RETAIL OPPORTUNITY INVESTMENTS CORP - Annual Report: 2007 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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x
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 31, 2007
or
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from ____ to ____
Commission
file number:
NRDC
ACQUISITION CORP.
(Exact
name of registrant as specified in its charter)
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Delaware
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26-0500600
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(State
or other jurisdiction
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(I.R.S.
Employer
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of
incorporation or organization)
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Identification
No.)
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3
Manhattanville Road, Purchase, NY
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10577
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (914) 272-8067
Securities
registered pursuant to Section 12(b) of the Act:
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Title
of each class
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Name
of each exchange on which registered
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Units,
each consisting of one share of Common Stock
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American
Stock Exchange
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and
one Warrant
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Common
Stock, par value $0.0001 per share
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American
Stock Exchange
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Common
Stock Purchase Warrants
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American
Stock Exchange
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Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if 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 if the registrant is not required to file reports pursuant to
Section 13 or Section 15(a) 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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or 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.
Large
Accelerated Filer o Accelerated
Filer o Non-Accelerated
Filer x
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes x No o
The
aggregate market value of the voting and non‑voting common
equity held by non‑affiliates of the
registrant, based on the closing price as of March 31, 2008 of the registrant’s
Units, each consisting of one share of the registrant’s common stock and one
warrant exercisable for an additional share of common stock, was approximately
$501,975,000.00.
The
number of outstanding shares of the registrant’s common stock on March 31, 2008
was 51,750,000 shares.
DOCUMENTS
INCORPORATED BY REFERENCE: None
TABLE
OF CONTENTS
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PART
I
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2
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Item
1.
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Business
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2
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Item
1A.
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Risk
Factors
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15
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Item
1B.
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Unresolved
Staff Comments
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34
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Item
2.
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Properties
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35
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Item
3.
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Legal
Proceedings
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35
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PART II
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35
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Item
4.
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchasers of Equity Securities
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35
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Item
5.
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Selected
Financial Data
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36
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Item
6.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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37
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Item
7.
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Quantitative
and Qualitative Disclosures About Market Risk
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39
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Item
8.
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Financial
Statements and Supplementary Data
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40
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Item
9.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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52
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Item
9A.
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Controls
and Procedures
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52
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Item
9B.
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Internal
Control Over Financial Reporting
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52
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PART
III
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53
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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53
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Item
11.
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Executive
Compensation
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56
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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56
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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57
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Item
14.
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Principal
Accountant Fees and Services
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58
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Item
15.
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Exhibits
and Financial Statement Schedules
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59
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FORWARD
LOOKING STATEMENTS
The
Securities and Exchange Commission, or SEC, encourages companies to disclose
forward-looking information so that investors can better understand a company’s
future prospects and make informed investment decisions. This report
contains such “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended, or Securities Act,
and Section 21E of the Securities Exchange Act of 1934, as amended, or
Exchange Act.
Words
such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,”
“believes” and words and terms of similar substance used in connection with any
discussion of future operating or financial performance identify forward-looking
statements.
We claim
the protection of the safe harbor for forward-looking statements provided in the
Private Securities Litigation Reform Act of 1995. These statements
may be made directly in this report and include, but are not limited to,
statements about future financial and operating results and performance,
statements about our plans, objectives, expectations and intentions with respect
to future operations, and other statements that are not historical
facts.
These
forward-looking statements are based upon the current beliefs and expectations
of our management and are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are difficult to
predict and generally beyond our control. In addition, these
forward-looking statements are subject to assumptions with respect to future
business strategies and decisions that are subject to change. Actual
results may differ materially from the anticipated results discussed in these
forward-looking statements. These forward-looking statements include,
without limitation, statements regarding our:
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expectations
regarding competition for Business Combination
opportunities;
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beliefs
regarding the types of businesses that we can purchase with the funds in
the Trust Account;
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expectations
regarding the prioritization of the fiduciary duties of our executive
officers and directors with respect to the allocation of business
opportunities and the consummation of any Business
Combination;
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expectations
regarding the involvement of our executive officers following a Business
Combination;
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estimate
regarding the operating expenses of our business before and after the
consummation of an initial Business Combination and our expectation that
we may require additional financing to fund the operations or growth of
the target business or businesses;
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expectations
regarding the waiver of any right, title, interest or claim of any kind in
or to any monies held in the Trust Account by all vendors, prospective
target businesses or other entities we do business
with;
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belief
that we will have sufficient funds to operate for at least until we are
required to dissolve, assuming that an initial Business Combination is not
consummated prior to that time;
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expectations
regarding the timing of generating any
revenues;
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expectations
regarding the trading of the units, common stock and warrants on the
American Stock Exchange;
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intention
to make liquidating distributions to our stockholders as soon as
reasonably possible if we have not consummated our initial Business
Combination and we are obligated to terminate our
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corporate existence on October 23, 2009, assuming that an
initial Business Combination is not consummated prior to that time; and
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plan
to seek stockholder approval before we consummate our initial Business
Combination.
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These
forward-looking statements reflect our current views about future events and are
subject to risks, uncertainties and assumptions. We wish to caution
readers that certain important factors may have affected and could in the future
affect our actual results and could cause actual results to differ significantly
from those expressed in any forward-looking statement.
We
caution you not to place undue reliance on these forward-looking statements,
which speak only as of the date of this report. All subsequent
written and oral forward-looking statements attributable to us or any person
acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. Except to the
extent required by applicable law or regulation, we undertake no obligation to
update these forward-looking statements to reflect events or circumstances after
the date of this filing or to reflect the occurrence of unanticipated
events.
PART
I
Item
1. Business
Introduction
We are a
blank check company formed for the purpose of acquiring, through a merger,
capital stock exchange, stock purchase, asset acquisition or other similar
Business Combination, one or more assets or control of one or more operating
businesses, which we refer to as our “initial Business
Combination.” We were incorporated under Delaware law on
July 10, 2007. We were formed for the purpose of acquiring a
business through a Business Combination. Since our initial public
offering, our activities have been limited to identifying and evaluating
prospective acquisition targets.
The
registration statement for the Company’s initial public offering (the
“Offering”) was declared effective on October 17, 2007 (the “Effective
Date”). The Company consummated the Offering on October 23,
2007, and received net proceeds of approximately $384,000,000 from the issue and
sale of 41,400,000 of its units, comprising one share of common stock of the
Company and one warrant to purchase one share of common stock of the Company,
and also received $8,000,000 of proceeds from the private placement (“the
Private Placement”) of 8,000,000 warrants to NRDC Capital Management, LLC (the
“Sponsor”). The warrants sold in the Private Placement are identical
to the warrants sold in the Offering as part of the units, except that the
warrants sold in the private placement are not subject to redemption and are
subject to certain restrictions on transfer.
Substantially
all of the net proceeds of the Offering are intended to be generally applied
toward consummating a Business Combination with an operating business (“Business
Combination”). There is no assurance that the Company will be able to
successfully affect a Business Combination. Upon the closing of the
Offering and Private Placement, $406,456,881 including $14,490,000 of the
underwriters’ discounts and commissions as described in Note 3, was
placed in a trust account (“Trust Account”) and invested in United States
“government securities” within the meaning of Section 2(a)(16) of the
Investment Company Act of 1940 having a maturity of 180 days or less or in money
market funds meeting conditions under Rule 2a-7 promulgated under the
Investment Company Act of 1940 until the earlier of (i) the consummation of
the Company’s initial Business Combination and (ii) the liquidation of the
Company. The placing of funds in the Trust Account may not protect
those funds from third party claims against the Company. Although the
Company will seek to have all vendors, providers of financing, prospective
target businesses or other entities it engages, execute agreements with the
Company waiving any right, title, interest or claim of any kind in or to any
monies held in the Trust Account, there is no guarantee that they will execute
such agreements. NRDC Capital Management, LLC and the Company’s
executive officers have agreed that they will be liable under certain
circumstances to ensure that the proceeds in the Trust Account are not reduced
by the claims of target businesses or vendors, providers of financing, service
providers or other entities that are owed money by the Company for services
rendered to or contracted for or
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products
sold to the Company. There can be no assurance that they will be able
to satisfy those obligations. The net proceeds not held in the Trust
Account may be used to pay for business, legal and accounting due diligence on
prospective acquisitions and continuing general and administrative
expenses. Additionally, up to an aggregate of $2,700,000 of interest
earned on the Trust Account balance may be released to the Company to fund
working capital requirements and additional funds may be released to fund tax
obligations. As of December 31, 2007, there was $409,813,737 held in
the Trust Account, including accrued interest income of $3,356,856.
Since the
completion of the Offering, we have focused our efforts on identifying
businesses that operate within the U.S. and Europe across various industries
including but not limited to the following: retail, real estate,
gaming and lodging, restaurant, self-storage, grocery, and convenience
stores. While our primary focus is upon target businesses
incorporated in the United States, we may consider target businesses
incorporated in any geographical region.
While we
may seek to consummate Business Combinations with more than one target business,
our initial Business Combination must be with one or more operating businesses
whose fair market value is at least equal to 80% of the balance in the Trust
Account (less the deferred underwriting discounts and commissions and taxes
payable) at the time of such acquisition. The actual amount of
consideration which we will be able to pay for the initial Business Combination
will depend on whether we choose, and are able, to pay a portion of the initial
Business Combination consideration with shares of our common stock or to finance
a portion or all of the consideration by issuing debt or equity securities or
incurring indebtedness. No financing arrangements have been entered
into or contemplated with any third parties to raise any additional funds,
whether through the sale of securities or otherwise, that we may need if we
decide to consummate an initial Business Combination for consideration in excess
of our available assets at the time of acquisition. If we elect to
pursue the simultaneous acquisitions of several assets or closely related
operating businesses at the same time, we could encounter difficulties in
consummating all or a portion of such acquisitions due to a lack of adequate
resources, including the inability of management to devote sufficient time to
the due diligence investigation, negotiation and documentation of each
acquisition. Furthermore, even if we complete the acquisition of more
than one target business at the same time, we may be unable to integrate the
operations of such target businesses.
Overview
of U.S. Retail and Real Estate Industries
The
retail industry is large and growing and comprises a significant component of
the global and U.S. economies. We consider the retail industry to
encompass a number of large and diverse sectors, including but not limited
to: motor vehicle and parts dealers; furniture and home furnishings
stores; electronics and appliance stores; building materials and garden
equipment and supplies dealers; food and beverage stores; health and personal
care stores; gasoline stations; clothing and accessories stores; sporting goods,
hobby, book and music stores; general merchandise and department stores;
electronic shopping and mail-order houses; and restaurants. According
to the U.S. Census Bureau, retail businesses generated sales of $4.3 trillion in
2006, an average annual increase of 6.1% since 2004. Additionally,
the U.S. Bureau of Economic Analysis reported that retail businesses represented
$863 billion, or 6.5% of total Gross Domestic Product, in 2006; an average
annual increase of 5.1% since 2004. While potentially deteriorating
U.S. domestic macroeconomic conditions pose a threat to the retail industry, we
believe that relatively high employment levels, moderate inflation and declining
interest rates as well as rising household disposable income will help consumers
maintain confidence in the event of an economic slowdown.
