UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 29, 2017
SILVER RUN ACQUISITION CORPORATION II
(Exact name of registrant as specified in its charter)
Delaware |
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001-38040 |
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81-4433840 |
(State or other jurisdiction of |
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(Commission File Number) |
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(I.R.S. Employer Identification No. |
incorporation) |
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1000 Louisiana Street, Suite 1450 |
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77002 |
(Address of principal executive offices) |
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(Zip Code) |
(713) 357-1400
(Registrants telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencements communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 8.01 Other Events.
On March 29, 2017, Silver Run Acquisition Corporation II (the Company) consummated its initial public offering (the IPO) of 103,500,000 units (the Units), including the issuance of 13,500,000 Units as a result of the underwriters full exercise of their over-allotment option. Each Unit consists of one share of Class A common stock of the Company, par value $0.0001 per share (the Class A Common Stock), and one-third of one warrant of the Company, each whole warrant entitling the holder thereof to purchase one whole share of Class A Common Stock at an exercise price of $11.50 per share. The Units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $1,035,000,000.
On March 29, 2017, simultaneously with the consummation of the IPO, the Company completed the private sale (the Private Placement) of 15,133,333 warrants (the Private Placement Warrants) at a purchase price of $1.50 per Private Placement Warrant, to the Companys sponsor, Silver Run Sponsor II, LLC, generating gross proceeds to the Company of approximately $22,700,000.
A total of $1,035,000,000, comprised of $1,014,300,000 of the proceeds from the IPO, including approximately $36,225,000 of the underwriters deferred discount, and $20,700,000 of the proceeds of the sale of the Private Placement Warrants, were placed in a trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee. An audited balance sheet as of March 29, 2017 reflecting receipt of the proceeds upon consummation of the IPO and the Private Placement has been issued by the Company and is included as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. The following exhibits are filed with this Form 8-K:
Exhibit No. |
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Description of Exhibits |
99.1 |
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Audited Balance Sheet, as of March 29, 2017. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Silver Run Acquisition Corporation II | |
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Date: April 4, 2017 |
By: |
/s/ Thomas J. Walker |
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Name: |
Thomas J. Walker |
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Title: |
Chief Financial Officer |
Exhibit 99.1
INDEX TO FINANCIAL STATEMENT
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Page |
Report of Independent Registered Public Accounting Firm |
F-2 | |
Balance Sheet as of March 29, 2017 |
F-3 | |
Notes to Balance Sheet |
F-4 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Silver Run Acquisition Corporation II
We have audited the accompanying balance sheet of Silver Run Acquisition Corporation II (the Company), as of March 29, 2017. This balance sheet is the responsibility of the Companys management. Our responsibility is to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Silver Run Acquisition Corporation II as of March 29, 2017, in conformity with accounting principles generally accepted in the United States of America.
/s/ WithumSmith+Brown, PC |
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New York, New York |
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April 4, 2017 |
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Silver Run Acquisition Corporation II
BALANCE SHEET
March 29, 2017
ASSETS: |
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Current assets: |
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Cash |
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$ |
1,639,293 |
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Prepaid expenses |
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10,000 |
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Total current assets |
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1,649,293 |
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Cash held in Trust Account |
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1,035,000,000 |
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Total assets |
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$ |
1,036,649,293 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilitiesAccrued formation and offering costs |
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$ |
324,022 |
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Deferred underwriting compensation |
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36,225,000 |
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Total liabilities |
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36,549,022 |
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Class A common stock subject to possible redemption; 99,510,027 shares (at redemption value of approximately $10.00 per share) |
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995,100,270 |
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Stockholders equity: |
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Preferred shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding |
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Class A common stock, $0.0001 par value, 400,000,000 shares authorized, 3,989,973 issued and outstanding (excluding 99,510,027 shares subject to possible redemption) |
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399 |
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Class B common stock, $0.0001 par value, 50,000,000 shares authorized, 25,875,000 shares issued and outstanding |
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2,588 |
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Additional paid-in capital |
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4,999,014 |
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Accumulated deficit |
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(2,000 |
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Total stockholders equity |
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5,000,001 |
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Total liabilities and stockholders equity |
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$ |
1,036,649,293 |
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See accompanying notes to balance sheet
Silver Run Acquisition Corporation II
NOTES TO BALANCE SHEET
1. Description of Organization and Business Operations
Organization and General
Silver Run Acquisition Corporation II (the Company) was incorporated in Delaware on November 16, 2016. 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 is an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the JOBS Act).
At March 29, 2017, the Company had not commenced any operations. All activity for the period from November 16, 2016 (date of inception) through March 29, 2017 relates to the Companys formation and the initial public offering (Public Offering) described below. The Company will not generate any operating revenues until after completion of its initial 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 and the Private Placement (defined below). The Company has selected December 31st as its fiscal year end.
