ROSS HOLDING CORP.
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Year ended December 31, 2015 |
For the Period from March 24, 2014 (inception) to December 31, 2014 |
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Revenue | $ | | $ | | ||||
Professional fees and other expenses | (585,768 | ) | (963,178 | ) | ||||
State franchise taxes, other than income tax | (180,000 | ) | (139,554 | ) | ||||
Interest on Sponsor convertible note | (10,644 | ) | | |||||
Loss from operations | (776,412 | ) | (1,102,732 | ) | ||||
Other income Interest income | 443,800 | 65,646 | ||||||
Net loss attributable to common shares | $ | (332,612 | ) | $ | (1,037,086 | ) | ||
Weighted average common shares outstanding, basic and diluted (excluding shares subject to possible redemption) | 14,846,923 | 14,619,097 | ||||||
Net loss per common share: |
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Basic and diluted | $ | (0.02 | ) | $ | (0.07 | ) |
See accompanying notes to financial statements.
F-2
WL ROSS HOLDING CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
For the year ended December 31, 2015 and for the period from
March 24, 2014 (inception) to December 31, 2014
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Common Stock | Additional Paid-in Capital |
Accumulated Deficit |
Stockholders Equity |
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Shares | Amount | |||||||||||||||||||
Balances, January 1, 2015 | 14,834,834 | $ | 1,483 | $ | 6,035,607 | $ | (1,037,086 | ) | $ | 5,000,004 | ||||||||||
Change in shares subject to possible redemption |
33,261 | 3 | 332,607 | | 332,610 | |||||||||||||||
Net loss for the year ended December 31, 2015 |
| | | (332,612 | ) | (332,612 | ) | |||||||||||||
Balances, December 31, 2015 | 14,868,095 | $ | 1,486 | $ | 6,368,214 | $ | (1,369,698 | ) | $ | 5,000,002 |
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Common Stock | Additional Paid-in Capital |
Accumulated Deficit |
Stockholders Equity |
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Shares | Amount | |||||||||||||||||||
Sale of common stock to Sponsor on March 24, 2014 at $0.002 per share |
14,375,000 | $ | 1,437 | $ | 23,563 | $ | | $ | 25,000 | |||||||||||
Forfeiture of common stock by Sponsor on June 5, 2014 |
(1,868,750 | ) | (187 | ) | 187 | | | |||||||||||||
Sale of common stock on June 5, 2014 at $10.00 per share |
50,025,000 | 5,003 | 500,244,997 | | 500,250,000 | |||||||||||||||
Sale of 22,400,000 of Private Placement Warrants on June 5, 2014 at $0.50 per warrant |
| | 11,200,000 | | 11,200,000 | |||||||||||||||
Underwriters compensation and offering expenses |
| | (28,473,750 | ) | | (28,473,750 | ) | |||||||||||||
Common stock subject to possible redemption; 47,800,124 (at redemption value of $10.00 per share) |
(47,800,124 | ) | (4,780 | ) | (477,996,460 | ) | | (478,001,240 | ) | |||||||||||
Change in proceeds subject to possible redemption to 47,696,416 shares at redemption value |
103,708 | 10 | 1,037,070 | | 1,037,080 | |||||||||||||||
Net loss attributable to common shares |
| | | (1,037,086 | ) | (1,037,086 | ) | |||||||||||||
Balances, December 31, 2014 | 14,834,834 | $ | 1,483 | $ | 6,035,607 | $ | (1,037,086 | ) | $ | 5,000,004 |
See accompanying notes to financial statements.
F-3
WL ROSS HOLDING CORP.
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Year ended December 31, 2015 |
For the Period from March 24, 2014 (inception) to December 31, 2014 |
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Cash flows from operating activities: |
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Net loss | $ | (332,612 | ) | $ | (1,037,086 | ) | ||
Adjustments to reconcile net loss to net cash used in operations: |
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Decrease/(Increase) in prepaid expenses | 103,974 | (152,628 | ) | |||||
Increase/(Decrease) in accrued state franchise tax | (71,260 | ) | 139,554 | |||||
Increase/(Decrease) in accrued expenses | (470,010 | ) | 856,821 | |||||
Accrued interest on Sponsor convertible note | 10,644 | | ||||||
Amortization of original issue discount | (108,098 | ) | (14,376 | ) | ||||
Interest on investments | (335,702 | ) | (51,270 | ) | ||||
Net cash used by operating activities | (1,203,064 | ) | (258,985 | ) | ||||
Cash flows from investing activities: |
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Withdrawal of trust account funds for payment of Delaware franchise tax | 111,649 | | ||||||
Proceeds deposited into trust account for investments | | (500,250,000 | ) | |||||
Net cash provided by/(used in) investing activities | 111,649 | (500,250,000 | ) | |||||
Cash flows from financing activities: |
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Proceeds from sale of common stock to Sponsor | | 25,000 | ||||||
Proceeds from sale of common stock through public offering | | 500,250,000 | ||||||
Proceeds from Sponsor to purchase private placement warrants | | 11,200,000 | ||||||
Proceeds from note payable related party | | 350,000 | ||||||
Payment of underwriting discounts | | (9,204,600 | ) | |||||
Payment of accrued formation and offering costs | | (960,000 | ) | |||||
Payment of note payable related party | | (350,000 | ) | |||||
Proceeds from Sponsor convertible note | 300,000 | |||||||
Net cash provided by financing activities | 300,000 | 501,310,400 | ||||||
Increase (decrease) in cash | (791,415 | ) | 801,415 | |||||
Cash at beginning the period | 801,415 | | ||||||
Cash at end of the period | $ | 10,000 | $ | 801,415 | ||||
Supplemental disclosure of non-cash financing activities: |
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Deferred underwriting compensation | $ | | $ | 18,309,150 | ||||
Supplemental disclosure of cash flow information |
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Cash paid for state franchise taxes | $ | (251,260 | ) | $ | |
See accompanying notes to financial statements.
F-4
WL Ross Holding Corp. (the Company) was incorporated in Delaware on March 24, 2014. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the Business Combination). The Company has neither engaged in any operations nor generated any revenue to date. The Companys management has broad discretion with respect to the Business Combination. The Companys sponsor is WL Ross Sponsor LLC, a Delaware limited liability company (the Sponsor). The Company has selected December 31 as its fiscal year-end.
At December 31, 2015, the Company had not commenced any operations. All activity for the period from March 24, 2014 (inception) through December 31, 2015 relates to the Companys formation, initial public offering (Public Offering) described below and efforts directed toward locating a suitable Business Combination. The Company will not generate any operating revenues until after the completion of its Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Public Offering.
The Company intends to finance a Business Combination with the proceeds from a $500,250,000 Public Offering (Note 3) and an $11,200,000 private placement (Note 4).
Upon the closing of the Public Offering and the private placement, $500,250,000 was placed in a trust account with the Continental Stock Transfer & Trust Company (the Trust Account) acting as Trustee.
The Trust Account can be invested only in U.S. government treasury bills with a maturity of one hundred and eighty (180) days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act of 1940 which invest only in direct U.S. government obligations. As of December 31, 2015 and December 31, 2014 the Trust Account consisted of U.S. government treasury bills and cash.
The Companys amended and restated certificate of incorporation provides that, other than the withdrawal of interest to pay taxes, if any, none of the funds held in trust will be released until the earlier of: (i) the completion of the Business Combination; or (ii) the redemption of 100% of the shares of common stock included in the units being sold in the Public Offering if the Company is unable to complete a Business Combination within 24 months from the closing of the Public Offering (June 11, 2016), subject to the requirements of law and stock exchange rules.
The Companys management has broad discretion with respect to the specific application of the net proceeds of the Public Offering, although substantially all of the net proceeds of the Public Offering are intended to be generally applied toward consummating a Business Combination with (or acquisition of) a Target Business. As used herein, Target Business must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the trust account (less any deferred underwriting commissions and taxes payable on interest earned) at the time of the Company signing a definitive agreement in connection with the Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect a Business Combination.
The Company, after signing a definitive agreement for a Business Combination, will either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including
F-5
interest but less taxes payable, or (ii) provide stockholders with the opportunity to sell their shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to commencement of the tender offer, including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval of the Business Combination or will allow stockholders to sell their shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval, unless a vote is required by NASDAQ rules. If the Company seeks stockholder approval, it will complete its Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Business Combination. However, in no event will the Company redeem or repurchase its public shares in an amount that would cause its net tangible assets to be less than $5,000,001. In such case, the Company would not proceed with the redemption or repurchase of its public shares and the related Business Combination, and instead may search for an alternate Business Combination.
If the Company holds a stockholder vote or there is a tender offer for shares in connection with a Business Combination, public stockholders will have the opportunity to have public shares redeemed or repurchased for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination or commencement of the tender offer, respectively, including interest but less taxes payable. As a result, such shares have been classified as common stock subject to possible redemption, in accordance with ASC 480, Distinguishing Liabilities from Equity.
The Company will only have 24 months from the closing date of the Public Offering (June 11, 2016) to complete its Business Combination. If the Company does not complete a Business Combination within this period of time, it shall (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem the public shares of common stock for a per share pro rata portion of the Trust Account, including interest, but less taxes payable (less up to $50,000 of such net interest to pay dissolution expenses) and (iii) as promptly as possible following such redemption, dissolve and liquidate the balance of the Companys net assets to its remaining stockholders, as part of its plan of dissolution and liquidation. The Sponsor has entered into letter agreements with the Company, pursuant to which it has waived its rights to participate in any redemption with respect to its initial shares; however, if the Sponsor or any of the Companys officers, directors or affiliates acquire shares of common stock in or after the Public 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 complete 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 Public Offering.
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
F-6
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (SEC), and reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the financial position as of December 31, 2015 and 2014 and the results of operations and cash flows for the periods presented.
Net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period, plus to the extent dilutive the incremental number of shares of common stock to settle warrants, as calculated using the treasury stock method. At December 31, 2015, the Company had outstanding warrants to purchase 36,212,500 shares of common stock and notes that could convert into warrants and potentially be exercised or converted into common shares. For all periods presented, the weighted average of these shares was excluded from the calculation of diluted loss per share of common stock because their inclusion would have been anti-dilutive. As a result, dilutive loss per share of common stock is equal to basic loss per share of common stock.
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
The fair value of the Companys assets and liabilities, which qualify as financial instruments under ASC 820, Fair Value Measurements and Disclosures, approximates the carrying amounts represented in the balance sheets.
The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A Expenses of Offering. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering and were charged to stockholders equity upon the completion of the Public Offering. Accordingly, at December 31, 2015 and December 31, 2014, offering costs totaling approximately $28,473,750 (including $27,513,750 in underwriters fees) have been charged to stockholders equity.
As discussed in Note 3, all of the 50,025,000 common shares sold as part of the units in the Public Offering contain a redemption feature which allows for the redemption of common shares under the Companys Liquidation or Tender Offer/Stockholder Approval provisions. In accordance with ASC 480, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entitys equity instruments, are excluded from the provisions of ASC 480. Although the Company did not specify a maximum redemption threshold, its charter provides that in no event will it redeem its public shares in an amount that would cause its net tangible assets (stockholders equity) to be less than $5,000,001.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of the security to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against accumulated deficit.