The U.S.
real estate industry can be segmented into three broad
sectors: commercial, residential and government. The
commercial sector, where our efforts to target our initial Business Combination
are focused, can be further segmented into several sub-sectors, including
lodging and leisure, retail, multi-family, office, industrial and
specialty. The Bureau of Economic Analysis of the U.S. Department of
Commerce estimates the commercial real estate sector contributed approximately
$1.6 trillion to 2006 GDP, which represented 12.3% of GDP and an annual increase
of 6.8% since 2001. While each sub-sector has distinct
characteristics, common factors generally include high fragmentation and a large
percentage of private ownership.
Market
Opportunity
Based on
the current dynamics of the U.S. and global economies, we believe that
significant opportunities exist for us to effect a Business Combination in any
one or several of our targeted industries as companies begin
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trading
on a discounted valuation basis. Despite the current state of the
credit markets, the prospects of effecting a Business Combination in the current
market environment are extremely positive as we have approximately $400M of cash
with which to invest in a target business.
As
discussed above, the current trends affecting the retail and real estate
industries may result in increased mergers and acquisition activity in which we
believe we are well positioned to participate. Our executive officers
have previously developed and utilized an equity investment approach through
their work at NRDC Equity Partners that we will use, along with other investment
techniques, to identify and evaluate our initial Business
Combination. This approach seeks to capitalize on the dynamic
relationship between an operating business and its underlying real
estate. The NRDC Equity Partners approach holds as a central tenet
that operating businesses and the real estate that they own or lease have an
inherent symbiotic relationship and that improving or enhancing either the
operations or the real estate holdings of a business has a positive impact on
the other and, in turn, on the aggregate value of the enterprise. The
analytical techniques used to find such opportunities are a holistic method of
investment research that simultaneously examines (a) the strength and
prospects of the operating business, (b) the current and future value of
the real estate underlying the operating business, and (c) the present
relationship between the real estate and the operating business. NRDC
then creates value by: (i) improving the operating business
through the implementation of marketing, operational, growth and management
strategies, and/or (ii) improving the dynamic between the operating
business and its real estate, and/or (iii) enhancing, growing or
repositioning the real estate underneath the operating business.
We have
identified the following sub-sectors as those which could benefit from our
approach to realizing a company’s real estate platform value:
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Lodging
and Leisure: including hotels, resorts, casinos,
restaurants.
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Retail: including
regional malls, “big box” shopping centers, neighborhood grocery-anchored
shopping centers and other facilities where retail operations are
located.
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Industrial: including
warehousing, distribution and other logistical facilities, manufacturing
facilities.
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Healthcare: including
skilled nursing facilities, assisted living facilities, hospitals, medical
office buildings and other facilities related to the delivery of health
care services.
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We
believe that we are well positioned to source potential acquisition
opportunities throughout a variety of industries, including the retail and real
estate marketplace. Our executive officers and directors have an
average of over 30 years of experience acquiring, building, operating, advising
and selling public and private companies. Our management also has
developed long-standing market relationships throughout the industry that will
also help us to attract high quality talent as well as to identify and evaluate
acquisition opportunities.
Effecting
a Business Combination
General
We are
not presently engaged in, and we will not engage in, any operations or
activities other than seeking and evaluating potential target businesses until
we complete a Business Combination. We intend to use cash derived
from the proceeds of our Offering, the Private Placement and the co-investment,
and may also use our capital stock, debt or a combination of these, in effecting
a Business Combination. Although we intend to apply substantially all
of the net proceeds of the Offering, the Private Placement and the co-investment
generally toward effecting a Business Combination as described herein, the
proceeds are not otherwise designated a more specific purpose. While
we may seek to effect Business Combinations with more than one target business,
it is likely that we will have the ability to initially complete only a single
Business Combination, although this may entail the simultaneous acquisitions of
several operating businesses.
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We
have not identified a target business.
Subject
to the limitation that a target business have a fair market value of at least
80% of the net amount in the Trust Account (exclusive of the underwriters’
deferred compensation, and interest earned on that amount, held in the Trust
Account) at the time of the acquisition, we will have broad flexibility in
identifying and selecting a prospective acquisition candidate, as long as it
meets the criteria we describe in this section. If the net proceeds
of the Offering and the Private Placement are insufficient for us to complete a
Business Combination, because of the size of the Business Combination, or
because we become obligated to convert a significant number of shares of our
common stock from dissenting stockholders, we will need to seek additional
financing through the issuance of equity or debt securities or other financing
arrangements. We currently have no restrictions on our ability to
raise additional funds through the sale of our equity or debt securities or
through loans or other financing arrangements. However, no financing
arrangements have been entered into or contemplated with any third parties to
raise any additional funds, whether through the sale of securities or
otherwise.
Sources
of target businesses
We may
identify a target business through our executive officers’ and directors’
current and previous business contacts or through our public relations and
marketing efforts. Our executive officers and directors have long
standing business relationships, have seats on the boards of various companies
and are involved in several charitable organizations and industry associations
in their respective fields. Our executive officers and directors have
on average, over 30 years of professional experience. This breadth of
experience, and tenure, may be a valuable basis with which to source business
targets.
In
addition to leveraging our experience and relationships within our executive
officers and directors we anticipate that target businesses may also be brought
to our attention from various unaffiliated parties such as business brokers,
private equity and venture capital firms, consultants, investment bankers,
attorneys and accountants among other sources.
Our
executive officers have committed to spending a significant portion of their
time on our business but are not required to devote any specific amount of time
to our affairs. Our directors have no commitment to spend a specified
amount of time in identifying or performing due diligence on potential target
businesses. Our executive officers and directors believe that the
relationships they have developed over their careers, in combination with the
possible sources discussed above, will generate a number of potential target
businesses that will warrant further investigation.
We may
pay fees or compensation to third parties for their efforts in introducing us to
potential target businesses. Such payments are typically, although
not always, calculated as a percentage of the dollar value of the
transaction. We have not anticipated use of a particular percentage
fee, but instead will seek to negotiate the smallest reasonable percentage fee
consistent with the attractiveness of the opportunity and the alternatives, if
any, that are then available to us. We may make such payments to
entities we engage for this purpose or entities that approach us on an
unsolicited basis. Payment of finders’ fees is customarily tied to
completion of a transaction and certainly would be tied to a completed
transaction in the case of an unsolicited proposal. Although it is
possible that we may pay finders’ fees in the case of an uncompleted
transaction, we consider this possibility to be remote. In no event
will we pay our sponsor or any of our executive officers, directors or existing
stockholders or any entity with which they are affiliated any finder’s fee or
other compensation for services rendered to us prior to or in connection with
the consummation of an initial Business Combination. In addition,
neither our sponsor nor any of our executive officers, directors or existing
stockholders will receive any finder’s fee, consulting fees, or any similar fees
from any person or entity prior to or in connection with any Business
Combination involving us other than any compensation or fees that may be
received for any services provided following such Business
Combination.
Selection
of a target business and structuring of a business combination
Subject
to the requirement that our initial Business Combination must be with one or
more operating businesses whose fair market value is at least equal to 80% of
the balance in the Trust Account (less the deferred underwriting discounts and
commissions and taxes payable) at the time of such acquisition, our management
will have broad flexibility in identifying and selecting a prospective target
business. In evaluating a prospective target
5
business,
our management will conduct business, legal and accounting due diligence reviews
and will consider, among other factors, the following:
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financial
condition and results of operation;
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earnings
and growth potential;
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experience
and skill of management and availability of additional
personnel;
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capital
requirements;
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competitive
position;
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stage
of development;
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regulatory
environment of the industry;
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lines
of business in which the target business
engages;
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degree
of current or potential market acceptance of the
services;
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costs
associated with effecting the Business
Combination.
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We expect
that our due diligence review will encompass, among other things, meetings with
incumbent management, inspection of facilities, as well as review of financial,
operating, industry and other information derived from publicly available
sources or which the target business will make available to us.
We cannot
predict the amount of time and costs required to identify and evaluate a target
business and to structure and complete a Business Combination. Any
costs incurred with respect to the identification and evaluation of a target
business with which we do not complete a Business Combination will reduce the
funds we have available to complete a Business Combination with another
business.
Fair
market value of target business
Our
initial Business Combination must be with one or more operating businesses whose
fair market value is at least equal to 80% of the balance in the Trust Account
(less the deferred underwriting discounts and commissions and taxes payable) at
the time of such combination. The fair market value of such business
or businesses will be determined by our board of directors based upon standards
generally accepted by the financial community, such as actual and potential
sales, earnings, cash flow, book value and the assumption of any indebtedness of
the target. If our board of directors is not able to independently determine
that the target business has a sufficient fair market value to meet the
threshold criterion or if one of our executive officers, directors or existing
stockholders is affiliated with that target business, we will obtain an opinion
from an unaffiliated, independent investment banking firm which is a member of
the Financial Industry Regulatory Authority (FINRA) with respect to the fair
market value of the target business. In all other instances, we will
have no obligation to obtain or provide our stockholders with a fairness
opinion. Investment banking firms providing fairness opinions
typically place limitations on the purposes for which the opinion may be used,
and there can be no assurances that, as a result of such limitations or
applicable law, stockholders will be entitled to rely on the
opinion. We expect to require that any firm selected by us to provide
a fairness opinion will adhere to general industry practice in stating the
purposes for which its opinion may be used. If no opinion is obtained
or if stockholders are not permitted to rely on the opinion, our stockholders
will be relying solely on the judgment of our board of directors with respect to
the determination of the fair market value of our initial Business
Combination.
6
Probable
lack of business diversification
Our
initial Business Combination must be with one or more target businesses whose
fair market value is at least equal to 80% of the balance in the Trust Account
(less the deferred underwriting discounts and commissions and taxes payable) at
the time of such acquisition. We expect to consummate only a single
Business Combination, although to satisfy the 80% test, we may need to
consummate a simultaneous combination with more than one operating businesses at
the same time. At the time of our initial Business Combination, we
may not be able to acquire more than one target business because of various
factors, including complex accounting or financial reporting
issues. For example, in the proxy solicitation materials we
distribute to our stockholders in connection with our initial Business
Combination, we may need to present pro forma financial
statements reflecting the operations of several target businesses as if they had
been combined historically. Consummating our initial Business
Combination through more than one acquisition would likely result in increased
costs as we would be required to conduct a due diligence investigation of more
than one business and negotiate the terms of the acquisition with multiple
sellers. A simultaneous combination with several target businesses
also presents logistical issues such as the need to coordinate the timing of
negotiations, proxy statement disclosure and closings. Our attempt to
consummate our initial Business Combination in this manner would increase the
chance that we would be unable to successfully consummate our initial Business
Combination in a timely manner. In addition, if conditions to
closings with respect to one or more of the target businesses are not satisfied,
the fair market value of the business could fall below the required fair market
value threshold of 80% of the balance in the Trust Account (less the deferred
underwriting discounts and commissions and net of taxes
payable). Furthermore, the success of a business formed through the
combination of smaller businesses will depend on our ability to integrate
disparate organizations and achieve expected synergies. See “Risk
Factors—Any attempt to consummate more than one transaction as our initial
Business Combination will make it more difficult to consummate our initial
Business Combination.”