As of March 29, 2017, transaction costs amounted to $57,622,729, consisting of $20,700,000 of underwriting fees, $36,225,000 of deferred underwriting fees payable (which are held in a trust account with Continental Stock Transfer and Trust Company acting as trustee (the Trust Account) and $697,729 of initial Public Offering costs. In addition, $1,639,293 of cash was held outside of the Trust Account at March 29, 2017 and is available for working capital purposes, As described in Note 3, the $36,225,000 deferred underwriting fee payable is contingent upon the consummation of a Business Combination by March 29, 2019.
Sponsor and Proposed Financing
The Companys sponsor is Silver Run Sponsor II, LLC; a Delaware limited liability company (the Sponsor). The registration statement for the Public Offering was declared effective by the United States Securities and Exchange Commission (the SEC) on March 23, 2017. On March 29, 2017, the Company consummated the initial Public Offering of 103,500,000 units (the Units and, with respect to the Companys Class A common stock, $0.0001 par value per share, included in the Units being offered, the Public Shares), which includes a full exercise by the underwriters of their over-allotment option in the amount of 13,500,000 Units at $10.00 per Unit, generating gross proceeds of $1,035,000,000 which is described in Note 3. The Sponsor purchased an aggregate of 15,133,333 warrants (the Private Placement Warrants) at a purchase price of $1.50 per warrant, or approximately $22,700,000 in the aggregate, in a private placement simultaneously with the closing of the Public Offering (the Private Placement). The Private Placement Warrants are included in additional paid-in capital on the balance sheet.
Trust Account
The proceeds held in the Trust Account will be invested only in U.S. government treasury bills with a maturity of one hundred eighty (180) days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940 and that invest only in direct U.S. government obligations. Funds will remain in the Trust Account until the earlier of (i) the consummation of the initial Business Combination or (ii) the distribution of the Trust Account proceeds as described below. The remaining proceeds outside the Trust Account may be used to pay for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses.
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 the Trust Account will be released until the earlier of: (i) the completion of the initial Business Combination; (ii) the redemption of any Public Shares that have been properly tendered in connection with a
stockholder vote to amend the Companys amended and restated certificate of incorporation to modify the substance or timing of its obligation to redeem 100% of such shares of Class A common stock if it does not complete the initial Business Combination within 24 months from the closing of the Public Offering; and (iii) the redemption of 100% of the Public Shares if the Company is unable to complete an initial Business Combination within 24 months from the closing of the Public Offering (subject to the requirements of law). The proceeds deposited in the Trust Account could become subject to the claims of the Companys creditors, if any, which could have priority over the claims of the Companys public stockholders.
Initial Business Combination
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 an initial Business Combination. The initial Business Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect an initial Business Combination.
The Company, after signing a definitive agreement for an initial Business Combination, will either (i) seek stockholder approval of the initial 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 initial 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 initial Business Combination, including interest but less taxes payable, or (ii) provide stockholders with the opportunity to sell their Public 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 the consummation of the initial Business Combination, including interest but less taxes payable. The decision as to whether the Company will seek stockholder approval of the initial Business Combination or will allow stockholders to sell their Public 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 law or under NASDAQ rules. If the Company seeks stockholder approval, it will complete its initial Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial Business Combination. However, in no event will the Company redeem 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 of its Public Shares and the related initial Business Combination, and instead may search for an alternate initial Business Combination.
If the Company holds a stockholder vote or there is a tender offer for shares in connection with an initial Business Combination, a public stockholder will have the right to redeem its shares 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 initial Business Combination, including interest but less taxes payable. As a result, such shares of Class A common stock are recorded at redemption amount and classified as temporary equity on the accompanying balance sheet, in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 480, Distinguishing Liabilities from Equity.
Pursuant to the Companys amended and restated certificate of incorporation, if the Company is unable to complete the initial Business Combination within 24 months from the closing of the Public Offering, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter subject to lawfully available funds therefor, 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 earned on the funds held in the Trust Account and not previously released to us to pay the Companys franchise and income taxes (less up to $100,000 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 liquidating 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. The Sponsor and the Companys officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed to waive their
rights to liquidating distributions from the Trust Account with respect to any Founder Shares (as defined below) held by them if the Company fails to complete the initial Business Combination within 24 months of the closing of the Public Offering. However, if the Sponsor or any of the Companys directors, officers or affiliates acquires Public Shares in or after the Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete the initial Business Combination within the prescribed time period.
In the event of a liquidation, dissolution or winding up of the Company after an initial Business Combination, the Companys stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. The Companys stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the common stock, except that the Company will provide its stockholders with the opportunity to redeem their Public Shares for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account upon the completion of the initial Business Combination and as otherwise described above.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying balance sheet of the Company is presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (GAAP).