F-7
Accordingly, at December 31, 2015 and December 31, 2014, 47,663,155 and 47,696,416, respectively, of the 50,025,000 public shares were classified outside of permanent equity at its redemption value.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Companys 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.
The Company follows the asset and liability method of accounting for income taxes under ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
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 liabilities or 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 liabilities as income tax expense. No amounts were accrued for the payment of interest and penalties at December 31, 2015 and December 31, 2014. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
The Company may be subject to potential examination by U.S. federal, states or foreign jurisdiction authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income amount various tax jurisdictions and compliance with U.S. federal, states or foreign tax laws. The Companys management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
The Company is incorporated in the State of Delaware and is required to pay franchise taxes to the State of Delaware on an annual basis.
The Company adopted FASB Accounting Standards Update No. 2014-10 (ASU No. 2014-10) to Topic 915, which eliminated certain financial reporting requirements of companies previously identified as Development Stage Entities (Topic 915). The amendments in ASU No. 2014-10 simplify the accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs, by eliminating the requirement for development stage entities to present inception-to-date information in the statements of operations, cash flows, and stockholders equity.
The Company adopted FASB Accounting Standards Update No. 2014-15, which provided guidance on managements responsibility in evaluating whether there is substantial doubt about a companys ability to continue as a going concern within one year from the date the financial statements are issued and to provide related footnote disclosures.
F-8
As of December 31, 2015, the Companys financial statements have been presented to conform with the reporting and disclosure requirements of the above standards.
If the Company does not complete an initial Business Combination by June 11, 2016, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the common stock sold as part of the units in the Public Offering, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of franchise and income taxes payable and less up to $50,000 of such net interest which may be distributed to the Company to pay dissolution expenses), divided by the number of then outstanding public shares, 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 (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Companys remaining stockholders and the Companys Board of directors, dissolve and liquidate, subject in each case to the Companys obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. This mandatory liquidation and subsequent dissolution requirement raises substantial doubt about the Companys ability to continue as a going concern.
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 Public Offering. In addition if the Company fails to complete its Business Combination by June 11, 2016, there will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless.
In addition, at December 31, 2015, the Company had current liabilities of $765,749 and negative working capital of $707,095 largely due to amounts owed to professionals, consultants, advisors and others who are working on seeking a Business Combination described in Note 1. Such work is continuing after December 31, 2015 and amounts are continuing to accrue. The Company expects to pay many of these costs upon consummation of the Business Combination. The uncertainty regarding the lack of resources to pay the above noted liabilities raises substantial doubt about the Companys ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be unable to continue operations.
On June 11, 2014, the Company sold 50,025,000 at a price of $10.00 per unit (the Public Units) in the Public Offering. Each Unit consists of the Companys share of our common stock, $0.0001 par value per share and one redeemable common stock purchase warrant (the Warrants).
Under the terms of the warrant agreement, the Company has agreed to use its best efforts to file a new registration statement under the Securities Act following the completion of the Business Combination. Each Warrant entitles the holder to purchase one-half of one share of common stock at a price of $5.75. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number the number of shares of common stock to be issued to the warrant holder. Each Warrant will become exercisable on the later of 30 days after the completion of the Companys Business Combination or 12 months from the closing of the Public Offering and will expire five years after the completion of the Companys Business Combination or earlier upon redemption or liquidation. However, if the Company does not complete its Business Combination on or prior to the 24-month period allotted to complete the Business Combination, the Warrants will expire at the end of such period. If the Company is unable to deliver registered shares of common stock to the holder upon exercise of Warrants issued in connection with the 50,025,000 Public Units during the exercise period, there will be no net cash settlement
F-9
of these Warrants and the Warrants will expire worthless, unless they may be exercised on a cashless basis in the circumstances described in the warrant agreement. Once the warrants become exercisable, the Company may redeem the outstanding warrants in whole and not in part at a price of $0.01 per warrant upon a minimum of 30 days prior written notice of redemption, only in the event that the last sale price of the Companys shares of common stock equals or exceeds $24.00 per share for any 20 trading days within the 30-trading day period ending on the third trading day before the Company sends the notice of redemption to the warrant holders.
The Company paid an upfront underwriting discount of approximately 1.84% ($9,204,600) of the per unit offering price to the underwriters at the closing of the Public Offering, with an additional fee (the Deferred Discount) of 3.66% ($18,309,150) of the gross offering proceeds payable upon the Companys completion of a Business Combination. The Deferred Discount will become payable to the underwriters from the amounts held in the Trust Account solely in the event the Company completes its Business Combination. The underwriters are not entitled to any interest accrued on the Deferred Discount.
In March 2014, the Sponsor purchased 14,375,000 shares of common stock (the Founder Shares) for $25,000, or approximately $0.002 per share. The Founder Shares are identical to the common stock included in the Units sold in the Public Offering except that the Founder Shares are subject to certain transfer restrictions, as described in more detail below. Immediately prior to the Public Offering, the Sponsor forfeited 1,868,750 Founder Shares so that the remaining founder shares represent 20.0% of the outstanding shares upon the completion of the Public Offering.
The Sponsor has agreed not to transfer, assign or sell any of its Founder Shares until the earlier of (A) one year after the completion of the Business Combination, or earlier if, subsequent to the Business Combination, the last sale price of the Companys common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination or (B) the date on which the Company completes complete a liquidation, merger, stock exchange or other similar transaction after the Business Combination that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property (the Lock Up Period).
Rights The Founder Shares are identical to the public shares except that (i) the Founder Shares are subject to certain transfer restrictions, as described above, and (ii) the Sponsor has agreed to waive redemption rights in connection with the Business Combination with respect to the Founders Shares and any public shares they may purchase, and to waive their redemption rights with respect to the Founder Shares if the Company fails to complete a Business Combination within 24 months from the closing of the Public Offering (June 11, 2016).
Voting If the Company seeks stockholder approval of a Business Combination, the Sponsor has agreed to vote its Founder Shares and any public shares purchased during or after the Public Offering in favor of the Business Combination.
Redemption Although the Sponsor and its permitted transferees will waive their redemption rights with respect to the Founder Shares the Company faila to complete a Business Combination within the prescribed time frame, they will be entitled to redemption rights with respect to any public shares they may own.
Prior to the Public Offering, we had granted the Sponsor the option to purchase, simultaneously with the consummation of an initial Business Combination, up to an additional 10,000,000 shares of common stock at a price of $10.00 per share.
F-10
The Sponsor has purchased from the Company an aggregate of 22,400,000 warrants at a price of $0.50 per warrant (a purchase price of $11,200,000) in a private placement that occurred simultaneously with the completion of the Public Offering (the Private Placement Warrants). Each Private Placement Warrant entitles the holder to purchase one-half of one share of common stock at $5.75 per share. The purchase price of the Private Placement Warrants was added to the proceeds from the Public Offering to be held in the Trust Account pending completion of the Business Combination.
The Private Placement Warrants (including the common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the Business Combination and they will be non-redeemable so long as they are held by the Sponsor or its permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants included in the units being sold in the Public Offering. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants sold as part of the units in the Public Offering and have no net cash settlement provisions.
If the Company does not complete a Business Combination, then the Private Placement Warrants proceeds will be part of the liquidation distribution to the public stockholders and the Private Placement Warrants will expire worthless.
The holders of the Founder Shares and Private Placement Warrants hold registration rights to require the Company to register the sale of any of the securities held by them pursuant to a registration rights agreement. The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders will have piggy-back registration rights to include their securities in other registration statements filed by the Company. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable Lock Up Period. The Company will bear the costs and expenses of filing any such registration statements.
The Sponsor loaned the Company $350,000 in the aggregate by the issuance of unsecured promissory notes (the Notes) for $350,000 to cover expenses related to the Public Offering. These Notes were non-interest bearing and payable on the earlier of March 31, 2015 or the completion of the Public Offering. The Notes were repaid in full on June 12, 2014.
On March 26, 2015, the Company issued a convertible promissory note (the Convertible Note) to the Sponsor that provides for the Sponsor to loan us up to $300,000 for ongoing expenses. The Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of the Sponsor, any amounts outstanding under the Convertible Note may be converted into warrants to purchase shares of our common stock at a conversion price of $0.60 per warrant. Each warrant will entitle the Sponsor to purchase one-half of one share of our common stock at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants previously issued to the Sponsor. On April 16, 2015, the Company borrowed the total proceeds of $300,000 from the Convertible Note entered with the Sponsor. For the year ended December 31, 2015, the Company incurred $10,644 of interest expense which under the terms of the Convertible Note has been added to the principal amount. As of December 31, 2015, the outstanding balance of the Convertible Note is $310,644.
F-11
The Company has agreed to pay $10,000 a month for office space, administrative services and secretarial support to WL Ross & Co. LLC, an affiliate of the Sponsor. Upon the completion of the Business Combination or the liquidation of the Company, the Company will cease paying these monthly fees. On March 26, 2015, The Sponsor irrevocably and unconditionally waived the $10,000 per month payment obligations of the Company for office space, administrative services and secretarial support for the year beginning on January 1, 2015 to December 31, 2015.
The Company is committed to pay the Deferred Discount totaling $18,309,150 or 3.66% of the gross offering proceeds of the Public Offering, to the underwriters upon the Companys consummation of a Business Combination. The underwriters are not entitled to any interest accrued on the Deferred Discount, and no Deferred Discount is payable to the underwriters if there is no Business Combination.
Components of the Companys deferred tax asset at December 31, 2015 are as follows:
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Net operating loss | 415,233 | |||
Valuation allowance | (415,233 | ) | ||
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Components of the Companys deferred tax asset at December 31, 2014 are as follows:
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Net operating loss | 319,041 | |||
Valuation allowance | (319,041 | ) | ||
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The Company established a valuation allowance of approximately $415,000 as of December 31, 2015 and $319,000 as of December 31, 2014, which fully offsets the deferred tax asset as of December 31, 2015 and December 31, 2014 of approximately $415,000 and $319,000 respectively. The deferred tax asset results from applying an effective combined federal and state tax rate of 35% to net operating loss of approximately $1,186,000 as of December 31, 2015 and $912,000 as of December 31, 2014, respectively. The Companys net operating losses will expire beginning 2034.
As of December 31, 2015 investment securities in the Companys Trust Account consist of $499,848,764 in United States Treasury Bills and $799,033 in a money market fund. As of December 31, 2014 investment securities in the Companys Trust Account consist of $500,151,393 in United States Treasury Bills and $164,253 in cash. The Company classifies its United States Treasury and equivalent securities as held-to-maturity in accordance with FASB ASC 320, Investments Debt and Equity Securities. Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying balance sheet and adjusted for the amortization or accretion of premiums or discounts.