Accordingly,
while it is possible that we may attempt to consummate our initial Business
Combination with more than one target business, we are more likely to choose a
single target business if all other factors appear equal. This means
that for an indefinite period of time, the prospects for our success may depend
entirely on the future performance of a single business. Unlike other
entities that have the resources to consummate Business Combinations with
multiple entities in one or several industries, it is probable that we will not
have the resources to diversify our operations and mitigate the risks of being
in a single line of business. By consummating a Business Combination
with only a single entity, our lack of diversification may:
|
|
•
|
subject
us to negative economic, competitive, and regulatory developments, any or
all of which may have a substantial adverse impact on the particular
industry in which we operate after an initial Business Combination;
and
|
|
|
•
|
cause
us to depend on the marketing and sale of a single service or product or
limited number of services or products;
and
|
|
|
•
|
result
in our dependency upon the performance of a single operating
business.
|
If we
consummate an initial Business Combination structured as a merger in which the
consideration is our stock, we would have a significant amount of cash available
to make add-on acquisitions following our initial Business
Combination. See “Risk Factors—We may only be able to consummate one
Business Combination, which may cause us to be solely dependent on a single
business and a limited number of services or products.”
Management
following a business combination
While we
expect that the members of our management will remain associated with us
following a Business Combination, their continued association with us, and the
positions they may assume in a combined company, will depend upon our evaluation
of the target company’s management and the terms of the Business
Combination. None of our management is obligated to remain associated
with us following a Business Combination. In addition, we expect that
we may employ at least some of the officers and other personnel in the target
business and we may seek to recruit additional personnel to supplement the
incumbent management. While we intend to closely scrutinize the
management of a prospective target business when evaluating the desirability of
effecting a Business Combination, we cannot assure you that our assessment of
the target business’ management will prove to be correct. Moreover,
7
we cannot
assure you that our officers and directors will have significant experience or
knowledge relating to the operations of the particular target
business. Furthermore, the future role of our officers and directors,
if any, in the target business cannot presently be stated with any
certainty. Our current management will only be able to remain with
the combined company after the consummation of a Business Combination if they
are able to negotiate and agree to mutually acceptable employment terms in
connection with any such combination. While we expect that one or
more of our directors will remain associated in some capacity with us following
a Business Combination, it is unlikely that any of them will devote their full
efforts to our affairs subsequent to a Business Combination.
Use
of Trust Funds
To the
extent that the funds in the Trust Account earn interest, we are permitted to
use that interest for several purposes. We can use the interest from
the funds in the Trust Account to provide working capital to enable us to fund
our expenses, including the expenses associated with the pursuit of a Business
Combination, up to an aggregate maximum of $2,700,000. The Company
has agreed to pay up to $7,500 a month in total for office space and general and
administrative services to NRDC Capital Management, LLC. NRDC Capital
Management, LLC commenced providing these services commenced on the effective
date of the Offering, October 17, 2007 and will terminate upon the earlier
of (i) the completion of the Business Combination, or (ii) the
Company’s liquidation. For the period ended December 31, 2007,
the Company has incurred $16,451 of expense relating to this agreement which is
included in general/administrative services in the accompanying Statement of
Income.
Except as
provided above, unless and until we consummate a Business Combination, the funds
held in the Trust Account (other than interest used to fund working capital)
will not be available for our use for any expenses which we may incur related to
the investigation and selection of a target business and the negotiation of an
agreement to acquire a target business. The $14,490,000 of the funds
attributable to deferred underwriting compensation in connection with our
Offering and the underwriters’ exercise of their over allotment option (and
accrued interest thereon, net of taxes payable) less the amount allocable to
stockholders exercising their conversion rights, will be released to the
underwriters of our Offering, upon completion of a Business Combination as more
fully described in Item 1, “Business – Effecting a Business Combination –
Conversion Rights”, or to our public stockholders upon the implementation of a
stockholder approved plan of dissolution and liquidation and the distribution of
the Trust Account, but will in no event be available for use by us in a Business
Combination.
Stockholder
approval of our initial business combination
Prior to
the consummation of our initial Business Combination, we will submit the
proposed transaction to our stockholders for approval, even if the nature of the
acquisition is such as would not ordinarily require stockholder approval under
Delaware law. Pursuant to our by-laws, holders of a majority of our
issued and outstanding shares of common stock who are entitled to vote, or a
quorum, must vote on our initial Business Combination. Abstentions
are not considered to be voting “for” or “against” a transaction and will have
no effect on the outcome of the vote to approve our initial Business
Combination. The American Stock Exchange, or AMEX, recommends that
stockholders receive notice of any shareholder meeting a minimum of 20 days
prior to the meeting. Therefore, if shares of our common stock are
listed on AMEX, we will mail the notice at least 23 days prior to the meeting
date to allow time for mailing. If shares of our common stock are not
listed on AMEX, we will abide by our by-laws and Delaware law, which require us
to provide at least ten days’ written notice, measured from the certification
date of the mailing, before the date of any shareholders meeting. We
will conduct any vote on our initial Business Combination, whether by a
shareholder meeting or written consent, in accordance with the SEC’s proxy rules
and the requirements of our amended and restated certificate of incorporation
and by-laws. In addition, even if our shareholders vote in favor of a
Business Combination, under the terms of our amended and restated certificate of
incorporation, we will not consummate a Business Combination if public
stockholders owning 30% or more of the shares sold in the Offering both vote
against the Business Combination and exercise their conversion
rights. See “— Conversion Rights.” If a majority of the
shares of common stock voted by the public stockholders are not voted in favor
of a proposed initial Business Combination, we may continue to seek other target
businesses with which to consummate our initial Business Combination that meet
the criteria set forth in this prospectus until the expiration of 24 months from
completion of the Offering. In connection with seeking stockholder
approval of an initial Business Combination, we will furnish our stockholders
with proxy solicitation materials prepared in accordance with the Exchange Act,
which, among other matters, will include a description of the operations of the
8
target
business and audited historical financial statements of the target business
based on United States generally accepted accounting principles.
In
connection with the vote required for any Business Combination, our executive
officers, directors and existing stockholders have agreed to vote the shares of
common stock acquired by them prior to the completion of the Offering, either
for or against an initial Business Combination in the same manner as the
majority of the shares of common stock are voted by our public
stockholders. Our existing stockholders have also agreed that they
will not be eligible to exercise conversion rights with respect to those
shares. In addition, our executive officers, directors and existing
stockholders have agreed that they will vote any shares they purchase in the
secondary market in favor of an initial Business Combination. As a
result, an officer, director or existing stockholder who acquires shares in the
secondary market must vote those shares in favor of the proposed initial
Business Combination with respect to those shares, and will therefore not be
eligible to exercise conversion rights for those shares if our initial Business
Combination is approved by a majority of our public stockholders. We
will proceed with the initial Business Combination only if (i) a majority
of the shares of common stock voted by the public stockholders are voted in
favor of the initial Business Combination, (ii) public stockholders owning
less than 30% of the shares sold in our Offering vote against the proposed
Business Combination and exercise their conversion rights and (iii) our
stockholders approve an amendment to our amended and restated certificate of
incorporation to provide for our perpetual existence. Voting against
the initial Business Combination alone will not result in conversion of a
stockholder’s shares into a pro rata share of the
Trust Account. To do so, a stockholder must have also exercised the
conversion rights described below.
After the
consummation of our initial Business Combination, unless required by Delaware
law, the federal securities laws, and the rules and regulations promulgated
thereunder, or the rules and regulations of an exchange upon which our
securities are listed, we do not presently intend to seek stockholder approval
for any subsequent acquisitions.
Conversion
Rights
At the
time we seek stockholder approval of any Business Combination, we will offer
each public stockholder the right to have such stockholder’s shares of common
stock converted to cash if the stockholder votes against the initial Business
Combination and the initial Business Combination is approved and
consummated.
The
actual per share conversion price will be equal to the aggregate amount then on
deposit in the Trust Account, including accrued interest income (net of taxes
payable on such interest and after release of up to $2,700,000 of interest
income, after tax, to fund working capital requirements), as of two business
days prior to the consummation of the initial Business Combination, divided by
the number of shares of common stock sold in the Offering. As of
December 31, 2007, the initial per share conversion price, including accrued
interest income on deposit in the Trust Account, would be approximately
$9.90.
An
eligible stockholder may request conversion at any time after the mailing to our
stockholders of the proxy statement and prior to the vote taken with respect to
a proposed Business Combination at a meeting held for that purpose, but the
request will not be granted unless the stockholder votes against the initial
Business Combination and the initial Business Combination is approved and
consummated. In addition, no later than the business day immediately
preceding the vote on the Business Combination, the stockholder must present
written instructions to our transfer agent stating that the stockholder wishes
to convert its shares into a pro rata share of the
Trust Account and confirming that the stockholder has held the shares since the
record date and will continue to hold them through the stockholder meeting and
the closing of our initial Business Combination. We may also require
public stockholders to tender their certificates to our transfer agent or to
deliver their shares to the transfer agent electronically using The Depository
Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System no later than the
business day immediately preceding the vote on the Business
Combination.
The proxy
solicitation materials that we will furnish to stockholders in connection with
the vote for any proposed initial Business Combination will indicate whether we
are requiring stockholders to satisfy such certification and delivery
requirements. Traditionally, in contrast to the requirement for
physical or electronic delivery prior to the stockholder meeting, in order to
perfect conversion rights in connection with a blank check company’s initial
Business Combination, a holder could simply vote against a proposed Business
Combination and
9
check a
box on the proxy card indicating such holder was seeking to exercise his
conversion rights. After the Business Combination was approved, the
company would contact such stockholder to arrange for him to deliver his
certificate to verify ownership. As a result, the stockholder then
had an “option window” after the consummation of the Business Combination during
which he could monitor the price of the stock in the market. If the
price rose above the conversion price, he could sell his shares in the open
market before actually delivering his shares to the company for cancellation in
consideration for the conversion price. Thus, the company would not
have any control over the process and the conversion right, to which
stockholders were aware they needed to exercise before the stockholder meeting,
would become a continuing right until the converting holder delivered his
certificate for conversion at the conversion price or such stockholder sold his
shares in the open market. The requirement for physical or electronic
delivery prior to the stockholder meeting is two-fold. First, it
ensures that a converting stockholder’s election to convert is irrevocable once
the Business Combination is approved. Second, it ensures that we will
know the amount of proceeds that we will be able to use to consummate our
initial Business Combination.
The proxy
solicitation materials that we will furnish to stockholders in connection with
the vote for any proposed Business Combination will indicate whether we are
requiring stockholders to satisfy such certification and delivery
requirements. Accordingly, a stockholder would have from the time we
send out our proxy statement up until the business day immediately preceding the
vote on the Business Combination to deliver his shares if he wishes to seek to
exercise his conversion rights. This time period varies depending on
the specific facts of each transaction. However, as the delivery
process is within the stockholder’s control and, whether or not he is a record
holder or his shares are held in “street name,” can be accomplished by the
stockholder in a matter of hours simply by contacting the transfer agent or his
broker and requesting delivery of his shares through the DWAC System, we believe
this time period is sufficient for investors generally. However,
because we do not have any control over the process, it may take significantly
longer than we anticipated and investors may not be able to seek conversion in
time. Accordingly, we will only require stockholders to deliver their
certificates prior to the vote if, in accordance with the American Stock
Exchange’s proxy notification recommendations, the stockholders receive the
proxy solicitation materials at least twenty days prior to the
meeting.
In the
event a stockholder tenders his or her shares and decides prior to the
stockholder meeting that he or she does not want to convert his or her shares,
the stockholder may withdraw the tender. In the event that a
stockholder tenders shares and our initial Business Combination is not
completed, these shares will not be converted into cash and the physical
certificates representing these shares will be returned to the
stockholder.