Emerging Growth Company
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. 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. This may make comparison of the Companys financial statement 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 accounting standards used.
Redeemable Ordinary Shares
As discussed in Note 1, all of the 103,500,000 shares of Class A common stock sold as parts of the Units in the Public Offering contain a redemption feature which allows for the redemption of such shares under the Companys amended and restated certificate of incorporation. In accordance with FASB 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 FASB ASC 480. Although the Company has not specified a maximum redemption threshold, its amended and restated certificate of incorporation provides that in no event will the Company redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001.
The Company recognizes changes in redemption value immediately as they occur and will adjust 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 Class A ordinary shares shall be affected by charges against additional paid in capital.
Accordingly, at March 29, 2017, 99,510,027 of the 103,500,000 shares of Class A common stock included in the Units were classified outside of permanent equity at its redemption value.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times, may exceed the Federal depository insurance coverage of $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.
Financial Instruments
The fair value of the Companys assets and liabilities, which qualify as financial instruments under FASB ASC 820, Fair Value Measurements and Disclosures, approximates the carrying amounts represented in the balance sheet.
Use of Estimates
The preparation of the balance sheet in conformity with GAAP 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 balance sheet. Actual results could differ from those estimates.
Deferred Offering Costs
The Company complies with the requirements of FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5AExpenses of Offering. Deferred offering costs of approximately $1,000,000, consisting principally of costs incurred in connection with formation and preparation for the Public Offering, together with the underwriter discount, were charged to additional paid-in capital upon completion of the Public Offering.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB 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 income 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.
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of March 29, 2017. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at March 29, 2017. 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.
Recent Accounting Pronouncements
In August 2014, the FASB issued Accounting Standards Update (ASU) 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern. ASU 2014-15 provides guidance on managements responsibility to evaluate whether there is substantial doubt about an organizations ability to continue as a going concern and to provide related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a companys ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in ASU 2014-15 are effective for annual reporting periods ending after December 15, 2016 and for annual and interim periods thereafter. Early adoption is permitted. The Company has adopted the methodologies prescribed by ASU 2014-15, and it did not have an effect on its financial position.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have an effect on the Companys financial statements.
3. Public Offering
In the initial Public Offering, the Company sold 103,500,000 units, including a full exercise of the underwriters over-allotment in the amount of 13,500,000 units, at a price of $10.00 per unit (the Units). The Sponsor purchased an aggregate of 15,133,333 warrants at a price of $1.50 per warrant in a private placement that occurred simultaneously with the completion of the Public Offering.
Each Unit consists of one share of the Companys Class A common stock and one-third of one warrant (each, a Warrant and, collectively, the Warrants). Each whole Warrant entitles the holder to purchase one share of Class A common stock at a price of 11.50 per share. No fractional Warrants will be issued upon separation of the Units and only whole Warrants will trade. Each Warrant will become exercisable on the later of 30 days after the completion of the Companys initial Business Combination and 12 months from the closing of the Public Offering and will expire five years after the completion of the Companys initial Business Combination or earlier upon redemption or liquidation. 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, if and only if the last sale price of the Companys Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sent the notice of redemption to the Warrant holders.
The Company paid an underwriting discount of $20,700,000 ($0.20 per Unit sold) to the underwriters at the closing of the Public Offering, with an additional fee (the Deferred Discount) of 3.5% of the gross offering proceeds (or $36,225,000) payable upon the Companys completion of an initial 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 initial Business Combination.
4. Related Party Transactions
Founder Shares
On November 21, 2016, the Sponsor purchased 11,500,000 shares of Class B common stock (the Founder Shares) for $25,000, or $.0002 per share. In March 2017, the Company effected stock dividends of approximately 1.25 shares in the aggregate for each outstanding share of Class B common stock, resulting in the initial stockholders holding an aggregate of 25,875,000 Founder Shares. As used herein, unless the context otherwise requires, Founder Shares shall be deemed to include the shares of Class A common stock issuable upon conversion thereof. The Founder Shares are identical to the Class A common stock included in the Units sold in the Public Offering except that the Founder Shares automatically convert into shares of Class A common stock at the time of the Companys initial Business Combination and are subject to certain transfer restrictions, as described in more detail below. Holders of Founder Shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment at any time.
In March 2017, the Sponsor transferred 33,000 Founder Shares to each of the Companys independent director nominees at their original purchase price.