F-12
The carrying amount, excluding accrued interest income, gross unrealized holding gains and fair value of held to maturity securities at December 31, 2015 and December 31, 2014 are as follows:
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Carrying Amount December 31, 2015 |
Gross Unrealized Holding Gains |
Fair Value | ||||||||||
Held-to-maturity: |
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U.S. Treasury Securities (Maturity dates range from 3/31/16 to 5/19/16) | $ | 499,848,764 | $ | 41,283 | $ | 499,890,047 |
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Carrying Amount December 31, 2014 |
Gross Unrealized Holding Gains |
Fair Value | ||||||||||
Held-to-maturity: |
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U.S. Treasury Securities (Maturity dates range from 4/16/15 to 6/18/15) | $ | 500,151,393 | $ | 20,622 | $ | 500,172,015 |
The Company complies with FASB ASC 820, Fair Value Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The following table presents information about the Companys assets that are measured at fair value on a recurring basis as of December 31, 2015 and December 31, 2014, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability:
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Description | December 31, 2015 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Other Unobservable Inputs (Level 3) |
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Investments in treasury bills held in trust account | $ | 499,890,047 | $ | 499,890,047 | $ | | $ | | ||||||||
Investments in money market fund held in trust account | 799,033 | 799,033 | | | ||||||||||||
Total | $ | 500,689,080 | $ | 500,689,080 | $ | | $ | |
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Description | December 31, 2014 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Other Unobservable Inputs (Level 3) |
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Investments and cash held in trust account | $ | 500,336,268 | $ | 500,336,268 | $ | | $ | |
The Company is authorized to issue 200,000,000 shares of common stock. Holders of the Companys common stock are entitled to one vote for each share of common stock. At December 31, 2015, there were 62,531,250 shares of common stock outstanding, including 47,663,155 shares subject to possible redemption.
F-13
At December 31, 2014, there were 62,531,250 shares of common stock outstanding, including 47,696,416 shares subject to possible redemption.
The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. At December 31, 2015 and December 31, 2014, there were no shares of preferred stock issued and outstanding.
On August 13, 2015, Robert S. Miller resigned from the Board of directors of the Company and any committees thereof. Two of the Companys four directors are independent and the Companys audit committee is currently comprised of two independent directors due to the vacancy caused by this resignation.
Also on August 13, 2015, the Company notified NASDAQ that it was no longer in compliance with Rule 5605(b)(1) of NASDAQs listing requirements requiring that a majority of the board of directors of a NASDAQ-listed company be comprised of independent directors or Rule 5605(c)(2) of NASDAQs listing requirements requiring an audit committee to be comprised of at least three members. The Company is relying on the cure period set forth in Rule 5605(b)(1)(A) and Rule 5605(c)(4) that provides that if an issuer fails to comply with the requirement that a majority of the board of directors must be comprised of independent directors or that an audit committee be comprised of three independent directors due to one vacancy, the issuer shall regain compliance by the earlier of its next annual meeting of shareholders or one year from the occurrence of the event that caused the failure to comply with the requirement.
On January 13, 2016, the Board of directors of the Company appointed Robert C. Dinerstein to serve as an independent director on the Companys Board of Directors, Audit Committee, and Compensation Committee, with such appointment to be effective as of January 15, 2016. Because Mr. Dinersteins appointment will take effect before the annual meeting of shareholders and before the anniversary of Mr. Millers resignation, the Company will thereby regain compliance on January 15, 2016 with NASDAQs Rule 5605(b)(1) and Rule 5605(c)(2).
Mr. Dinerstein will participate in the director compensation arrangements generally applicable to all of the Companys directors. Under the terms of those arrangements as currently in effect, Mr. Dinerstein will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Companys behalf such as attending board meetings, identifying potential target businesses and performing due diligence on suitable business combinations. As of the date of this report, additional director compensation arrangements for Mr. Dinerstein have not been determined.
The Company did not hold an annual meeting of the stockholders by December 31, 2015 as required by NASDAQ Marketplace Rule 5620(a). To regain compliance so that the Company can continue to list our securities on the NASDAQ Stock Market, the Company has scheduled the 2015 annual meeting of the stockholders for February 11, 2016, within the cure period as communicated to us by NASDAQ.
Subsequent to the annual period covered by this report, on January 5, 2016, the Company issued an additional convertible promissory note (the Second Convertible Note) to the Sponsor that provides for the Sponsor to loan the Company up to $425,000 for ongoing expenses. The Second Convertible Note is interest bearing at 5% per annum and is due and payable on June 11, 2016. At the option of the Sponsor, any amounts outstanding under the Second Convertible Note may be converted into warrants to purchase shares of common stock of the Company at a conversion price of $0.50 per warrant. Each warrant will entitle the Sponsor to
F-14
purchase one-half of one share of common stock of the Company at an exercise price of $5.75 per half share ($11.50 per whole share). Each warrant will contain other terms identical to the terms contained in the Private Placement Warrants previously issued to the Sponsor. On January 5, 2016, the Company borrowed the total proceeds of $425,000 from the Second Convertible Note entered with the Sponsor.
On January 13, 2016, the Sponsor irrevocably and unconditionally waived the $10,000 per month payment obligations of the Company for office space, administrative services and secretarial support to WL Ross & Co. LLC, for the year beginning on January 1, 2016 to December 31, 2016.
On January 4, 2016, the Company received written notice from NASDAQ Stock Market LLC notifying it that the Company is not in compliance with requirements of Nasdaq Marketplace Rule 5620(a) and (b) for continued listing on The NASDAQ Global Market because the Company did not hold an annual meeting or solicit proxies for such meeting prior to December 31, 2015. The Company has requested an oral appeal hearing before the Nasdaq Listing Qualifications Panel.
NASDAQ has orally informed the Company that if it holds the 2015 annual meeting of stockholders on February 11, 2016, the Company will regain compliance with NASDAQs listing requirements. The Company intends to hold the annual meeting on February 11, 2016.
Other than the foregoing, management has performed an evaluation of subsequent events through the date of issuance of the financial statements, noting no items which require adjustments or disclosure.
F-15
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES |
None.
ITEM 9A. | CONTROLS AND PROCEDURES |
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2015. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. Management based its assessment on the 2013 framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Managements assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. Based on its assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2015.
During the most recently completed fiscal year, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the control systems objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within a company are detected. The inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
ITEM 9B. | OTHER INFORMATION |
None.
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ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
The information required by this Item is set forth under the headings Directors and Officers, Corporate Governance, Section 16(a) Beneficial Ownership Reporting Compliance, Conflict of Interest, and Limitation on Liability and Indemnification of Officers and Directors in our 2015 Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for our 2015 Annual Meeting of Stockholders (our 2015 Proxy Statement) and is incorporated herein by reference.
Such 2015 Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year to which this report relates.
ITEM 11. | EXECUTIVE COMPENSATION |
The information required by this Item is set forth under the heading Executive Officer and Director Compensation in our 2015 Proxy Statement and is incorporated herein by reference.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The information required by this Item is set forth under the headings Security Ownership of Certain Beneficial Owners and Management, Transfers of Founder Shares and Private Placement Warrants, Private Placement Shares and Registration Rights in our 2015 Proxy Statement and is incorporated herein by reference.
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
The information required by this Item is set forth under the headings Certain Relationships and Related Transactions and Director Independence in our 2015 Proxy Statement and is incorporated herein by reference.
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The information required by this Item is set forth under the heading Principal Accountant Fees and Services in our 2015 Proxy Statement and is incorporated herein by reference.
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ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a) The following documents are filed as part of this Annual Report on Form 10-K:
Financial Statements: The financial statements listed in the accompanying Index to the Financial Statements are filed or incorporated by reference as part of this Annual Report on Form 10-K.
(b) Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K.
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Exhibit Number |
Description | |
3.1 | Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 filed with Amendment No. 3 to the Form S-1 filed by the Registrant on June 3, 2014). | |
3.2 | Bylaws (incorporated by reference to Exhibit 3.3 filed with the Form S-1 filed by the Registrant on May 9, 2014). | |
4.1 | Specimen Unit Certificate (incorporated by reference to Exhibit 4.1 filed with Amendment No. 1 to the Form S-1 filed by the Registrant on May 30, 2014). | |
4.2 | Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.2 filed with Amendment No. 1 to the Form S-1 filed by the Registrant on May 30, 2014). | |
4.3 | Specimen Warrant Certificate (incorporated by reference to Exhibit 4.3 filed with Amendment No. 1 to the Form S-1 filed by the Registrant on May 30, 2014). | |
4.4 | Warrant Agreement (incorporated by reference to the document previously filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.1 | Promissory Note, dated March 24, 2014, issued to WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.1 filed with the Form S-1 filed by the Registrant on May 9, 2014). | |
10.2 | Amended and Restated Securities Subscription Agreement, dated April 4, 2014, between the Company and WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.5 filed with the Form S-1 filed by the Registrant on May 9, 2014). | |
10.3 | Promissory Note, dated May 12, 2014, issued to WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.2 filed with Amendment No. 1 to the Form S-1 filed by the Registrant on May 30, 2014). | |
10.4 | Promissory Note, dated May 22, 2014, issued to WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.3 filed with Amendment No. 1 to the Form S-1 filed by the Registrant on May 30, 2014). | |
10.5 | Letter Agreement, dated May 29, 2014, among the Company and our officers, directors and WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.4 filed with Amendment No. 1 to the Form S-1 filed by the Registrant on May 30, 2014). | |
10.6 | Investment Management Trust Agreement (incorporated by reference to Exhibit 10.1 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.7 | Registration Rights Agreement (incorporated by reference to Exhibit 10.2 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.8 | Amended and Restated Sponsor Warrants Purchase Agreement (incorporated by reference to Exhibit 10.3 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.9 | Indemnity Agreement between the Company and Wilbur L. Ross, Jr. (incorporated by reference to Exhibit 10.4 filed to the Form 8-K filed by the Registrant on June 16, 2014). |
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Exhibit Number |
Description | |
10.10 | Indemnity Agreement between the Company and Stephen J. Toy (incorporated by reference to Exhibit 10.5 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.11 | Indemnity Agreement between the Company and Michael J. Gibbons (incorporated by reference to Exhibit 10.6 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.12 | Indemnity Agreement between the Company and Wendy L. Teramoto (incorporated by reference to Exhibit 10.7 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.13 | Indemnity Agreement between the Company and Lord William Astor (incorporated by reference to Exhibit 10.8 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.14 | Indemnity Agreement between the Company and Thomas E. Zacharias (incorporated by reference to Exhibit 10.9 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.15 | Indemnity Agreement between the Company and Robert S. Miller (incorporated by reference to Exhibit 10.15 filed to the Form 10-K filed by the Registrant on March 31, 2015). | |
10.16* | Form of Indemnity Agreement between the Company and Robert C. Dinerstein. | |
10.17 | Administrative Services Agreement (incorporated by reference to the document previously filed to Exhibit 10.10 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.18 | Contribution Agreement (incorporated by reference to Exhibit 10.11 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.19 | Convertible Promissory Note, dated March 26, 2015, issued to WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.18 filed to the Form 10-K filed by the Registrant on March 31, 2015). | |
10.20* | Second Convertible Promissory Note, dated January 5, 2016, issued to WL Ross Sponsor LLC. | |
10.21 | Letter Agreement, dated March 30, 2015, between the Company and Robert S. Miller (incorporated by reference to Exhibit 10.19 filed to the Form 10-K filed by the Registrant on March 31, 2015). | |
10.22* | Form of Letter Agreement between the Company and Robert C. Dinerstein. | |
10.23 | Waiver Letter to the Administrative Services Agreement, dated March 26, 2015, between the Company and WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.1 filed to the Form 10-K filed by the Registrant on March 31, 2015). | |
10.24* | Second Waiver Letter to the Administrative Services Agreement, dated January 13, 2016, between the Company and WL Ross Sponsor LLC. | |
14 | Code of Ethics (incorporated by reference to Exhibit 14 filed with Amendment No. 3 to the Form S-1 filed by the Registrant on June 3, 2014). | |
24.1* | Power of Attorney (included on the signature pages herein). | |
31.1* | Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). | |
31.2* | Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). | |
32.1** | Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350. | |
32.2** | Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350. |
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Exhibit Number |
Description | |
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase |
* | Filed herewith. |
** | The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of WL Ross Holding Corp. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-K irrespective of any general incorporation language contained in such filing. |
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Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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WL ROSS HOLDING CORP. | ||
Date: January 14, 2016 | /s/ Wilbur L. Ross, Jr.![]() Name: Wilbur L. Ross, Jr. Title: Chief Executive Officer (Principal Executive Officer) |
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Date: January 14, 2016 | /s/ Michael J. Gibbons![]() Name: Michael J. Gibbons Title: Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the dates indicated.