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
approximately $35 and it would be up to the broker whether or not to pass this
cost on to the converting holder. However, this fee would be incurred
regardless of whether or not we require holders seeking to exercise conversion
rights to tender their shares prior to the meeting as the need to deliver shares
is a requirement of conversion regardless of the timing of when such delivery
must be effectuated. Accordingly, this would not result in any
increased cost to shareholders when compared to the traditional
process.
The steps
outlined above will make it more difficult for our stockholders to exercise
their conversion rights. In the event that it takes longer than
anticipated to obtain a physical certificate, stockholders who wish to convert
may be unable to obtain physical certificates by the deadline for exercising
their conversion rights and thus will be unable to convert their
shares. If a stockholder votes against the initial Business
Combination but fails to properly exercise its conversion rights, such
stockholder will not have its shares of common stock converted to its pro rata distribution of
the Trust Account. Any request for conversion, once made, may be
withdrawn at any time up to the date of the meeting. It is
anticipated that the funds to be distributed to stockholders who properly elect
conversion will be distributed promptly after consummation of our initial
Business Combination. Public stockholders who convert their stock
into their share of the Trust Account will still have the right to exercise the
warrants that they received as part of the units. We will not
consummate our proposed initial Business Combination if public stockholders
owning 30% or more of the shares sold in the Offering both vote against the
Business Combination and exercise their conversion rights. We will
not propose to our stockholders any transaction that is conditioned on holders
of less than 30% of the public shares exercising their conversion
rights.
If a vote
on our initial Business Combination is held and the Business Combination is not
approved, we may continue to try to consummate a Business Combination with a
different target until 24 months from the
10
completion
of the Offering. If the initial Business Combination is not approved
or completed for any reason, then public stockholders voting against our initial
Business Combination who exercised their conversion rights would not be entitled
to convert their shares of common stock for a pro rata share of the
aggregate amount then on deposit in the Trust Account. In such case,
if we have required public stockholders to tender their certificates prior to
the meeting, we will promptly return such certificates to the tendering public
stockholder.
Public
stockholders would be entitled to receive their pro rata share of the
aggregate amount on deposit in the Trust Account only in the event that the
initial Business Combination they voted against was duly approved and
subsequently completed, or in connection with our liquidation, whether or not
they have previously delivered their shares for conversion without any further
action on their part.
We will
not complete our proposed initial Business Combination if public stockholders
owning 30% or more of the shares sold in the Offering exercise their conversion
rights. We intend to structure and consummate any potential Business
Combination in a manner such that public stockholders holding up to in the
aggregate one share less than 30% of our shares issued in the Offering voting
against our initial Business Combination could convert their shares of common
stock into a pro rata
share of the aggregate amount then on deposit in the Trust Account, and
the Business Combination could still go forward. As a result, we will
be able to complete a Business Combination even in the face of strong
stockholder dissent. Furthermore, the ability to consummate a
transaction despite shareholder disapproval in excess of what would be
permissible in a traditional blank check offering may be viewed negatively by
potential investors seeking shareholder protections consistent with traditional
blank check offerings. However, we believe the benefit of approving a
transaction with a large majority outweighs these potential
negatives.
Plan
of dissolution and liquidation if no business combination
Our
amended and restated certificate of incorporation provides that we will continue
in existence only until October 23, 2009, 24 months from the completion of
the Offering. This provision may not be amended except in connection
with the consummation of our initial Business Combination. If we have
not completed a Business Combination by such date, our corporate existence will
cease except for the purposes of liquidating and winding up our affairs,
pursuant to Section 278 of the Delaware General Corporation
Law. This has the same effect as if our board of directors and
stockholders had formally voted to approve our dissolution pursuant to
Section 275 of the Delaware General Corporation
Law. Accordingly, limiting our corporate existence to a specified
date as permitted by Section 102(b)(5) of the Delaware General Corporation
Law removes the necessity to comply with the formal procedures set forth in
Section 275 (which would have required our board of directors and
stockholders to formally vote to approve our liquidation and to have filed a
certificate of dissolution with the Delaware Secretary of
State). Instead, we will notify the Delaware Secretary of State in
writing on the termination date that our corporate existence has ended, with any
franchise tax due or assessable by the State of Delaware. We view
this provision terminating our corporate life by October 23, 2009 as an
obligation to our stockholders, and our executive officers and directors have
agreed that they will not take any action to amend or waive this provision to
allow us to survive for a longer period of time except in connection with the
consummation of our initial Business Combination.
If we are
unable to complete an initial Business Combination within 24 months after the
completion of the Offering, as soon as practicable thereafter, we will adopt a
plan of distribution in accordance with Section 281(b) of the Delaware
General Corporation Law. Section 278 provides that our existence
will continue for at least three years after our expiration for the purpose of
prosecuting and defending suits, whether civil, criminal or administrative, by
or against us, and of enabling us gradually to settle and close our business, to
dispose of and convey our property, to discharge our liabilities and to
distribute to our stockholders any remaining assets, but not for the purpose of
continuing the business for which we were organized. Our existence
will continue automatically even beyond the three-year period for the purpose of
completing the prosecution or defense of suits begun prior to the expiration of
the three-year period, until such time as any judgments, orders or decrees
resulting from such suits are fully executed. Section 281(b)
will require us to pay or make reasonable provision for all then-existing claims
and obligations, including all contingent, conditional, or unmatured contractual
claims known to us, and to make such provision as will be reasonably likely to
be sufficient to provide compensation for any then-pending claims and for claims
that have not been made known to us or that have not arisen but that, based on
facts known to us at the time, are likely to arise or to become known to us
within 10 years after such date. Payment or reasonable provision for
payment of claims will be made in the discretion of the board of directors based
on the nature of the claim and
11
other
factors deemed relevant by the board of directors. Claims may be
satisfied by direct negotiation and payment, purchase of insurance to cover the
claim(s), setting aside money as a reserve for future claims, or otherwise as
determined by the board of directors in its discretion. Under
Section 281(b), the plan of distribution must provide for all of such
claims to be paid in full or make provision for payments to be made in full, as
applicable, if there are sufficient assets. If there are insufficient
assets, the plan must provide that such claims and obligations be paid or
provided for according to their priority and, among claims of equal priority,
ratably to the extent of legally available assets. Any remaining
assets will be available for distribution to our
stockholders. 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 and service providers (such as accountants, lawyers,
investment bankers, etc.) and potential target businesses. We will
seek to have all vendors, service providers and prospective target businesses
execute agreements with us waiving any right, title, interest or claim of any
kind they may have in or to any monies held in the Trust Account. As
a result, the claims that could be made against us will be limited, thereby
lessening the likelihood that any claim would result in any liability extending
to the trust. We therefore believe that any necessary provision for
creditors will be reduced and should not have a significant impact on our
ability to distribute the funds in the Trust Account to our public
stockholders. Nevertheless, we cannot assure you of this fact as
there is no guarantee that vendors, service providers and prospective target
businesses will execute such agreements. Nor is there any guarantee
that, even if they execute such agreements with us, they will not seek recourse
against the Trust Account. A court could also conclude that such
agreements are not legally enforceable. As a result, if we liquidate,
the per-share distribution from the Trust Account could be less than $9.84 due
to claims or potential claims of creditors. We will distribute to all
of our public stockholders, in proportion to their respective equity interests,
an aggregate sum equal to the amount in the Trust Account, inclusive of any
interest, plus any remaining net assets (subject to our obligations under
Delaware law to provide for claims of creditors as described
below).
We will
notify the trustee of the Trust Account to begin liquidating such assets
promptly after such date and anticipate it will take no more than 10 business
days to effectuate such distribution. Our existing stockholders have
waived their rights to participate in any liquidation distribution with respect
to their initial shares of common stock. There will be no
distribution from the Trust Account with respect to our warrants, which will
expire worthless.
We will
pay the costs of liquidation from our remaining assets outside of the Trust
Account. If such funds are insufficient, our Sponsor has agreed to
advance us the funds necessary to complete such liquidation (currently
anticipated to be between $15,000 and $25,000) and has agreed not to seek
repayment of such expenses.
If we
were unable to consummate an initial Business Combination and expended all of
the net proceeds of the Offering, other than the proceeds deposited in the Trust
Account, and without taking into account interest income, if any (and net of
taxes payable on such interest income and release of up to $2,700,000 of
interest income, after tax, available to us to fund working capital
requirements), earned on the Trust Account, the per share liquidation price
would be approximately $9.84, plus interest. The proceeds deposited
in the Trust Account could, however, become subject to the claims of our
creditors which will be prior to the claims of our public
stockholders. Our Sponsor and our executive officers have agreed, on
a joint and several basis, that, if we liquidate prior to the consummation of
our initial Business Combination, they will reimburse the Trust Account for our
debts to any vendor for services rendered, products sold or financing provided
to us, to a potential target business or to providers of financing, if any, in
each case only to the extent necessary to ensure that such claims do not reduce
the amount in the Trust Account available for payment to our stockholders in the
event of a liquidation. We currently believe that our Sponsor and our
executive officers are capable of funding a shortfall in our Trust Account to
satisfy their foreseeable indemnification obligations. However, we
cannot assure you that our sponsor and our executive officers will be able to
satisfy those obligations. In the event that the proceeds in the
Trust Account are reduced and our Sponsor or our executive officers assert that
they are unable to satisfy their obligations or that they have no
indemnification obligations related to a particular claim, our independent
directors would determine whether we would take legal action against our Sponsor
or our executive officers to enforce their indemnification
obligations. While we currently expect that our independent directors
would take action on our behalf against our Sponsor and our executive officers
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 per share liquidation price will not be
less than approximately $9.84, plus interest.
12
We will
seek to obtain agreements from third parties waiving their rights or claims to
the Trust Account. However, there is no guarantee that vendors,
prospective target businesses, or other entities will execute such agreements,
or even if they execute such agreements that they would be prevented from
bringing claims against the Trust Account, including but not limited to
fraudulent inducement, breach of fiduciary responsibility and other similar
claims, as well as claims challenging the enforceability of the waiver, in each
case in order to gain an advantage with a claim against our assets, including
the funds held in the Trust Account which could have higher priority than the
claims of our public stockholders. Our Sponsor and our executive
officers have agreed, on a joint and several basis, pursuant to agreements with
us and the underwriters that, if we liquidate prior to the consummation of our
initial Business Combination, they will be liable to ensure that the proceeds in
the Trust Account are not reduced by claims of target businesses or entities
that are owed money by us for services rendered or contracted for or products
sold to us. We cannot assure you, however, that they would be able to
satisfy those obligations. Accordingly, the actual per-share
liquidation price could be less than $9.84, plus interest. We
currently believe that our sponsor is capable of funding a shortfall in our
Trust Account to satisfy its foreseeable indemnification obligations and, based
on representations made to us by each of our executive officers, we currently
believe that they are of substantial means and capable of funding a shortfall in
our Trust Account to satisfy their foreseeable indemnification obligations, but
we have not asked them to reserve for such an eventuality. Despite
our belief, we cannot assure you that our Sponsor and our executive officers
will be able to satisfy those obligations. The indemnification
obligations may be substantially higher than our Sponsor and our executive
officers currently foresee or expect and/or their financial resources may
deteriorate in the future. As a result, the steps outlined above may
not effectively mitigate the risk of creditors’ claims reducing the amounts in
the Trust Account.