The Companys initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the Companys Class A 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 initial Business Combination, or (y) the date on which we complete a liquidation, merger, stock exchange or other similar transaction that results in all of the Companys stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Private Placement Warrants
The Sponsor has purchased an aggregate of 15,133,333 Private Placement Warrants at a price of $1.50 per whole warrant (approximately $22,700,000 in the aggregate) in a private placement that occurred simultaneously with the closing of the Public Offering. Each whole Private Placement Warrant is exercisable for one whole share of the Companys Class A common stock at a price of $11.50 per share. A portion of the purchase price of the Private Placement Warrants has been added to the proceeds from the Public Offering held in the Trust Account such that at the closing of the Public Offering $1,035.0 million was placed in the Trust Account. If the initial Business Combination is not completed within 24 months from the closing of the Public Offering, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
The Sponsor and the Companys officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
In March 2017, the Sponsor transferred 33,000 Founder Shares to each of the Companys independent director nominees at their original purchase price.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans, if any, are entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock) as stated in the registration rights agreement signed on the date of the prospectus for the Public Offering. These holders are entitled to certain demand and piggyback registration rights. 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 for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Related Party Loans
On November 22, 2016, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Public Offering pursuant to a promissory note (the Note). This loan was non-interest bearing and payable on the earlier of March 31, 2017 or the completion of the Public Offering. On November 22, 2016, the Company borrowed $300,000 under the Note. On March 29, 2017, the full $300,000 balance of the Note was repaid to the Sponsor.
Administrative Support Agreement
The Company has agreed to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the initial Business Combination or the Companys liquidation, the Company will cease paying these monthly fees.
Forward Purchase Agreement
In March 2017, the Company entered into a forward purchase agreement (the Forward Purchase Agreement) pursuant to which Riverstone VI SR II Holdings, L.P. (Fund VI Holdings) agreed to purchase an aggregate of up to 40,000,000 shares of the Companys Class A common stock, plus an aggregate of up to 13,333,333 warrants (the Forward Purchase Warrants), for an aggregate purchase price of up to $400,000,000, or $10.00 per unit
(collectively, Forward Purchase Units). Each Forward Purchase Warrant has the same terms as each of the Private Placement Warrants.
The obligations under the Forward Purchase Agreement do not depend on whether any public stockholders elect to redeem their shares in connection with the initial Business Combination and provide the Company with a minimum funding level for the initial Business Combination. Additionally, the obligations of Fund VI Holdings to purchase the Forward Purchase Units are subject to termination prior to the closing of the sale of such units by mutual written consent of the Company and such party, or automatically: (i) if the Public Offering is not consummated on or prior to June 30, 2017; (ii) if the initial Business Combination is not consummated within 24 months from the closing of the proposed offering, unless extended up to a maximum of sixty (60) days in accordance with the amended and restated certificate of incorporation; or (iii) if the Sponsor or the Company become subject to any voluntary or involuntary petition under the United States federal bankruptcy laws or any state insolvency law, in each case which is not withdrawn within sixty (60) days after being filed, or a receiver, fiscal agent or similar officer is appointed by a court for business or property of the Sponsor or the Company in each case which is not removed, withdrawn or terminated within sixty (60) days after such appointment. In addition, the obligations of Fund VI Holdings to purchase the Forward Purchase Units are subject to fulfillment of customary closing conditions, including that the initial Business Combination must be consummated substantially concurrently with the purchase of the Forward Purchase Units and must be with a Company engaged in a business that is within Riverstone Global Energy and Power Fund VI, L.P.s investment objectives.
5. Stockholders Equity
Common Stock
The authorized common stock of the Company includes up to 400,000,000 shares of Class A common stock and 50,000,000 shares of Class B common stock. If the Company enters into an initial Business Combination, it may (depending on the terms of such an initial Business Combination) be required to increase the number of shares of Class A common stock which the Company is authorized to issue at the same time as the Companys stockholders vote on the initial Business Combination to the extent the Company seeks stockholder approval in connection with the initial Business Combination. Holders of the Companys common stock are entitled to one vote for each share of common stock. At March 29, 2017, there were 103,500,000 shares of Class A common stock, of which 99,510,027 was classified outside of permanent equity, and 25,875,000 shares of Class B common stock issued and outstanding.
Preferred Stock
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 Companys board of directors. At March 29, 2017, there were no shares of preferred stock issued or outstanding.
Warrants
Only whole public Warrants may be exercised. No fractional shares will be issued upon exercise of the public Warrants. The public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or we permit holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement). The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, the Company will use its best efforts to file and have an effective registration statement covering the shares of Class A common stock issuable upon exercise of the Warrants, to maintain a current prospectus relating to those shares of Class A common stock until the Warrants expire or are redeemed; provided, that if the Companys Class A 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, the Company may, at its option, require holders of public Warrants who exercise their warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, the Company will not be required to file or maintain in effect a registration statement, but the Company will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. The public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Private Placement Warrants are identical to the public Warrants underlying the Units sold in the initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, and the Private Placement Warrants are not redeemable by the Company and are excersable on a cashless basis.