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Date: January 14, 2016 | /s/ Wilbur L. Ross, Jr.![]() Name: Wilbur L. Ross, Jr. Title: Chairman |
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Date: January 11, 2016 | /s/ Lord William Astor![]() Name: Lord William Astor Title: Director |
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Date: January 14, 2016 | /s/ Stephen J. Toy![]() Name: Stephen J. Toy Title: Director and President |
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Date: January 7, 2016 | /s/ Thomas E. Zacharias![]() Name: Thomas E. Zacharias Title: Director |
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KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael J. Gibbons, Stephen J. Toy, and Wendy L. Teramoto and each or any one of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated:
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Date: January 14, 2016 | /s/ Wilbur L. Ross, Jr.![]() Name: Wilbur L. Ross, Jr. Title: Chairman and Chief Executive Officer (Principal Executive Officer) |
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Date: January 14, 2016 | /s/ Michael J. Gibbons![]() Name: Michael J. Gibbons Title: Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) |
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Date: January 11, 2016 | /s/ Lord William Astor![]() Name: Lord William Astor Title: Director |
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Date: January 14, 2016 | /s/ Stephen J. Toy![]() Name: Stephen J. Toy Title: Director and President |
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Date: January 7, 2016 | /s/ Thomas E. Zacharias![]() Name: Thomas E. Zacharias Title: Director |
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Exhibit Number | Description | |
3.1 | Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 filed with Amendment No. 3 to the Form S-1 filed by the Registrant on June 3, 2014). | |
3.2 | Bylaws (incorporated by reference to Exhibit 3.3 filed with the Form S-1 filed by the Registrant on May 9, 2014). | |
4.1 | Specimen Unit Certificate (incorporated by reference to Exhibit 4.1 filed with Amendment No. 1 to the Form S-1 filed by the Registrant on May 30, 2014). | |
4.2 | Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.2 filed with Amendment No. 1 to the Form S-1 filed by the Registrant on May 30, 2014). | |
4.3 | Specimen Warrant Certificate (incorporated by reference to Exhibit 4.3 filed with Amendment No. 1 to the Form S-1 filed by the Registrant on May 30, 2014). | |
4.4 | Warrant Agreement (incorporated by reference to the document previously filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.1 | Promissory Note, dated March 24, 2014, issued to WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.1 filed with the Form S-1 filed by the Registrant on May 9, 2014). | |
10.2 | Amended and Restated Securities Subscription Agreement, dated April 4, 2014, between the Company and WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.5 filed with the Form S-1 filed by the Registrant on May 9, 2014). | |
10.3 | Promissory Note, dated May 12, 2014, issued to WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.2 filed with Amendment No. 1 to the Form S-1 filed by the Registrant on May 30, 2014). | |
10.4 | Promissory Note, dated May 22, 2014, issued to WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.3 filed with Amendment No. 1 to the Form S-1 filed by the Registrant on May 30, 2014). | |
10.5 | Letter Agreement, dated May 29, 2014, among the Company and our officers, directors and WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.4 filed with Amendment No. 1 to the Form S-1 filed by the Registrant on May 30, 2014). | |
10.6 | Investment Management Trust Agreement (incorporated by reference to Exhibit 10.1 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.7 | Registration Rights Agreement (incorporated by reference to Exhibit 10.2 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.8 | Amended and Restated Sponsor Warrants Purchase Agreement (incorporated by reference to Exhibit 10.3 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.9 | Indemnity Agreement between the Company and Wilbur L. Ross, Jr. (incorporated by reference to Exhibit 10.4 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.10 | Indemnity Agreement between the Company and Stephen J. Toy (incorporated by reference to Exhibit 10.5 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.11 | Indemnity Agreement between the Company and Michael J. Gibbons (incorporated by reference to Exhibit 10.6 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.12 | Indemnity Agreement between the Company and Wendy L. Teramoto (incorporated by reference to Exhibit 10.7 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.13 | Indemnity Agreement between the Company and Lord William Astor (incorporated by reference to Exhibit 10.8 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.14 | Indemnity Agreement between the Company and Thomas E. Zacharias (incorporated by reference to Exhibit 10.9 filed to the Form 8-K filed by the Registrant on June 16, 2014). |
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Exhibit Number | Description | |
10.15 | Indemnity Agreement between the Company and Robert S. Miller (incorporated by reference to Exhibit 10.15 filed to the Form 10-K filed by the Registrant on March 31, 2015). | |
10.16* | Form of Indemnity Agreement between the Company and Robert C. Dinerstein. | |
10.17 | Administrative Services Agreement (incorporated by reference to the document previously filed to Exhibit 10.10 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.18 | Contribution Agreement (incorporated by reference to Exhibit 10.11 filed to the Form 8-K filed by the Registrant on June 16, 2014). | |
10.19 | Convertible Promissory Note, dated March 26, 2015, issued to WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.18 filed to the Form 10-K filed by the Registrant on March 31, 2015). | |
10.20* | Second Convertible Promissory Note, dated January 5, 2016, issued to WL Ross Sponsor LLC. | |
10.21 | Letter Agreement, dated March 30, 2015, between the Company and Robert S. Miller (incorporated by reference to Exhibit 10.19 filed to the Form 10-K filed by the Registrant on March 31, 2015). | |
10.22* | Form of Letter Agreement between the Company and Robert C. Dinerstein. | |
10.23 | Waiver Letter to the Administrative Services Agreement, dated March 26, 2015, between the Company and WL Ross Sponsor LLC (incorporated by reference to Exhibit 10.1 filed to the Form 10-K filed by the Registrant on March 31, 2015). | |
10.24* | Second Waiver Letter to the Administrative Services Agreement, dated January 13 2016, between the Company and WL Ross Sponsor LLC. | |
14 | Code of Ethics (incorporated by reference to Exhibit 14 filed with Amendment No. 3 to the Form S-1 filed by the Registrant on June 3, 2014). | |
24.1* | Power of Attorney (included on the signature pages herein). | |
31.1* | Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). | |
31.2* | Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). | |
32.1** | Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350. | |
32.2** | Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350. | |
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase |
* | Filed herewith. |
** | The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of WL Ross Holding Corp. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-K irrespective of any general incorporation language contained in such filing. |
66
EXHIBIT 10.16
FORM OF INDEMNITY AGREEMENT BETWEEN THE COMPANY AND ROBERT C. DINERSTEIN
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this “Agreement”) is made as of January , 2016, by and between WL ROSS HOLDING CORP., a Delaware corporation (the “Company”), and Robert C. Dinerstein (“Indemnitee”).
RECITALS
WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors, officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of such corporations;
WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among publicly traded corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The Amended and Restated Certificate of Incorporation (the “Charter”) and Bylaws of the Company require indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to applicable provisions of the Delaware General Corporation Law (“DGCL”). The Charter, Bylaws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification, hold harmless, exoneration, advancement and reimbursement rights;
WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;
WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, hold harmless, exonerate and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so protected against liabilities;
WHEREAS, this Agreement is a supplement to and in furtherance of the Charter and Bylaws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder;
WHEREAS, Indemnitee may not be willing to serve as an officer or director, advisor or in another capacity without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; and
NOW, THEREFORE, in consideration of the premises and the covenants contained herein and subject to the provisions of the letter agreement to be entered into as of the date hereof between the Company and the Indemnitee, the Company and Indemnitee do hereby covenant and agree as follows:
TERMS AND CONDITIONS
1. SERVICES TO THE COMPANY. Indemnitee will serve or continue to serve as an officer, director, advisor, key employee or in any other capacity of the Company, as applicable, for so long as Indemnitee is duly elected, appointed or retained or until Indemnitee tenders his resignation.
2. DEFINITIONS. As used in this Agreement:
2.1. References to “agent” shall mean any person who is or was a director, officer or employee of the Company or a subsidiary of the Company or other person authorized by the Company to act for the Company, to include such person serving in such capacity as a director, officer, employee, advisor, fiduciary or other official of another corporation, partnership, limited liability company, joint venture, trust or other enterprise at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company.
2.2. The terms “Beneficial Owner” and “Beneficial Ownership” shall have the meanings set forth in Rule 13d-3 promulgated under the Exchange Act (as defined below) as in effect on the date hereof.
2.3. A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:
2.3.1. Acquisition of Stock by Third Party. Other than an affiliate of WL Ross & Co. LLC and Invesco, Ltd., any Person (as defined below) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing fifteen percent (15%) or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors, unless (1) the change in the relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors, or (2) such acquisition was approved in advance by the Continuing Directors (as defined below) and such acquisition would not constitute a Change in Control under part 2.3.3 of this definition;
2.3.2. Change in Board of Directors. Individuals who, as of the date hereof, constitute the Board, and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two thirds of the directors then still in office who were directors on the date hereof or whose election for nomination for election was previously so approved (collectively, the “Continuing Directors”), cease for any reason to constitute at least a majority of the members of the Board;
2.3.3. Corporate Transactions. The effective date of a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination, involving the Company and one or more businesses (a “Business Combination”), in each case, unless, following such Business Combination: (1) all or substantially all of the individuals and entities who were the Beneficial Owners of securities entitled to vote generally in the election of directors immediately prior to such Business Combination beneficially own, directly or indirectly, more than 51% of the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more Subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination, of the securities entitled to vote generally in the election of directors; (2) other than an affiliate of WL Ross & Co. LLC and Invesco, Ltd., no Person (excluding any corporation resulting from such Business Combination) is the Beneficial Owner, directly or indirectly, of 15% or more of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the surviving corporation except to the extent that such ownership existed prior to the Business Combination; and (3) at least a majority of the Board of Directors of the corporation resulting from such Business Combination were Continuing Directors at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination;
2.3.4. Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement or series of agreements for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than factoring the Company’s current receivables or escrows due (or, if such approval is not required, the decision by the Board to proceed with such a liquidation, sale, or disposition in one transaction or a series of related transactions); or
2.3.5. Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.