Furthermore,
creditors may seek to interfere with the distribution of the Trust Account
pursuant to federal or state creditor and bankruptcy laws which could delay the
actual distribution of such funds or reduce the amount ultimately available for
distribution to our public stockholders. If we are forced to file a
bankruptcy case or an involuntary bankruptcy case is filed against us which is
not dismissed, the funds held in our Trust Account will be subject to applicable
bankruptcy law, and may be included in our bankruptcy estate and subject to
claims of third parties with priority over the claims of our public
stockholders. To the extent bankruptcy claims deplete the Trust
Account, we cannot assure you we will be able to return to our public
stockholders the liquidation amounts they might otherwise receive.
We expect
that our total costs and expenses associated with the implementing and
completing our liquidation will be in the range of $15,000 to
$25,000. This amount includes all costs and expenses related to our
winding up and liquidation. We believe that there should be
sufficient funds available from interest income, after tax, earned on the Trust
Account available to us as working capital to fund the $15,000 to $25,000 of
expenses, although we cannot give you assurances that there will be sufficient
funds for such purposes.
If we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, any distributions received by stockholders
could be viewed under applicable debtor/creditor and/or bankruptcy laws as
either a “preferential transfer” or a “fraudulent conveyance.” As a
result, a bankruptcy court could seek to recover all amounts received by our
stockholders. Furthermore, because we intend to distribute the
proceeds held in the Trust Account to our public stockholders promptly after
October 23, 2009, 24 months from the completion of the Offering, this may
be viewed or interpreted as giving preference to our public stockholders over
any potential creditors with respect to access to or distributions from our
assets. Furthermore, our board may be viewed as having breached their
fiduciary duties to our creditors and/or may have acted in bad faith, and
thereby exposing itself and us to claims of punitive damages, by paying public
stockholders from the Trust Account prior to addressing the claims of
creditors. We cannot assure you that claims will not be brought
against us for these reasons.
Our
public stockholders will be entitled to receive funds from the Trust Account
only in the event of the expiration of our corporate existence and liquidation
or if the stockholders seek to convert their respective shares into cash upon a
Business Combination which the stockholder voted against and which is actually
consummated by us. In no other circumstances shall a stockholder have
any right or interest of any kind to or in the Trust Account.
13
Competition
for Target Businesses
In
identifying, evaluating and selecting target businesses, we may encounter
intense competition from other entities having a business objective similar to
ours, including leveraged buyout and other private equity funds, operating
businesses and other entities and individuals, both foreign and domestic,
competing for Business Combinations in the retail and real estate
industries. Many of these entities are well established and have
extensive experience identifying and effecting Business Combinations directly or
through affiliates. Many of these competitors possess greater
financial, marketing, technical, human and other resources than us and our
financial resources will be relatively limited when contrasted with those of
many of these competitors. While we believe there are numerous
potential target businesses that may be available to us for the reasons we
discuss in “—Market Opportunity,” our ability to compete in acquiring certain
sizable target businesses will be limited by our available financial
resources. This limitation gives others competitive advantage in
pursuing a Business Combination with target
businesses. Further:
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our
obligation to seek stockholder approval of a Business Combination and
obtain the necessary financial information to be included in the proxy
statement to be sent to stockholders in connection with such Business
Combination may impede or delay the completion of a
transaction;
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our
share redemption obligations may limit the manner in which we may
structure a Business Combination, as described in “—Effecting a Business
Combination—Conversion Rights;”
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our
outstanding warrants, and the future dilution they potentially represent,
may not be viewed favorably by target businesses;
and
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the
fair market value requirement that any business or businesses we acquire
must meet could require us to acquire several companies or closely related
operating businesses at the same time, all of which sales would be
contingent on the closings of the other sales, which could make it more
difficult to consummate the Business
Combination.
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Additionally,
we face competition from private equity and leveraged buy-out firms as well as
other blank check companies which have formed recently, a number of which may
consummate a Business Combination in any industry they
choose. Moreover, the limited number of such blank check companies
that have completed or agreed to complete a Business Combination may be an
indication that there are only a limited number of attractive target businesses
available to such entities or that many privately-held target businesses may not
be inclined to enter into Business Combinations with publicly-held blank check
companies like us.
Any of
these factors may place us at a competitive disadvantage in successfully
negotiating a Business Combination. Our management believes, however,
that if our target business is a privately held entity, our status as a
well-financed public entity may give us a competitive advantage over non-public
entities having a similar business objective as ours in acquiring a target
business with significant growth potential on favorable terms.
If we
succeed in effecting a Business Combination, we expect to encounter competition
from competitors of the target business. This competition may be
based on a number of factors, including service, product features, scale, price,
financial strength, credit ratings, business capabilities and name
recognition. These companies may offer a broader array of products,
be regulated differently, or have more competitive pricing Also,
these companies may have greater financial resources with which to compete and a
greater market share. We cannot assure you that, subsequent to a
Business Combination, we will have the resources or ability to compete
effectively.
Employees
We
currently have four executive officers, all of whom are also members of our
board of directors. Although our executive officers are not obligated
to contribute any specific number of hours per week to our business, following
the Offering, we anticipate that our executive officers will devote a portion of
their working time to our business. As noted earlier, each of our
executive officers is affiliated with other entities, including NRDC and Apollo,
and the amount of time each of them will devote to us in any time period will
vary based on the availability
14
of
suitable target businesses to investigate, the course of negotiations with
target businesses, and the due diligence preceding and accompanying a possible
Business Combination. We do not intend to have any employees prior to the
consummation of an initial Business Combination.
Item
1A. Risk
Factors
Risks
Associated with Our Business
An
investment in our securities involves a high degree of risk. You
should consider carefully all of the risks described below, together with the
other information contained in our prospectus, before making a decision to
invest in our securities. If any of the following risks occur, our
business, financial condition and results of operations may be adversely
affected. In that event, the trading price of our securities could
decline, and you could lose all or a part of your investment.
Risks
Relating to the Company
We
are a development stage company with no operating history and, accordingly, you
will have no basis upon which to evaluate our ability to achieve our business
objective.
We are a
development stage company with no operating results to date. Because
we do not have an operating history, you will have no basis upon which to
evaluate our ability to achieve our business objective, which is to consummate
an initial Business Combination with one or more operating
businesses. We will not generate any revenues (other than interest
income on the proceeds from the Offering and the private placement) until, if at
all, after the consummation of an initial Business Combination. We
cannot assure you as to when, or if, our initial Business Combination will
occur.
We
may not be able to consummate an initial business combination within the
required time frame, in which case we will be required to liquidate our
assets.
We must
consummate a Business Combination with one or more operating businesses with a
collective fair market value at least equal to 80% of the balance in the Trust
Account (less the deferred underwriting discounts and commissions of $14,490,000
and taxes payable) at the time of the acquisition within 24 months after the
completion of the Offering. If we fail to consummate an initial
Business Combination within the required time frame, in accordance with our
amended and restated certificate of incorporation our corporate existence will
terminate, except for purposes of liquidation and winding-up. Because
we do not have any specific Business Combination under consideration and we have
neither identified nor been provided with the identity of any specific target
business or taken any measures to locate a specific target business or
consummate an initial Business Combination, we may not be able to find suitable
target businesses within the required time frame. In addition, our
negotiating position and our ability to conduct adequate due diligence on any
potential target may be reduced as we approach the deadline for the consummation
of an initial Business Combination.
If
we are unable to consummate our initial business combination, our public
stockholders will likely be forced to wait the full 24 months before receiving
liquidation distributions.
We have
24 months after the completion of the Offering, which closed on October 23,
2007, in which to complete a Business Combination. We have no
obligation to return funds to investors prior to such date unless we consummate
our initial Business Combination prior thereto and only then to those investors
that have both voted against the Business Combination and requested conversion
of their shares at or prior to the stockholder vote. Only after the
expiration of this full time period will public stockholders be entitled to
liquidation distributions if we are unable to complete a Business
Combination. Accordingly, investors’ funds may be unavailable to them
until such date.
You
will not be entitled to protections normally afforded to investors of blank
check companies.
15
Because
the net proceeds of the Offering are intended to be used to complete a Business
Combination with a target business that has not been identified, we may be
deemed to be a “blank check” company under United States securities
laws. However, because our securities are listed on the American
Stock Exchange, a national securities exchange, and we have net tangible assets
in excess of $5,000,000 and we have filed a Current Report on Form 8-K with
the SEC including an audited balance sheet demonstrating this fact, we are
exempt from rules promulgated by the U.S. Securities and Exchange Commission,
which we refer to as the SEC, to protect investors in blank check companies,
such as Rule 419 under the Securities Act. Accordingly,
investors will not be afforded the benefits or protections of those
rules. Because we are not subject to those rules, including
Rule 419, our units were immediately tradable at the time of the offering
and we have a longer period of time to complete a Business Combination than we
would if we were subject to those rules. For a more detailed
comparison of our offering to offerings under Rule 419, see the section
entitled “Proposed Business—Comparison of The Offering to Those of Blank Check
Companies Subject to Rule 419,” contained in our Prospectus.
Under
Delaware law, the requirements and restrictions relating to the Offering
contained in our amended and restated certificate of incorporation may be
amended, which could reduce or eliminate the protection afforded to our
stockholders by such requirements and restrictions.
Our
amended and restated certificate of incorporation contains certain requirements
and restrictions that apply to us until the consummation of an initial Business
Combination.
Specifically,
our amended and restated certificate of incorporation provides, among other
things, that:
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upon
completion of our offering, a total of $406,456,881 from the proceeds from
the offering, deferred underwriting discounts and commissions and the
proceeds of the private placement, were deposited into the Trust Account,
which proceeds may not be disbursed from the Trust Account until the
earlier of (i) an initial Business Combination or (ii) our
liquidation;
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prior
to consummating our initial Business Combination, we must submit such
Business Combination to our stockholders for
approval;
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we
may consummate our initial Business Combination if (i) stockholders
owning a majority of the shares of our common stock approve the Business
Combination; (ii) public stockholders owning less than 30% of the
shares sold in the Offering both vote against the Business Combination and
exercise their conversion rights and (iii) our stockholders approve
an amendment of our amended and restated certificate of incorporation to
provide for our perpetual
existence;
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if
our initial Business Combination is approved and consummated, public
stockholders who voted against the initial Business Combination and who
exercised their conversion rights will receive their pro rata share of
amounts in the Trust Account;
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if
an initial Business Combination is not consummated within the 24 months
after the completion of the offering, then our corporate purposes and
powers will immediately thereupon be limited to winding up our affairs,
including liquidation of our assets, which will include funds in the Trust
Account, and we will not be able to engage in any other business
activities; and
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we
may not consummate any other merger, acquisition, capital stock exchange,
stock purchase, asset purchase or other similar transaction other than a
Business Combination that meets the conditions specified in this
prospectus, including the requirement that our initial Business
Combination be with one or more operating businesses whose fair market
value, collectively, is at least equal to 80% of the balance in the Trust
Account (less the deferred underwriting discounts and commissions and
taxes payable) at the time of such Business
Combination.