2.4. ”Corporate Status” describes the status of a person who is or was a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of the Company or of any other Enterprise (as defined below) which such person is or was serving at the request of the Company.
2.5. ”Delaware Court” shall mean the Court of Chancery of the State of Delaware.
2.6. ”Disinterested Director” shall mean a director of the Company who is not and was not a party to the Proceeding (as defined below) in respect of which indemnification is sought by Indemnitee.
2.7. ”Enterprise” shall mean the Company and any other corporation, constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which the Company (or any of its wholly owned subsidiaries) is a party, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent.
2.8. ”Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
2.9. ”Expenses” shall include all direct and indirect costs, fees and expenses of any type or nature whatsoever, including, without limitation, all attorneys’ fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, fees of private investigators and professional advisors, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, fax transmission charges, secretarial services and all other disbursements, obligations or expenses in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, settlement or appeal of, or otherwise participating in, a Proceeding (as defined below), including reasonable compensation for time spent by the Indemnitee for which he or she is not otherwise compensated by the Company or any third party. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding (as defined below), including without limitation the principal, premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
2.10. ”Independent Counsel” shall mean a law firm or a member of a law firm with significant experience in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements); or (ii) any other party to the Proceeding (as defined below) giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.
2.11. References to “fines” shall include any excise tax assessed on Indemnitee with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.
2.12. The term “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act as in effect on the date hereof; provided, however, that “Person” shall exclude: (i) the Company; (ii) any Subsidiaries (as defined below) of the Company; (iii) any employment benefit plan of the Company or of a Subsidiary (as defined below) of the Company or of any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company; and (iv) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a Subsidiary (as defined below) of the Company or of a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
2.13. The term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative, or investigative or related nature, in which Indemnitee was, is, will or might be involved as a party or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action (or failure to act) taken by him or of any action (or failure to act) on his part while acting as a director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of any other Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Agreement.
2.14. The term “Subsidiary,” with respect to any Person, shall mean any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by that Person.
3. INDEMNITY IN THIRD-PARTY PROCEEDINGS.
To the fullest extent permitted by applicable law, the Company shall indemnify, hold harmless and exonerate Indemnitee in accordance with the provisions of this Section 3 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness or otherwise) in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified, held harmless and exonerated against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding, had no reasonable cause to believe that his conduct was unlawful.
4. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY.
To the fullest extent permitted by applicable law, the Company shall indemnify, hold harmless and exonerate Indemnitee in accordance with the provisions of this Section 4 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness or otherwise) in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified, held harmless and exonerated against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. No indemnification, hold harmless or exoneration for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that any court in which the Proceeding was brought or the Delaware Court shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification, to be held harmless or to exoneration.
5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL.
Notwithstanding any other provisions of this Agreement except for Section 27, to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses actually and reasonably incurred by him in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. If the Indemnitee is not wholly successful in such Proceeding, the Company also shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related to any claim, issue, or matter on which the Indemnitee was successful. For purposes of this Section 5 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.
6. INDEMNIFICATION FOR EXPENSES OF A WITNESS.
Notwithstanding any other provision of this Agreement except for Section 27, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall, to the fullest extent permitted by applicable law, be indemnified, held harmless and exonerated against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.
7. ADDITIONAL INDEMNIFICATION, HOLD HARMLESS AND EXONERATION RIGHTS.
7.1 Notwithstanding any limitation in Sections 3, 4, or 5, except for Section 27, the Company shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the Proceeding. No indemnification, hold harmless or exoneration rights shall be available under this Section 7.1 on account of Indemnitee’s conduct which constitutes a breach of Indemnitee’s duty of loyalty to the Company or its stockholders or is an act or omission not in good faith or which involves intentional misconduct or a knowing violation of the law.
7.2 Notwithstanding any limitation in Sections 3, 4, 5 or 7.1, except for Section 27, the Company shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the Proceeding.
8. CONTRIBUTION IN THE EVENT OF JOINT LIABILITY.
8.1. To the fullest extent permissible under applicable law, if the indemnification, hold harmless and/or exoneration rights provided for in this Agreement are unavailable to Indemnitee in whole or in part for any reason whatsoever, the Company, in lieu of indemnifying, holding harmless or exonerating Indemnitee, shall pay, in the first instance, the entire amount incurred by Indemnitee, whether for judgments, liabilities, fines, penalties, amounts paid or to be paid in settlement and/or for Expenses, in connection with any Proceeding without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have at any time against Indemnitee.
8.2. The Company shall not enter into any settlement of any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such Proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.
8.3. The Company hereby agrees to fully indemnify, hold harmless and exonerate Indemnitee from any claims for contribution which may be brought by officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee.
9. EXCLUSIONS.
Notwithstanding any provision in this Agreement except for Section 27, the Company shall not be obligated under this Agreement to make any indemnification, hold harmless or exoneration payment in connection with any claim made against Indemnitee:
(a) | for which payment has actually been received by or on behalf of Indemnitee under any insurance policy or other indemnity provision, except with respect to any excess beyond the amount actually received under any insurance policy, contract, agreement, other indemnity provision or otherwise; |
(b) | for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law; or |
(c) | except as otherwise provided in Sections 14.5 and 14.6 hereof, prior to a Change in Control, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, hold harmless or exoneration payment, in its sole discretion, pursuant to the powers vested in the Company under applicable law. |
10. ADVANCES OF EXPENSES; DEFENSE OF CLAIM.
10.1. Notwithstanding any provision of this Agreement to the contrary except for Section 27, and to the fullest extent not prohibited by applicable law, the Company shall pay the Expenses incurred by Indemnitee (or reasonably expected by Indemnitee to be incurred by Indemnitee within three months) in connection with any Proceeding within ten (10) days after the receipt by the Company of a statement or statements requesting such advances from time to time, prior to the final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to be indemnified, held harmless or exonerated under the other provisions of this Agreement. Advances shall include any and all reasonable Expenses incurred pursuing a Proceeding to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. To the fullest extent required by applicable law, such payments of Expenses in advance of the final disposition of the Proceeding shall be made only upon the Company’s receipt of an undertaking, by or on behalf of the Indemnitee, to repay the advance to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Charter, the Bylaws of the Company, applicable law or otherwise. This Section 10.1 shall not apply to any claim made by Indemnitee for which an indemnification, hold harmless or exoneration payment is excluded pursuant to Section 9.
10.2. The Company will be entitled to participate in the Proceeding at its own expense.
10.3. The Company shall not settle any action, claim or Proceeding (in whole or in part) which would impose any Expense, judgment, fine, penalty or limitation on the Indemnitee without the Indemnitee’s prior written consent.
11. PROCEDURE FOR NOTIFICATION AND APPLICATION FOR INDEMNIFICATION.
11.1. Indemnitee agrees to notify promptly the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification, hold harmless or exoneration rights, or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement, or otherwise.
11.2. Indemnitee may deliver to the Company a written application to indemnify, hold harmless or exonerate Indemnitee in accordance with this Agreement. Such application(s) may be delivered from time to time and at such time(s) as Indemnitee deems appropriate in his or her sole discretion. Following such a written application for indemnification by Indemnitee, the Indemnitee’s entitlement to indemnification shall be determined according to Section 12.1 of this Agreement.
12. PROCEDURE UPON APPLICATION FOR INDEMNIFICATION.
12.1. A determination, if required by applicable law, with respect to Indemnitee’s entitlement to indemnification shall be made in the specific case by one of the following methods, which shall be at the election of Indemnitee: (i) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board (ii) by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee; or (iii) by vote of the stockholders. The Company promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall reasonably cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
12.2. In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12.1 hereof, the Independent Counsel shall be selected as provided in this Section 12.2. The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected and certifying that the Independent Counsel so selected meets the requirements of “Independent Counsel” as defined in Section 2 of this Agreement. If the Independent Counsel is selected by the Board, the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected and certifying that the Independent Counsel so selected meets the requirements of “Independent Counsel” as defined in Section 2 of this Agreement. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection shall have been received, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 11.2 hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Delaware Court, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 12.1 hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 14.1 of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).
12.3. The Company agrees to pay the reasonable fees and expenses of Independent Counsel and to fully indemnify and hold harmless such Independent Counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
13. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
13.1. In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 11.2 of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.
13.2. If the person, persons or entity empowered or selected under Section 12 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within thirty (30) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a final judicial determination that any or all such indemnification is expressly prohibited under applicable law; provided, however, that such 30-day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto.
13.3. The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.
13.4. For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the directors or officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise, its Board, any committee of the Board or any director, or on information or records given or reports made to the Enterprise, its Board, any committee of the Board or any director, by an independent certified public accountant or by an appraiser or other expert selected by the Enterprise, its Board, any committee of the Board or any director. The provisions of this Section 13.4 shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed or found to have met the applicable standard of conduct set forth in this Agreement.
13.5. The knowledge and/or actions, or failure to act, of any other director, officer, trustee, partner, managing member, fiduciary, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
14. REMEDIES OF INDEMNITEE.
14.1. In the event that (i) a determination is made pursuant to Section 12 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses, to the fullest extent permitted by applicable law, is not timely made pursuant to Section 10 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 12.1 of this Agreement within thirty (30) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 5, 6, 7 or the last sentence of Section 12.1 of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) a contribution payment is not made in a timely manner pursuant to Section 8 of this Agreement, (vi) payment of indemnification pursuant to Section 3 or 4 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vii) payment to Indemnitee pursuant to any hold harmless or exoneration rights under this Agreement or otherwise is not made within ten (10) days after receipt by the Company of a written request therefor, Indemnitee shall be entitled to an adjudication by the Delaware Court to such indemnification, hold harmless, exoneration, contribution or advancement rights. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Except as set forth herein, the provisions of Delaware law (without regard to its conflict of laws rules) shall apply to any such arbitration. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.
14.2. In the event that a determination shall have been made pursuant to Section 12.1 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 14, Indemnitee shall be presumed to be entitled to be indemnified, held harmless, exonerated to receive advances of Expenses under this Agreement and the Company shall have the burden of proving Indemnitee is not entitled to be indemnified, held harmless, exonerated and to receive advances of Expenses, as the case may be, and the Company may not refer to or introduce into evidence any determination pursuant to Section 12.1 of this Agreement adverse to Indemnitee for any purpose. If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 14, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 10 until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed).
14.3. If a determination shall have been made pursuant to Section 12.1 of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 14, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
14.4. The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 14 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
14.5. The Company shall indemnify and hold harmless Indemnitee to the fullest extent permitted by law against all Expenses and, if requested by Indemnitee, shall (within ten (10) days after the Company’s receipt of such written request) pay to Indemnitee, to the fullest extent permitted by applicable law, such Expenses which are incurred by Indemnitee in connection with any judicial proceeding or arbitration brought by Indemnitee (i) to enforce his rights under, or to recover damages for breach of, this Agreement or any other indemnification, hold harmless, exoneration, advancement or contribution agreement or provision of the Charter, or the Company’s Bylaws now or hereafter in effect; or (ii) for recovery or advances under any insurance policy maintained by any person for the benefit of Indemnitee, regardless of the outcome and whether Indemnitee ultimately is determined to be entitled to such indemnification, hold harmless or exoneration right, advancement, contribution or insurance recovery, as the case may be (unless such judicial proceeding or arbitration was not brought by Indemnitee in good faith).
14.6. Interest shall be paid by the Company to Indemnitee at the legal rate under Delaware law for amounts which the Company indemnifies, holds harmless or exonerates, or is obliged to indemnify, hold harmless or exonerate for the period commencing with the date on which Indemnitee requests indemnification, to be held harmless, exonerated, contribution, reimbursement or advancement of any Expenses and ending with the date on which such payment is made to Indemnitee by the Company.
15. SECURITY.
Notwithstanding anything herein to the contrary except for Section 27, to the extent requested by the Indemnitee and approved by the Board, the Company may at any time and from time to time provide security to the Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to the Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee.
16. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.
16.1. The rights of Indemnitee as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter, the Company’s Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any Proceeding (regardless of when such Proceeding is first threatened, commenced or completed) arising out of, or related to, any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in applicable law, whether by statute or judicial decision, permits greater indemnification, hold harmless or exoneration rights or advancement of Expenses than would be afforded currently under the Charter, the Company’s Bylaws or this Agreement, then this Agreement (without any further action by the parties hereto) shall automatically be deemed to be amended to require that the Company indemnify Indemnitee to the fullest extent permitted by law. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
16.2. The DGCL, the Charter and the Company’s Bylaws permit the Company to purchase and maintain insurance or furnish similar protection or make other arrangements including, but not limited to, providing a trust fund, letter of credit, or surety bond (“Indemnification Arrangements”) on behalf of Indemnitee against any liability asserted against him or incurred by or on behalf of him or in such capacity as a director, officer, employee or agent of the Company, or arising out of his status as such, whether or not the Company would have the power to indemnify him against such liability under the provisions of this Agreement or under the DGCL, as it may then be in effect. The purchase, establishment, and maintenance of any such Indemnification Arrangement shall not in any way limit or affect the rights and obligations of the Company or of the Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and the Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the other party or parties thereto under any such Indemnification Arrangement.
16.3. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, trustees, partners, managing members, fiduciaries, employees, or agents of the Company or of any other Enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, trustee, partner, managing member, fiduciary, employee or agent under such policy or policies. If, at the time the Company receives notice from any source of a Proceeding as to which Indemnitee is a party or a participant (as a witness or otherwise), the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.
16.4. In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
16.5. The Company’s obligation to indemnify, hold harmless, exonerate or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification, hold harmless or exoneration payments or advancement of expenses from such Enterprise. Notwithstanding any other provision of this Agreement to the contrary except for Section 27, (i) Indemnitee shall have no obligation to reduce, offset, allocate, pursue or apportion any indemnification, hold harmless, exoneration, advancement, contribution or insurance coverage among multiple parties possessing such duties to Indemnitee prior to the Company’s satisfaction and performance of all its obligations under this Agreement, and (ii) the Company shall perform fully its obligations under this Agreement without regard to whether Indemnitee holds, may pursue or has pursued any indemnification, advancement, hold harmless, exoneration, contribution or insurance coverage rights against any person or entity other than the Company.
17. DURATION OF AGREEMENT.
All agreements and obligations of the Company contained herein shall continue during the period Indemnitee serves as a director or officer of the Company or as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise which Indemnitee serves at the request of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible Proceeding (including any rights of appeal thereto and any Proceeding commenced by Indemnitee pursuant to Section 14 of this Agreement) by reason of his Corporate Status, whether or not he is acting in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement.
18. SEVERABILITY.
If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
19. ENFORCEMENT AND BINDING EFFECT.
19.1. The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director, officer or key employee of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer or key employee of the Company.
19.2. Without limiting any of the rights of Indemnitee under the Charter or Bylaws of the Company as they may be amended from time to time, this Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.
19.3. The indemnification, hold harmless, exoneration and advancement of expenses rights provided by or granted pursuant to this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of any other Enterprise at the Company’s request, and shall inure to the benefit of Indemnitee and his or her spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.
19.4. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
19.5. The Company and Indemnitee agree herein that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking, among other things, injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which he may be entitled. The Company and Indemnitee further agree that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by a Court of competent jurisdiction and the Company hereby waives any such requirement of such a bond or undertaking.
20. MODIFICATION AND WAIVER.
No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.
21. NOTICES.
All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) if delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third (3rd) business day after the date on which it is so mailed:
(a) | If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide in writing to the Company. |
(b) | If to the Company, to: |
WL Ross Holding Corp.
1166 Avenue of the Americas
New York, New York 10036
Attn: Wilbur L. Ross, Jr.
Chairman and Chief Executive Officer
With a copy, which shall not constitute notice, to:
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue
Palo Alto, California 94301
Attn: Gregg A. Noel, Esq.
Thomas J. Ivey, Esq.
Fax No.: (650)798-6549
or to any other address as may have been furnished to Indemnitee in writing by the Company.
22. APPLICABLE LAW AND CONSENT TO JURISDICTION.
This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 14.1 of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court in the United States of America or any court in any other country; (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement; (c) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court; and (d) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum, or is subject (in whole or in part) to a jury trial.
23. IDENTICAL COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
24. MISCELLANEOUS.
Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.
25. PERIOD OF LIMITATIONS.
No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee’s spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.
26. ADDITIONAL ACTS.
If for the validation of any of the provisions in this Agreement any act, resolution, approval or other procedure is required, the Company undertakes to cause such act, resolution, approval or other procedure to be affected or adopted in a manner that will enable the Company to fulfill its obligations under this Agreement.
27. WAIVER OF CLAIMS TO TRUST ACCOUNT.
Indemnitee hereby agrees that it does not have any right, title, interest or claim of any kind (each, a “Claim”) in or to any monies in the trust account established in connection with the Company’s initial public offering for the benefit of the Company and holders of shares issued in such offering, and hereby waives any Claim it may have in the future as a result of, or arising out of, any services provided to the Company and will not seek recourse against such trust account for any reason whatsoever.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Indemnity Agreement to be signed as of the day and year first above written.
WL ROSS HOLDING CORP. | |||
By: | |||
Name: Wilbur L. Ross, Jr. | |||
Title: Chairman and Chief Executive Officer | |||
By: | |||
Name: Robert C. Dinerstein | |||
Address: |
EXHIBIT 10.20
SECOND CONVERTIBLE PROMISSORY NOTE, DATED JANUARY 5, 2016,
ISSUED TO WL ROSS SPONSOR LLC
THIS CONVERTIBLE PROMISSORY NOTE (THIS “NOTE”) AND THE SECURITIES INTO WHICH IT MAY BE CONVERTED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE. THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE COMPANY AND THE SECURITIES INTO WHICH IT MAY BE CONVERTED MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY TO THE EFFECT THAT ANY PROPOSED SALE OR SALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
WL ROSS HOLDING CORP.
CONVERTIBLE PROMISSORY NOTE
Principal Amount: Not to Exceed $425,000 (See Schedule A) |
Dated as of January 5, 2016 New York, New York |
FOR VALUE RECEIVED and subject to the terms and conditions set forth herein, WL Ross Holding Corp., a Delaware corporation and blank check company (the “Maker”), promises to pay to the order of WL Ross Sponsor LLC or its registered assigns or successors in interest (the “Payee”), or order, the principal balance as set forth on Schedule A hereto in lawful money of the United States of America; which schedule shall be updated from time to time by the parties hereto to reflect all advances and readvances outstanding under this Note; provided that at no time shall the aggregate of all advances and readvances outstanding under this Note exceed Four Hundred Twenty Five Thousand Dollars ($425,000). All payments on this Note shall be made by check or wire transfer of immediately available funds or as otherwise determined by the Maker to such account as the Payee may from time to time designate by written notice in accordance with the provisions of this Note.
1. Principal. All unpaid principal under this Note including accrued interest thereon pursuant to Section 2 below shall be due and payable in full on June 11, 2016 (such date, the “Maturity Date”), unless accelerated upon the occurrence of an Event of Default (as defined below). Any outstanding principal amount to date under this Note may be prepaid at any time by the Maker, at its election and without penalty; provided, however, that Payee shall have a right to first convert such principal balance pursuant to Section 5 below upon notice of such prepayment.
2. Interest. Interest shall accrue at a rate of five percent (5%) per annum on any unpaid principal amount outstanding and shall compound annually. All accrued interest shall be added to and become part of the principal amount outstanding under this Note that is due and payable on the Maturity Date.
3. Application of Payments. All payments shall be applied first to payment in full of any costs incurred in the collection of any sum due under this Note, including (without limitation) reasonable attorney’s fees, then to the payment in full of any late charges and finally to the reduction of the unpaid principal balance of this Note.
4. Events of Default. The occurrence of any of the following shall constitute an event of default (“Event of Default”):
(a) Failure to Make Required Payments. Failure by Maker to pay the principal amount due pursuant to this Note within five (5) business days of the date specified above or issue warrants pursuant to Paragraph 5 hereof, is so elected by Payee.
(b) Voluntary Bankruptcy, Etc. The commencement by Maker of a voluntary case under any applicable bankruptcy, insolvency, reorganization, rehabilitation or other similar law, or the consent by it to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Maker or for any substantial part of its property, or the making by it of any assignment for the benefit of creditors, or the failure of Maker generally to pay its debts as such debts become due, or the taking of corporate action by Maker in furtherance of any of the foregoing.
(c) Involuntary Bankruptcy, Etc. The entry of a decree or order for relief by a court having jurisdiction in the premises in respect of Maker in an involuntary case under any applicable bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of Maker or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days.
5. Conversion
(a) Optional Conversion. At the option of the Payee, at any time on or prior to the Maturity Date, any amounts outstanding under this Note (or any portion thereof) may be converted into warrants to purchase common stock of Maker (“Common Stock”) at a conversion price (the “Conversion Price”) per warrant of Maker (“Warrants”) equal to the greater of $0.50 and the consolidated closing bid price of the public warrants of the Maker as reported by NASDAQ before the close of the regular trading session at 4 p.m. (New York City time) on the date hereof as reported by NASDAQ. If Payee elects such conversion, the terms of such Warrants issued in connection with such conversion shall be identical to the warrants issued to Payee in the private placement (the “Private Placement Warrants”) that closed June 5, 2014 in connection with the commencement of Maker’s initial public offering that closed on June 11, 2014 (the “IPO”). Before this Note may be converted under this Section 5(a), Payee shall surrender this Note, duly endorsed, at the office of the Maker and shall state therein the amount of the unpaid principal of this Note to be converted and the name or names in which the certificates for Warrants are to be issued (or the book-entries to be made to reflect ownership of such Warrants with the Maker’s transfer agent). The conversion shall be deemed to have been made immediately prior to the close of business on the date of the surrender of this Note and the person or persons entitled to receive the Warrants upon such conversion shall be treated for all purposes as the record holder or holders of such Warrants as of such date. Each such newly-issued Warrant shall include a restricted legend that contemplates the same restrictions as the Private Placement Warrants.