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Our
amended and restated certificate of incorporation requires that we obtain the
unanimous consent of our stockholders to amend certain of the above
provisions. However, the validity of unanimous consent provisions
under Delaware law has not been settled. A court could conclude that
the unanimous consent requirement
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constitutes
a practical prohibition on amendment in violation of the stockholders’ implicit
rights to amend the corporate charter. In that case, some or all of
the above provisions could be amended without unanimous consent and any such
amendment could reduce or eliminate the protection afforded to our
stockholders. However, we view the foregoing provisions as
obligations to our stockholders and our officers and directors have agreed that
they will not recommend or take any action to waive or amend any of these
provisions that would take effect prior to the consummation of our initial
Business Combination.
Because
of our limited resources and the significant competition for business
combination opportunities, we may not be able to consummate an attractive
business combination.
Identifying,
executing and realizing attractive returns on Business Combinations is highly
competitive and involves a high degree of uncertainty. We expect to
encounter intense competition for potential target businesses from other
entities having a business objective similar to ours, including venture capital
funds, leveraged buyout funds, operating businesses, and other entities and
individuals, both foreign and domestic. Many of these competitors are
well established and have extensive experience in identifying and consummating
Business Combinations directly or through affiliates. Many of these
competitors possess greater technical, human and other resources than we do, and
our financial resources will be relatively limited when contrasted with those of
many of these competitors. Furthermore, over the past several years,
other “blank check” companies have been formed, and a number of such companies
have grown in size. Additional investment funds and blank check
companies with similar investment objectives as ours may be formed in the future
by other unrelated parties and these funds and companies may have substantially
more capital and may have access to and utilize additional financing on more
attractive terms. While we believe that there are numerous potential
target businesses with which we could combine using the net proceeds of the
Offering, the private placement and the co-investment, together with additional
financing, if available, our ability to compete in combining with certain
sizeable target businesses will be limited by our available financial
resources. This inherent competitive limitation gives others an
advantage in pursuing a Business Combination with certain target
businesses. In addition:
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the
requirement that we obtain stockholder approval of a Business Combination
may delay or prevent the consummation of an initial Business Combination
within the 24-month time period;
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the
requirement that we prepare a proxy statement and notice of special
meeting of stockholders in accordance with the requirements of Delaware
law and the federal securities laws, which proxy statement will be
required to be submitted to and reviewed by the Securities and Exchange
Commission, in connection with such Business Combination may delay or
prevent the completion of a
transaction;
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the
requirement that we prepare audited and perhaps interim-unaudited
financial information to be included in the proxy statement to be sent to
stockholders in connection with such Business Combination may delay or
prevent the consummation of a
transaction;
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the
conversion of common stock held by our public stockholders into cash may
reduce the resources available to us to fund our initial Business
Combination;
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the
existence of our outstanding warrants, and the dilution they potentially
represent, may not be viewed favorably by certain target businesses;
and
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the
requirement to acquire assets or an operating business that have a fair
market value at least equal to 80% of the balance in the Trust Account
(less the deferred underwriting discounts and commissions and taxes
payable) at the time of the initial Business Combination (i) could
require us to acquire several assets or closely related operating
businesses at the same time, all of which sales would be contingent on the
closings of the other sales, which could make it more difficult to
consummate our initial Business Combination and (ii) together with
our ability to proceed with a Business Combination if public stockholders
owning less than 30% of the shares sold in the Offering vote against our
Business Combination and exercise their conversion rights, may require us
to raise additional funds through the private sale of securities or incur
indebtedness in order to enable us to effect such a Business
Combination.
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Any of
these factors may place us at a competitive disadvantage in consummating an
initial Business Combination on favorable terms or at all.
To the
extent that our initial Business Combination entails the contemporaneous
combination with more than one operating business, we may not have sufficient
resources, financial or otherwise, to effectively and efficiently conduct
adequate due diligence and negotiate definitive agreements on terms most
favorable to our stockholders. In addition, because our initial
Business Combination may be with different sellers, we will need to convince
such sellers to agree that the purchase of their businesses is contingent upon
the simultaneous closings of the other acquisitions.
Because
there are numerous “blank check” companies similar to ours seeking to consummate
an initial business combination, it may be more difficult for us to consummate
an initial business combination.
Based
upon publicly available information, as of January 31, 2008, approximately
150 similarly structured ‘‘blank check’’ companies have completed initial public
offerings in the United States since the start of 2004 and 47 others have filed
registration statements. Of the ‘‘blank check’’ companies that have
completed initial public offerings, 43 companies have consummated a Business
Combination, while 25 other companies have announced that they have entered into
definitive agreements or letters of intent with respect to potential Business
Combinations but have not yet consummated such Business
Combinations. Eight companies have failed to complete previously
announced Business Combinations and have announced their pending dissolution and
return of trust proceeds to stockholders. Accordingly, the remaining
74 ‘‘blank check’’ companies that we estimate to have raised approximately
$13.5 billion that is currently held in Trust Accounts, and potentially an
additional 47 ‘‘blank check’’ companies that have filed registration statements
to raise approximately $10.4 billion, will be seeking to enter into
Business Combinations. As a result, we may be subject to competition
from these and other companies seeking to consummate a Business Combination
which, in turn, will result in an increased demand for target
businesses. Further, the fact that 43 ‘‘blank check’’ companies have
consummated a Business Combination, 25 other companies have entered into
definitive agreements or letters of intent with respect to potential Business
Combinations, and eight companies have failed to complete a Business
Combination, may be an indication that there are a limited number of attractive
target businesses available or that many target businesses may not be inclined
to enter into a Business Combination with a publicly held ‘‘blank check’’
company. Because of this competition, we cannot assure you that we
will be able to consummate an initial Business Combination within the required
time periods. If we are unable to find a suitable target operating
business within the required time period, the terms of our amended and restated
certificate of incorporation will require us to liquidate.
We
may have insufficient resources to cover our operating expenses and the expenses
of consummating an initial business combination.
We
believe that the $250,000 available to us outside of the Trust Account and
interest earned of up to $2,700,000, after tax, on the balance of the Trust
Account that we expect to be available to us will be sufficient to cover our
working capital requirements for the next 24 months, including expenses incurred
in connection with an initial Business Combination, based upon our executive
officers’ estimate of the amount required for these purposes. This
estimate may prove inaccurate, especially if a portion of the available proceeds
is used to make a down payment or pay exclusivity or similar fees in connection
with an initial Business Combination or if we expend a significant portion of
the available proceeds in pursuit of a Business Combination that is not
consummated. If we do not have sufficient proceeds available to cover
our expenses, we may be required to obtain additional financing from our
executive officers, our directors, our existing stockholders or third
parties. Such additional financing may include loans from third
parties to cover the costs associated with the search for and consummation of an
initial Business Combination, although we currently have no intention of
obtaining third party loans. We would seek to have any third party
lenders waive any claim to any monies held in the Trust Account for the benefit
of the public stockholders. Our Sponsor and each of our executive
officers have agreed to be jointly and severally liable to reimburse the Trust
Account for any claims made by such lenders to the extent that the payment of
any debts or obligations owed to such lenders actually reduces the amount in the
Trust Account. We may not be able to obtain additional
financing. None of our executive officers, directors or existing
stockholders are obligated to provide any additional financing. If we
do not have sufficient proceeds and are unable to obtain additional financing,
we may be required to liquidate prior to consummating an initial Business
Combination.
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The
ability of our stockholders to exercise their conversion rights may not allow us
to effectuate the most desirable business combination or optimize our capital
structure.
When we
seek stockholder approval of our initial Business Combination, we will offer
each public stockholder (but not our existing stockholders) the right to have
his, her or its shares of common stock converted to cash if the stockholder
votes against the initial Business Combination and the initial Business
Combination is approved and completed. Such holder must both vote
against such Business Combination and exercise his, her or its conversion rights
to receive a pro rata portion of the
Trust Account. Accordingly, if our Business Combination requires us
to use substantially all of our cash to pay the purchase price, because we will
not know how many stockholders may exercise such conversion rights, we may
either need to reserve part of the Trust Account for possible payment upon such
conversion, or we may need to arrange third party financing to help fund our
Business Combination in case a larger percentage of stockholders exercise their
conversion rights than we expect. Since we have no specific Business
Combination under consideration, we have not taken any steps to secure third
party financing. Therefore, we may not be able to consummate an
initial Business Combination that requires us to use all of the funds held in
the Trust Account as part of the purchase price, or we may end up having a
leverage ratio that is not optimal for our Business Combination. This
may limit our ability to effectuate the most attractive Business Combination
available to us.
A
stockholder who abstains from voting will lose the ability to receive a
pro rata share of the funds in the trust account if we consummate an
initial business combination.
Prior to
the consummation of our initial Business Combination, we will submit the
transaction to our stockholders for approval, even if the nature of the
acquisition is such as would not ordinarily require stockholder approval under
applicable state law. If we achieve a quorum for the meeting, only
stockholders who exercise their right to vote will affect the outcome of the
stockholder vote. Abstentions are not considered to be voting “for”
or “against” the transaction. Any stockholder who abstains from
voting would be bound by the decision of the majority of stockholders who do
vote. As a result, an abstaining shareholder will lose the ability to
receive a pro rata
share of the Trust Account, including accrued interest (net of taxes payable on
such interest income and after release of up to $2,700,000 of interest income,
after tax, to fund working capital requirements), which would be available to a
shareholder that votes against the initial Business Combination and exercises
its conversion rights.
We
may require stockholders who wish to convert their shares in connection with a
proposed business combination to comply with specific requirements for
conversion that may make it more difficult for them to exercise their conversion
rights prior to the deadline for exercising their rights.
We may
require public stockholders who wish to exercise their conversion rights
regarding their shares in connection with a proposed Business Combination to
either tender their certificates to our transfer agent or to deliver their
shares to the transfer agent electronically using the Depository Trust Company’s
DWAC (Deposit/ Withdrawal At Custodian) System at any time up until the business
day immediately preceding the vote taken at the stockholder meeting relating to
such Business Combination. In order to obtain a physical stock
certificate, a stockholder’s broker and/or clearing broker, DTC and our transfer
agent will need to act to facilitate this request. It is our
understanding that stockholders should generally allot at least two weeks to
obtain physical certificates from the transfer agent. However,
because we do not have any control over the process, it may take significantly
longer than two weeks to obtain a physical stock certificate and you may not be
able to convert your shares in time. While we have been advised that
it takes a short time to deliver shares through the DWAC System, we cannot
assure you of this fact. Accordingly, we will only require
stockholders to deliver their certificates prior to the vote if, in accordance
with the American Stock Exchange’s proxy notification recommendations,
stockholders receive the proxy solicitation materials at least twenty days prior
to the meeting. However, if it takes longer than we anticipate for
stockholders to deliver their shares, stockholders who wish to exercise their
conversion rights may be unable to meet the deadline for exercising their
conversion rights and thus may be unable to convert their shares.
We
will proceed with a business combination even if public stockholders owning in
the aggregate one share less than 30% of the shares sold in the Offering
exercise their conversion rights.
We will
proceed with a Business Combination only if public stockholders owning at most
an aggregate of one share less than 30% of the shares sold in the Offering
exercise their conversion rights. Accordingly, the public
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stockholders
owning in the aggregate one share less than 30% of the shares sold in the
Offering may exercise their conversion rights and we could still consummate a
proposed Business Combination. We have increased the conversion
percentage (from the 20% that is customary in similar offerings to 30%) in order
to reduce the likelihood that a small group of investors holding a block of our
stock will be able to stop us from completing a Business Combination that may
otherwise be approved by a large majority of our public
stockholders. As a result of this change, it may be easier for us to
complete a Business Combination even in the face of a strong stockholder
dissent, thereby negating some of the protections of having a lower conversion
threshold to public stockholders. Furthermore, the ability to
consummate a transaction despite shareholder disapproval in excess of what would
be permissible in a traditional blank check offering may be viewed negatively by
potential investors seeking shareholder protections consistent with traditional
blank check offerings.
Our
Business Combination may require us to use substantially all of our cash to pay
the purchase price. In such a case, because we will not know how many
stockholders may exercise their conversion rights, we may need to arrange third
party financing to help fund our Business Combination in case a larger
percentage of stockholders exercise their conversion rights than we
expect. Additionally, even if our Business Combination does not
require us to use substantially all of our cash to pay the purchase price, if a
significant number of stockholders exercise their conversion rights, we will
have less cash available to use in furthering our business plans following a
Business Combination and may need to arrange third party
financing. We have not taken any steps to secure third party
financing for either situation, and we cannot assure you that we would be able
to obtain such financing on terms favorable to us or at all.
If
third parties bring claims against us, the proceeds held in the trust account
could be reduced and the per share liquidation price received by our public
stockholders would be less than approximately $9.84, plus interest, per
share.
Placing
the funds in a Trust Account may not protect those funds from third-party claims
against us. Although we will seek to have all vendors, providers of
financing, if any, prospective target businesses and other entities with whom we
execute agreements waive any right, title, interest or claim of any kind in or
to any monies held in the Trust Account for the benefit of our public
stockholders, we are not obligated to obtain a waiver from any potential
creditor or potential target business and there is no guarantee that they will
agree to provide such a waiver, which is not a condition to our doing business
with anyone. 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 our
executive officers and directors to be significantly superior to those of other
consultants that would agree to execute a waiver or if our executive officers
and directors are unable to find a provider of required services willing to
provide the waiver. In any event, our executive officers and
directors would perform an analysis of the alternatives available to us and
would enter into an agreement with a third party that did not execute a waiver
only if they believed that such third party’s engagement would be significantly
more beneficial to us than any alternative. We will seek to secure
waivers that we believe are valid and enforceable, but it is possible that a
waiver may later be found to be invalid or unenforceable. In
addition, there is no guarantee that such entities will agree to waive any
claims they may have in the future as a result of, or arising out of, any
negotiations, contracts, or agreements with us and will not seek recourse
against the Trust Account for any reason. Accordingly, the proceeds
held in the Trust Account could be subject to claims that would take priority
over the claims of our public stockholders and the per share liquidation price
could be less than approximately $9.84, plus interest, due to claims of such
creditors or other entities. If we are unable to consummate an
initial Business Combination and are required to liquidate, our Sponsor and each
of our executive officers have agreed, on a joint and several basis, to
reimburse us for our debts to any vendor for services rendered or products sold
to us, potential target businesses or to providers of financing, if any, in all
cases only to the extent necessary to ensure that such claims do not reduce the
amount in the Trust Account. Based on representations made to us by
our Sponsor and each of our executive officers, we currently believe that they
are of substantial means and capable of funding a shortfall in our Trust Account
to satisfy their foreseeable indemnification obligations. However, we
have not asked them to reserve for such an eventuality. We cannot
assure you that our Sponsor and our executive officers will be able to satisfy
those obligations or that the proceeds in the Trust Account will not be reduced
by such claims. In the event that the proceeds in the Trust Account
are reduced and our Sponsor and our executive officers assert that they are
unable to satisfy their obligations or that they have no indemnification
obligations related to a particular claim, our independent directors would
determine whether we would take legal action against our Sponsor and our
executive officers to enforce their indemnification
obligations. Furthermore, creditors may seek to interfere with the
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distribution
of the Trust Account pursuant to federal or state creditor and bankruptcy laws,
which could delay the actual distribution of such funds or reduce the amount
ultimately available for distribution to our public stockholders. If
we are required to file a bankruptcy case or an involuntary bankruptcy case is
filed against us that is not dismissed, the funds held in the Trust Account will
be subject to applicable bankruptcy law and may be included in our bankruptcy
estate and subject to the claims of third parties with priority over the claims
of our stockholders. To the extent any bankruptcy claims deplete the
Trust Account, the per share liquidation distribution would be less than the
initial $9.84 per share held in the Trust Account.
Our
independent directors may decide not to enforce our sponsor’s and our executive
officers’ indemnification obligations, resulting in a reduction in the amount of
funds in the trust account available for distribution to our public
stockholders.
Our
sponsor and our executive officers have agreed to reimburse us for our debts to
any vendor for services rendered or products sold to us, potential target
businesses or to providers of financing, if any, in each case only to the extent
necessary to ensure that such claims do not reduce the amount in the Trust
Account. In the event that the proceeds in the Trust Account are
reduced and our sponsor and our executive officers assert that they are unable
to satisfy their obligations or that they have no indemnification obligations
related to a particular claim, our independent directors would determine whether
we would take legal action against our sponsor to enforce its indemnification
obligations. While we currently expect that our independent directors
would take action on our behalf against our sponsor and our executive officers
to enforce their indemnification obligations, it is possible that our
independent directors in exercising their business judgment may choose not to do
so in a particular instance. If our independent directors choose not
to enforce our sponsor’s and our executive officers’ indemnification
obligations, the amount of funds in the Trust Account available for distribution
to our public stockholders may be reduced and the per share liquidation
distribution could be less than the initial $9.84 per share held in the Trust
Account.
Our
stockholders may be held liable for claims by third parties against us to the
extent of distributions received by them in our liquidation.
If we are
unable to complete an initial Business Combination within 24 months after the
completion of the Offering, our corporate existence will cease except for the
purposes of winding up our affairs and liquidating pursuant to Section 278
of the Delaware General Corporation Law, in which case we will, as promptly as
practicable thereafter, adopt a plan of distribution in accordance with
Section 281(b) of the Delaware General Corporation
Law. Section 278 provides that our existence will continue for
at least three years after its expiration for the purpose of prosecuting and
defending suits, whether civil, criminal or administrative, by or against us,
and of enabling us gradually to settle and close our business, to dispose of and
convey our property, to discharge our liabilities and to distribute to our
stockholders any remaining assets, but not for the purpose of continuing the
business for which we were organized. Our existence will continue
automatically even beyond the three-year period for the purpose of completing
the prosecution or defense of suits begun prior to the expiration of the
three-year period, until such time as any judgments, orders or decrees resulting
from such suits are fully executed. Section 281(b) will require
us to pay or make reasonable provision for all then-existing claims and
obligations, including all contingent, conditional, or unmatured contractual
claims known to us, and to make such provision as will be reasonably likely to
be sufficient to provide compensation for any then-pending claims and for claims
that have not been made known to us or that have not arisen but that, based on
facts known to us at the time, are likely to arise or to become known to us
within 10 years after the date of cessation. Accordingly, we would be
required to provide for any creditors known to us at that time or those that we
believe could be potentially brought against us within the subsequent 10 years
prior to distributing the funds held in the Trust Account to
stockholders. 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 that we engage after the consummation of the Offering (such
as accountants, lawyers, investment bankers, etc.) and potential target
businesses. We intend to have all vendors that we engage after the
consummation of the Offering and prospective target businesses execute
agreements with us waiving any right, title, interest or claim of any kind in or
to any monies held in the Trust Account. Accordingly, we believe the
claims that could be made against us should be limited, thereby lessening the
likelihood that any claim would result in any liability extending to the Trust
Account. However, 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 (but not more)
21
received
by them in a liquidation and any liability of our stockholders may extend well
beyond the third anniversary of such liquidation.
If we are
required to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, any distributions received by stockholders
could be viewed under applicable debtor/creditor and/or bankruptcy laws as
either a “preferential transfer” or a “fraudulent conveyance.” As a
result, a bankruptcy court could seek to recover all amounts received by our
stockholders. Furthermore, because we intend to distribute the
proceeds held in the Trust Account to our public stockholders promptly after
October 23, 2009, this may be viewed or interpreted as giving preference to our
public stockholders over any potential creditors with respect to access to or
distributions from our assets. Furthermore, our directors may be
viewed as having breached their fiduciary duties to our creditors and/or may
have acted in bad faith, thereby exposing themselves and us to claims of
punitive damages, by paying public stockholders from the Trust Account prior to
addressing the claims of creditors. We cannot assure that claims will
not be brought against us for these reasons.
Because
we have not selected any specific target businesses, you will be unable to
ascertain the merits or risks of any particular target business’s
operations.
Because
we have not yet identified or approached any specific target business with
respect to a Business Combination, there is no basis to evaluate the possible
merits or risks of any particular target business’s operations, financial
condition, or prospects. To the extent we consummate an initial
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 executive 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, meaning that we can do nothing 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 investors than a direct investment, if such opportunity were
available, in an acquisition target. Except for the limitation that
an acquisition target have a fair market value of at least 80% of the balance in
the Trust Account (excluding the amount held in the Trust Account representing
the deferred underwriting discount and commissions and taxes payable) at the
time of the acquisition, we will have virtually unrestricted flexibility in
identifying and selecting a prospective acquisition target. For a
more complete discussion of our selection of target businesses, see the section
entitled “Proposed Business—Consummating an Initial Business
Combination—Selection of a Target and Structuring of an Initial Business
Combination,” which can be found in our Prospectus.
A
significant portion of working capital could be expended in pursuing business
combinations that are not consummated.
It is
anticipated that the investigation of each specific target business and the
negotiation, drafting and execution of relevant agreements, disclosure
documents, and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and
others. In addition, we may opt to make down payments or pay
exclusivity or similar fees in connection with structuring and negotiating a
Business Combination. If a decision is made not to consummate a
specific Business Combination, the costs incurred up to that point in connection
with the abandoned transaction, potentially including down payments or
exclusivity or similar fees, will not be recoverable. Furthermore,
even if an agreement is reached relating to a specific target business, we may
fail to consummate an initial Business Combination for any number of reasons
including those beyond our control, such as if our public stockholders holding
30% or more of our common stock vote against an initial Business Combination
even though a majority of our public stockholders approve the
transaction. 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 combine with another business.
We
may issue additional shares of our capital stock, including through convertible
debt securities, to consummate an initial business combination, which would
reduce the equity interest of our stockholders and may cause a change in control
of our ownership.
22
Our
amended and restated certificate of incorporation authorizes the issuance of up
to 106,000,000 shares of common stock, par value $0.0001 per share, and 5,000
shares of preferred stock, par value $0.0001 per share. Immediately
after the Offering, there were 850,000 authorized but unissued shares of our
common stock available for issuance (after appropriate reservation of shares
issuable upon full exercise of the underwriters’ over-allotment option, all
outstanding warrants and the shares and warrants included in the co investment
units) and all of the 5,000 shares of preferred stock available for
issuance. Although we have no commitments as of the date of the
Offering to issue any additional securities, we may issue a substantial number
of additional shares of our common stock, preferred stock or a combination of
both, including through convertible debt securities, as consideration for or to
finance a Business Combination. The issuance of additional shares of
our common stock or any number of shares of preferred stock, including upon
conversion of any debt securities may:
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significantly
reduce the equity interest of investors in the
Offering;
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may
subordinate the rights of holders of common stock if preferred stock is
issued with rights senior to those afforded to our common
stock;
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cause
a change in control which may affect, among other things, our ability to
use our net operating loss carry forwards, if any, and result in the
resignation or removal of our current executive officers and directors;
and
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adversely
affect prevailing market prices for our common stock and
warrants. Our agreement with the underwriters prohibits us,
prior to an initial Business Combination, from issuing additional units,
additional common stock, preferred stock, additional warrants, or any
options or other securities convertible or exchangeable into common stock
or preferred stock which participates in any manner in the proceeds of the
Trust Account, or which votes as a class with the common stock on a
Business Combination.