(b) Remaining Principal. All accrued and unpaid principal of this Note that is not then converted into Warrants, shall continue to remain outstanding and to be subject to the conditions of this Note.
(c) Fractional Warrants; Effect of Conversion. No fractional warrants shall be issued upon conversion of this Note. In lieu of any fractional warrants to Payee upon conversion of this Note, Maker shall pay to Payee an amount equal to the product obtained by multiplying the Conversion Price by the fraction of a warrant not issued pursuant to the previous sentence. Upon conversion of this Note in full and the payment of any amounts specified in this Section 5(c), this Note shall be cancelled and void without further action of the Maker or Payee, and the Maker shall be forever released from all its obligations and liabilities under this Note.
6. Remedies.
(a) Upon the occurrence of an Event of Default specified in Section 4(a) hereof, Payee may, by written notice to Maker, declare this Note to be due immediately and payable, whereupon the unpaid principal amount of this Note, and all other amounts payable thereunder, shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the documents evidencing the same to the contrary notwithstanding.
(b) Upon the occurrence of an Event of Default specified in Sections 4(b) and 4(c), the unpaid principal balance of this Note, and all other sums payable with regard to this Note, shall automatically and immediately become due and payable, in all cases without any action on the part of Payee.
7. Waivers. Maker and all endorsers and guarantors of, and sureties for, this Note waive presentment for payment, demand, notice of dishonor, protest, and notice of protest with regard to the Note, all errors, defects and imperfections in any proceedings instituted by Payee under the terms of this Note, and all benefits that might accrue to Maker by virtue of any present or future laws exempting any property, real or personal, or any part of the proceeds arising from any sale of any such property, from attachment, levy or sale under execution, or providing for any stay of execution, exemption from civil process, or extension of time for payment; and Maker agrees that any real estate that may be levied upon pursuant to a judgment obtained by virtue hereof, on any writ of execution issued hereon, may be sold upon any such writ in whole or in part in any order desired by Payee.
8. Unconditional Liability. Maker hereby waives all notices in connection with the delivery, acceptance, performance, default, or enforcement of the payment of this Note, and agrees that its liability shall be unconditional, without regard to the liability of any other party, and shall not be affected in any manner by any indulgence, extension of time, renewal, waiver or modification granted or consented to by Payee, and consents to any and all extensions of time, renewals, waivers, or modifications that may be granted by Payee with respect to the payment or other provisions of this Note, and agrees that additional makers, endorsers, guarantors, or sureties may become parties hereto without notice to Maker or affecting Maker’s liability hereunder.
9. Notices. All notices, statements or other documents which are required or contemplated by this Agreement shall be: (i) in writing and delivered personally or sent by first class registered or certified mail, overnight courier service or facsimile or electronic transmission to the address designated in writing, (ii) by facsimile to the number most recently provided to such party or such other address or fax number as may be designated in writing by such party and (iii) by electronic mail, to the electronic mail address most recently provided to such party or such other electronic mail address as may be designated in writing by such party. Any notice or other communication so transmitted shall be deemed to have been given on the day of delivery, if delivered personally, on the business day following receipt of written confirmation, if sent by facsimile or electronic transmission, one (1) business day after delivery to an overnight courier service or five (5) days after mailing if sent by mail.
10. Construction. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WITHIN THE STATE OF NEW YORK.
11. Severability. Any provision contained in this Note which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
12. Trust Waiver. Notwithstanding anything herein to the contrary, the Payee hereby waives any and all right, title, interest or claim of any kind (“Claim”) in or to any distribution of or from the trust account established in which the proceeds of the IPO conducted by the Maker (including the deferred underwriters discounts and commissions) and the proceeds of the sale of the warrants issued in a private placement that occurred prior to the effectiveness of the IPO were deposited, as described in greater detail in the registration statement and prospectus filed with the Securities and Exchange Commission in connection with the IPO on June 5, 2014, and hereby agrees not to seek recourse, reimbursement, payment or satisfaction for any Claim against the trust account for any reason whatsoever.
13. Amendment; Waiver. Any amendment hereto or waiver of any provision hereof may be made with, and only with, the written consent of the Maker and the Payee.
14. Successors and Assigns. Subject to the restrictions on transfer in Sections 15 and 16 below, the rights and obligations of the Maker and Payee hereunder shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of any party hereto (by operation of law or otherwise) with the prior written consent of the other party hereto and any attempted assignment without the required consent shall be void.
15. Transfer of this Note or Securities Issuable on Conversion. With respect to any offer, sale or other disposition of this Note or securities into which this Note may be converted, Payee shall give written notice to Maker prior thereto, describing briefly the manner thereof, together with (i) except for a Permitted Transfer, in which case the requirements in this clause (i) shall not apply, a written opinion reasonably satisfactory to the Maker in form and substance from counsel reasonably satisfactory to the Maker to the effect that such offer, sale or other distribution may be effected without registration or qualification under any federal or state law then in effect and (ii) a written undertaking executed by the desired transferee reasonably satisfactory to the Maker in form and substance agreeing to be bound by the restrictions on transfer contained herein. Upon receiving such written notice, reasonably satisfactory opinion, or other evidence, and such written acknowledgement, the Maker, as promptly as practicable, shall notify Payee that Payee may sell or otherwise dispose of this Note or such securities, all in accordance with the terms of the note delivered to the Maker. If a determination has been made pursuant to this Section 15 that the opinion of counsel for Payee, or other evidence, or the written acknowledgment from the desired transferee, is not reasonably satisfactory to the Maker, the Maker shall so notify Payee promptly after such determination has been made. Each Note thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Maker such legend is not required in order to ensure compliance with the Securities Act. The Maker may issue stop transfer instructions to its transfer agent in connection with such restrictions. Subject to the foregoing, transfers of this Note shall be registered upon registration on the books maintained for such purpose by or on behalf of the Maker. Prior to presentation of this Note for registration of transfer, the Maker shall treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Maker shall not be affected by notice to the contrary. For purposes hereof “Permitted Transfer” shall have the same meaning as any transfer that would be permitted for the Private Placement Warrants under the Letter Agreement, dated May 29, 2014, among the Maker, the Maker’s directors and officers and Payee.
16. Acknowledgment. Payee is acquiring this Note for investment for its own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof. Payee understands that the acquisition of this Note involves substantial risk. Payee has experience as an investor in securities of companies and acknowledges that it is able to fend for itself, can bear the economic risk of its investment in this Note, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of this investment in this Note and protecting its own interests in connection with this investment.
[Signature page follows]
IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has caused this Note to be duly executed by the undersigned as of the day and year first above written.
WL ROSS HOLDING CORP. | |||
By: |
/s/ Stephen J. Toy |
||
Name: Stephen J. Toy | |||
Title: President |
Acknowledged and agreed as of the day and year first above written.
WL ROSS SPONSOR LLC By: WL ROSS GROUP, L.P., its Managing Member By: El Vedado, LLC, its General Partner |
||
By:/s/ Wilbur L. Ross, Jr. Name: Wilbur L. Ross, Jr. |
||
Title: Manager |
SCHEDULE A
Subject to the terms and conditions set forth in the Note to which this schedule is attached to, the principal balance due under the Note shall be set forth in the table below and shall be updated from time to time to reflect all advances and readvances outstanding under the Note.
Date | Drawing | Interest Earned | Principal Balance |
EXHIBIT 10.22
FORM OF LETTER AGREEMENT BETWEEN THE COMPANY AND ROBERT C. DINERSTEIN
January , 2016
WL Ross Holding Corp.
1166 Avenue of the Americas
New York, NY 10036
Re: Letter Agreement
Sir or Madam:
This letter (this “Letter Agreement”) is being delivered to you in connection with your role as a director or officer of the Company, consistent with the terms required of the company’s existing directors and officers pursuant to the Underwriting Agreement (the “Underwriting Agreement”) entered into by and between WL Ross Holding Corp., a Delaware corporation (the “Company”), and Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters (the “Underwriters”), relating to an underwritten initial public offering (the “Public Offering”), of 40,000,000 of the Company’s units (the “Units”), each comprised of one share of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and one warrant (each, a “Warrant”). Each Warrant entitles the holder thereof to purchase one-half of one share of the Common Stock at a price of $5.75 per half share, subject to adjustment. The Units were sold in the Public Offering pursuant to a registration statement on Form S-1 and prospectus (the “Prospectus”) filed by the Company with the Securities and Exchange Commission (the “Commission”) and the Company had the Units listed on the Nasdaq Capital Market. Certain capitalized terms used herein are defined in paragraph 9 hereof.
For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned individual, who is a director of the Company or member of the Company’s management team (the “Insider”), hereby agrees with the Company as follows:
1. The Insider agrees that if the Company seeks stockholder approval of a proposed Business Combination, then in connection with such proposed Business Combination, he or she shall (i) vote any shares of Common Stock owned by him or her in favor of any proposed Business Combination and (ii) not redeem any shares of Common Stock owned by him or her in connection with such stockholder approval.
2. The Insider hereby agrees that in the event that the Company fails to consummate a Business Combination (as defined in the Underwriting Agreement) within 24 months from the closing of the Public Offering, or such later period approved by the Company’s stockholders in accordance with the Company’s amended and restated certificate of incorporation, he or she shall take all reasonable steps to cause the Company to (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than 10 business days thereafter, subject to lawfully available funds therefor, redeem 100% of the Common Stock sold as part of the Units in the Public Offering (the “Offering Shares”), at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable and less up to $50,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, 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 (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and other requirements of applicable law. The Insider agrees to not propose any amendment to the Company’s amended and restated certificate of incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of the Offering Shares if the Company does not complete a Business Combination within 24 months from the closing of the Public Offering, unless the Company provides its public stockholders with the opportunity to redeem their shares of Common Stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding public shares.
The Insider acknowledges that he or she has no right, title, interest or claim of any kind in or to any monies held in the Trust Account or any other asset of the Company as a result of any liquidation of the Company with respect to the Founder Shares. The Insider hereby further waives, with respect to any shares of the Common Stock held by him or her, if any, any redemption rights he or she may have in connection with the consummation of a Business Combination, including, without limitation, any such rights available in the context of a stockholder vote to approve such Business Combination or in the context of a tender offer made by the Company to purchase shares of the Common Stock (although the Insider shall be entitled to redemption and liquidation rights with respect to any shares of the Common Stock (other than the Founder Shares) he or she holds if the Company fails to consummate a Business Combination within 24 months from the date of the closing of the Public Offering.
3. [Intentionally Omitted]
4. (a) Other than in the case of NBNK Investments PLC, the Insider hereby agrees not to participate in the formation of, or become an officer or director of, any other blank check company until the Company has entered into a definitive agreement with respect to a Business Combination or the Company has failed to complete a Business Combination within 24 months after the closing of the Public Offering.
(b) The Insider hereby agrees and acknowledges that: (i) each of the Underwriters and the Company would be irreparably injured in the event of a breach by such Insider of his or her obligations under paragraphs 1, 2, 3, 4(a), 5(a), 5(b) and 7 of this Letter Agreement (ii) monetary damages may not be an adequate remedy for such breach and (iii) the non-breaching party shall be entitled to injunctive relief, in addition to any other remedy that such party may have in law or in equity, in the event of such breach.
5. (a) The Insider agrees that he or she shall not Transfer (as defined below) any Founder Shares or Private Placement Shares until the earlier of (i) one year after the completion of the Company’s initial Business Combination or earlier if, subsequent to the Business Combination, (x) the last sale price of the Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Company’s initial Business Combination or (y) the date following the completion of the Company’s initial Business Combination on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property (the “Founder Shares and Private Placement Shares Lock-up Period”).
(b) The Insider agrees that he or she shall not effectuate any Transfer of Private Placement Warrants or Common Stock issued or issuable upon the conversion of the Private Placement Warrants, until 30 days after the completion of a Business Combination (the “Private Placement Warrants Lock-up Period”, together with the Founder Shares and Private Placement Shares Lock-up Period, the “Lock-up Periods”).
(c) Notwithstanding the provisions set forth in paragraphs 5(a) and (b), Transfers of the Founder Shares, Private Placement Warrants and shares of Common Stock issued or issuable upon the exercise or conversion of the Private Placement Warrants and that are held by the initial purchasers of the Private Placement Warrants or their permitted transferees (that have complied with this paragraph 5(c)), are permitted (a) to the Company’s officers or directors, any affiliates or family members of any of the Company’s officers or directors, any members of the Sponsor, or any affiliates of such person or the Sponsor; (b) in the case of an individual, by a gift to a member of one of the members of the individual’s immediate family or to a trust, the beneficiary of which is a member of one of the individual’s immediate family, an affiliate of such person or to a charitable organization; (c) in the case of an individual, by virtue of laws of descent and distribution upon death of the individual; (d) in the case of an individual, pursuant to a qualified domestic relations order; (e) by private sales or transfers made in connection with the consummation of a Business Combination at prices no greater than the price at which the shares were originally purchased; (f) in the event of the Company’s liquidation prior to the completion of a Business Combination; (g) by virtue of the laws of Delaware or the Sponsor’s limited liability company agreement upon dissolution of the Sponsor; or (h) in the event of the Company’s completion of a liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property subsequent to the Company’s completion of its initial Business Combination; provided, however, that in the case of clauses (a) through (e), these permitted transferees must enter into a written agreement agreeing to be bound by these transfer restrictions.
The Insider acknowledges and agrees that, prior to the effective date of any release or waiver, of the restrictions set forth in this paragraph 5, the Company shall announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if (i) the release or waiver is effected solely to permit a transfer not for consideration and the transferee has agreed in writing to be bound by the same terms described in this Letter Agreement to the extent and for the duration that such terms remain in effect at the time of the transfer or (ii) WL Ross Sponsor LLC (the “Sponsor”) assigns its option to purchase 10,000,000 shares of Common Stock to an affiliated fund pursuant to the Amended and Restated Securities Subscription Agreement, dated as of April 4, 2014, between the Company and the Sponsor and agrees to be bound by the same terms described in this Letter Agreement to the extent and for the duration that such terms remain in effect at the time of the transfer.
6. The Insider represents and warrants that he or she has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities license or registration denied, suspended or revoked. Each Insider’s biographical information furnished to the Company is true and accurate in all respects and does not omit any material information with respect to the undersigned’s background. Each Insider’s questionnaire furnished to the Company is true and accurate in all respects. Each Insider represents and warrants that: the undersigned is not subject to or a respondent in any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering of securities in any jurisdiction; the undersigned has never been convicted of, or pleaded guilty to, any crime (i) involving fraud, (ii) relating to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and the undersigned is not currently a defendant in any such criminal proceeding.
7. Except as disclosed in the Prospectus, neither the Insider, nor any affiliate of the Insider, shall receive from the Company any finder’s fee, reimbursement, consulting fee, monies in respect of any repayment of a loan or other compensation prior to, or in connection with any services rendered in order to effectuate the consummation of the Company’s initial Business Combination (regardless of the type of transaction that it is), other than the following, none of which will be made from the proceeds of the Public Offering held in the Trust Account prior to the completion of the initial Business Combination: reimbursement for any reasonable out-of-pocket expenses related to identifying, investigating and consummating an initial Business Combination, and repayment of loans, if any, and on such terms as to be determined by the Company from time to time, made by the Sponsor or certain of the Company’s officers and directors to finance transaction costs in connection with an intended initial Business Combination.
8. The Insider has full right and power, without violating any agreement to which he or she is bound (including, without limitation, any non-competition or non-solicitation agreement with any employer or former employer), to enter into this Letter Agreement and, as applicable, to serve as a director on the board of directors of the Company.
9. As used herein, (i) ”Business Combination” shall mean a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination, involving the Company and one or more businesses; (ii) ”Founder Shares” shall mean the 11,500,000 shares of the Common Stock beneficially held by the Sponsor (or 10,000,000 shares if the over-allotment option is not exercised by the Underwriters); which is the 14,375,000 shares of the Common Stock initially acquired by the Sponsor less 2,875,000 shares of the Common Stock that the Sponsor will forfeit immediately prior to the pricing of the Public Offering so that the Sponsor’s remaining shares prior to the Public Offering represent 20.0% for an aggregate purchase price of $25,000, or approximately $0.0025 per share, prior to the consummation of the Public Offering; (iii) ”Private Placement Shares ” shall mean the up to 10,000,000 shares of the Common Stock that the Sponsor (or any of its affiliates) was granted the option to purchase from the Company simultaneously with the consummation of the initial Business Combination; (iv) ”Private Placement Warrants ” shall mean the Warrants to purchase up to 20,000,000 shares of the Common Stock of the Company (or 22,400,000 shares of Common Stock if the over-allotment option is exercised in full) that are acquired by the Sponsor for an aggregate purchase price of $10,000,000 in the aggregate (or $11,200,000 if the over-allotment option is exercised in full), or $0.50 per Warrant, in a private placement that shall occur simultaneously with the consummation of the Public Offering; (v) ”Public Stockholders” shall mean the holders of securities issued in the Public Offering; (vi) ”Trust Account” shall mean the trust fund into which a portion of the net proceeds of the Public Offering shall be deposited; and (vii) ”Transfer” shall mean the (a) sale of, offer to sell, contract or agreement to sell, hypothecate, pledge, grant of any option to purchase or otherwise dispose of or agreement to dispose of, directly or indirectly, or establishment or increase of a put equivalent position or liquidation with respect to or decrease of a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder with respect to, any security, (b) entry into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any security, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or (c) public announcement of any intention to effect any transaction specified in clause (a) or (b).
10. This Letter Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated hereby. This Letter Agreement may not be changed, amended, modified or waived (other than to correct a typographical error) as to any particular provision, except by a written instrument executed by all parties hereto.
11. No party hereto may assign either this Letter Agreement or any of his, her or its rights, interests, or obligations hereunder without the prior written consent of the other party. Any purported assignment in violation of this paragraph shall be void and ineffectual and shall not operate to transfer or assign any interest or title to the purported assignee. This Letter Agreement shall be binding on the Insider and his or her successors and assigns.
12. This Letter Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The parties hereto (i) all agree that any action, proceeding, claim or dispute arising out of, or relating in any way to, this Letter Agreement shall be brought and enforced in the courts of New York City, in the State of New York, and irrevocably submits to such jurisdiction and venue, which jurisdiction and venue shall be exclusive and (ii) waives any objection to such exclusive jurisdiction and venue or that such courts represent an inconvenient forum.
13. Any notice, consent or request to be given in connection with any of the terms or provisions of this Letter Agreement shall be in writing and shall be sent by express mail or similar private courier service, by certified mail (return receipt requested), by hand delivery or facsimile transmission.
14. This Letter Agreement shall terminate on the earlier of (i) the expiration of the Lock-up Periods or (ii) the liquidation of the Company; provided, however, that this Letter Agreement shall earlier terminate in the event that the Business Combination is not consummated and closed by 24 months from the date of the Public Offering.
[Signature Page follows]
Sincerely, | ||
By: | ||
Robert C. Dinerstein |
EXHIBIT 10.24
SECOND WAIVER LETTER TO THE ADMINISTRATIVE
SERVICES AGREEMENT, DATED
JANUARY 13, 2016, BETWEEN THE COMPANY AND WL ROSS SPONSOR LLC
WL Ross Sponsor LLC
c/o WL Ross & Co. LLC
1166 Avenue of the Americas
New York, NY 10036
January 13, 2016
WL Ross Holding Corp.
c/o WL Ross & Co. LLC
1166 Avenue of the Americas
New York, NY 10036
Re: Waiver under Administrative Services Agreement
Gentlemen:
We refer to the Administrative Services Agreement by and between us and the Company dated June 5, 2014 (the “Agreement”).
We hereby irrevocably and unconditionally waive the $10,000 per month payment obligations (the “Administrative Fee”) of WL Ross Holding Corp. (the “Company”) that is payable to our affiliate, WL Ross & Co. LLC, for the period beginning on January 1, 2016 and ending on December 31, 2016 (the “Waiver Period”) under the Agreement. Following the Waiver Period, the Company shall continue to be obligated to pay the Administrative Fee under the Agreement to WL Ross & Co. LLC.
Other than the foregoing waiver expressed in this letter, the Agreement shall remain unchanged and in full force and effect.
[Signature page follows]
Very truly yours, |
WL ROSS SPONSOR LLC By: WL ROSS GROUP, L.P., its Managing Member By: El Vedado, LLC, its General Partner |
|
/s/ Wilbur L. Ross, Jr.
|
|
Name: Wilbur L. Ross, Jr. | |
Title: Manager |
AGREED TO AND ACCEPTED BY:
WL ROSS HOLDING CORP. | ||
By: | /s/ Stephen J. Toy. | |
Name: Stephen J. Toy | ||
Title: President |
EXHIBIT 31.1
I, Wilbur L. Ross, Jr., certify that:
1. | I have reviewed this Annual Report on Form 10-K of WL Ross Holding Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls over financial reporting. |
Date: January 14, 2016
/s/ Wilbur L. Ross, Jr.
Wilbur L. Ross, Jr.
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
I, Michael J. Gibbons, certify that:
1. | I have reviewed this Annual Report on Form 10-K of WL Ross Holding Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls over financial reporting. |
Date: January 14, 2016
/s/ Michael J. Gibbons
Michael J. Gibbons
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
EXHIBIT 32.1
I, Wilbur L. Ross, Jr., Chief Executive Officer of WL Ross Holding Corp. (the Company), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to the best of my knowledge:
(1) | the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2015 (the Report) fully complies with the requirements of Section 13 (a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: January 14, 2016
/s/ Wilbur L. Ross, Jr.
Wilbur L. Ross, Jr.
Chief Executive Officer
(Principal Executive Officer)
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
I, Michael J. Gibbons, Chief Financial Officer of WL Ross Holding Corp. (the Company), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to the best of my knowledge:
(1) | the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2015 (the Report) fully complies with the requirements of Section 13 (a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: January 14, 2016
/s/ Michael J. Gibbons
Michael J. Gibbons
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.