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We
may issue additional shares of our common stock as consideration for or to
finance an initial business combination, which may dilute the equity interest of
our stockholders.
We may
acquire all or part of a target business through a share for share exchange or
to finance a portion of the initial Business Combination consideration by
issuing additional shares of our common stock. Such additional equity
may be issued at a price below the then current trading price for shares of our
common stock, resulting in dilution of the equity interest of our then current
public stockholders. At this time, no financing arrangements have
been entered into or are contemplated with any third parties to raise any
additional funds to finance an initial Business Combination through the sale of
additional equity or otherwise.
We
may be unable to obtain additional financing, if required, to consummate an
initial business combination or to fund the operations and growth of the target
business, which could compel us to restructure or abandon a particular business
combination.
Although
we believe that the net proceeds of the Offering, the Private Placement and the
co-investment will be sufficient to allow us to consummate a Business
Combination, because we have not yet identified or approached any prospective
target businesses, we cannot ascertain the capital requirements for any
particular Business Combination. If the net proceeds of the Offering,
the Private Placement and the co-investment prove to be insufficient, because of
the size of the initial Business Combination, the depletion of the available net
proceeds in search of target businesses, or because we become obligated to
convert into cash a significant number of shares from dissenting stockholders,
we may be required to seek additional financing through the issuance of equity
or debt securities or other financing arrangements. We cannot assure
you that such financing will be available on acceptable terms, if at
all. Although we have no current plans to do so, if we were to incur
a substantial amount of debt to finance a Business Combination, such incurrence
of debt could:
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lead
to default and foreclosure on our assets if our operating revenues after a
Business Combination are insufficient to pay our debt
obligations;
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23
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cause
an acceleration of our obligation to repay the debt, even if we make all
principal and interest payments when due, if we breach the covenants
contained in the terms of any debt documents, such as covenants that
require the maintenance of certain financial ratios or reserves, without a
waiver or renegotiation of such
covenants;
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create
an obligation to repay immediately all principal and accrued interest, if
any, upon demand to the extent any debt securities are payable on
demand;
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require
us to dedicate a substantial portion of our cash flow to pay principal and
interest on our debt, which will reduce the funds available for dividends
on our common stock, working capital, capital expenditures, acquisitions
and other general corporate
purposes;
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limit
our flexibility in planning for and reacting to changes in our business
and in the industry in which we
operate;
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make
us more vulnerable to adverse changes in general economic, industry, and
competitive conditions and adverse changes in government
regulation;
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limit
our ability to borrow additional amounts for working capital, capital
expenditures, acquisitions, debt service requirements, execution of our
strategy or other purposes; and
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place
us at a disadvantage compared to our competitors who have less
debt.
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To the
extent that additional financing proves to be unavailable when needed to
consummate a particular Business Combination, we may be compelled to restructure
or abandon that particular Business Combination and seek alternative target
businesses. In addition, if we consummate a Business Combination, we
may require additional financing to fund the operations or growth of the target
business or businesses. The failure to secure additional financing
could have a material adverse effect on the continued development or growth of
our combined business or businesses. None of our executive officers,
directors or stockholders is required to provide any financing to us in
connection with or after the consummation of an initial Business
Combination.
The
desire of our current executive officers and directors to remain with us
following an initial business combination may result in a conflict of interest
in determining whether a particular target business is appropriate for a
business combination and in the public stockholders’ best
interests.
Messrs.
Mack, Robert Baker, Richard Baker and Neibart currently intend to continue to be
involved in our management following our initial Business
Combination. If any or all of them decide to do so, the personal and
financial interests of our current executive officers and directors may
influence them to condition a Business Combination on their retention by us and
to view more favorably target businesses that offer them a continuing role,
either as an officer, director, consultant, or other third-party service
provider, after the Business Combination. Messrs. Mack, Robert Baker,
Richard Baker and Neibart, in their capacity as our executive officers, could be
negotiating the terms and conditions of the Business Combination on our behalf
at the same time that they, as individuals, were negotiating the terms and
conditions related to an employment, consulting or other agreement with
representatives of the potential Business Combination candidate. As a
result, there may be a conflict of interest in the negotiation of the terms and
conditions related to such continuing relationships as our executive officers
and directors may be influenced by their personal and financial interests rather
than the best interests of our public stockholders.
If we
acquire a target business in an all-cash transaction, it would be more likely
that our current executive officers and directors would remain with us, if they
choose to do so. If our initial Business Combination were structured
as a merger in which the owners of the target business were to control us
following a Business Combination, it may be less likely that our current
management would remain with us because control would rest with the owners of
the target business and not our current management, unless otherwise negotiated
as part of the transaction in the acquisition agreement, an employment agreement
or other arrangement.
24
Our
executive officers and directors will allocate their time to other businesses,
thereby causing conflicts of interest in their determination as to how much time
to devote to our affairs. This could have a negative impact on our
ability to consummate a business combination.
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 other businesses. We
do not intend to have any full-time employees prior to the consummation of an
initial Business Combination. Each of our executive officers and
directors is engaged in several other business endeavors and they are not
obligated to contribute any specific number of hours per week to our
affairs. Mr. Mack continues to serve as senior partner of Apollo
Real Estate Advisors, or Apollo, and is president of the corporate partners of
the Apollo Real Estate Funds. Mr. Robert Baker continues to
serve as the Chairman of National Realty & Development Corporation and a
founder of NRDC Equity Partners. Mr. Richard Baker continues to
serve as president and chief executive officer of NRDC Real Estate Advisors, LLC
and NRDC Equity Partners. Mr. Neibart is a partner of
Apollo. Our outside directors also serve as officers and board
members for other entities, including, without limitation, Amalgamated Bank, PBS
Realty Advisors LLC, Ethan Allen Inc., the Jim Pattison Group, National
Cinemedia, LLC, Harman International Industries, Inc., The Bear Stearns
Companies, Inc., Bowne and Company, Inc., Cablevision, Inc., Intercontinental
Exchange, Inc., E.W. Scripps Company and Canadian Imperial Bank of
Commerce. 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
consummate an initial Business Combination.
Our
executive officers and directors are, and may in the future become, affiliated
with entities and, accordingly, may have conflicts of interest in determining to
which entity a particular business opportunity should be presented.
Following
the completion of the Offering and until we consummate an initial Business
Combination, we intend to engage in the business of identifying and combining
with one or more operating businesses. Our executive officers and
directors are, or may in the future become, affiliated with entities that are
engaged in a similar business. In each case, our executive officers’
and directors’ existing directorships may give rise to fiduciary obligations
that take priority over any fiduciary obligation owed to us.
We have
entered into a business opportunity right of first offer agreement with our
Sponsor, NRDC Real Estate Advisors, LLC and NRDC Equity Partners and with our
executive officers and directors. This right of first offer provides
that, subject to the respective pre-existing fiduciary duties of our executive
officers and directors, from the date of this prospectus until the earlier of
the consummation of our initial Business Combination or our liquidation, we will
have a right of first offer if any of these parties becomes aware of, or
involved with, a Business Combination opportunity with any operating
business. Subject to the respective preexisting fiduciary duties of
our executive officers and directors, these parties to the right of first offer
agreement will, and will cause companies or entities under their management or
control to, first offer any such business opportunity to us and they will not,
and will cause each other company or entity under their management or control
not to, pursue any such business opportunity unless and until our board of
directors, including a majority of our disinterested independent directors, has
determined that we will not pursue such opportunity.
We
recognize that each of our executive officers and directors may be deemed an
affiliate of any company for which such executive officer or director serves as
an officer or director or for which such executive officer or director otherwise
has a pre-existing fiduciary duty and that a conflict of interest could arise if
an opportunity is appropriate for one of such companies. For a
complete description of these affiliations, please see the sections entitled
“Management” and “Certain Relationships and Related Transactions — Conflicts of
Interest,” located in our Prospectus. As part of this right of first
offer, we have established procedures with respect to the sourcing of a
potential Business Combination by our executive officers and directors to
eliminate such conflict for our executive officers and directors, whereby a
potential Business Combination that must be presented to any company for which
such executive officer or director, as the case may be, serves as an officer or
director or otherwise has a pre-existing fiduciary duty (other than our Sponsor,
NRDC Real Estate Advisors, LLC and NRDC Equity Partners) will not be presented
to us until after such executive officer or director has presented the
opportunity to such company and such company has determined not to
proceed. These preexisting fiduciary duties may limit the
opportunities that are available to us to consummate our initial Business
Combination.
25
Because
each of our executive officers and directors directly or indirectly owns shares
of our common stock that will not participate in liquidating distributions, they
may have a conflict of interest in determining whether a particular target
business is appropriate for an initial business combination.
Messrs.
Mack, Robert Baker, Richard Baker and Neibart, each indirectly owns shares of
our common stock through ownership in our Sponsor. In addition, our
other directors own shares of our common stock. Each of our Sponsor
and our executive officers and directors have agreed to waive their right to
receive distributions from the Trust Account upon our liquidation with respect
to shares of our common stock they acquired prior to the completion of the
Offering, and it and they would lose its and their entire investment in us were
this to occur. Therefore, our executive officers’ and directors’
personal and financial interests may influence their motivation in identifying
and selecting target businesses and consummating an initial Business Combination
in a timely manner. This may also result in a conflict of interest
when determining whether the terms, conditions and timing of a particular
Business Combination are appropriate and in our stockholders’ best
interest.
Our
executive officers’ and directors’ interests in obtaining reimbursement for any
out-of-pocket expenses incurred by them may lead to a conflict of interest in
determining whether a particular target business is appropriate for a business
combination and in the public stockholders’ best interest.
Our
executive officers and directors will not receive reimbursement for any
out-of-pocket expenses incurred by them to the extent that such expenses exceed
the amount of available proceeds not deposited in the Trust Account, unless the
initial Business Combination is consummated. The amount of available
proceeds is based upon our executive officers’ estimate of the amount needed to
fund our operations for the next 24 months and consummate an initial Business
Combination. This estimate may prove to be inaccurate, especially if
a portion of the available proceeds is used to make a down payment in connection
with an initial Business Combination or pay exclusivity or similar fees or if we
expend a significant portion of the available proceeds in pursuit of an initial
Business Combination that is not consummated. The financial interest
of our executive officers and directors could influence their motivation in
selecting a target and thus, there may be a conflict of interest when
determining whether a particular Business Combination is in our public
stockholders’ best interest.
We
may engage in a business combination with one or more target businesses that
have relationships with entities that may be affiliated with our executive
officers, directors or existing stockholders which may raise potential conflicts
of interest.
In light
of our executive officers’, directors’ and existing stockholders’ involvement
with other companies and our intent to consummate an initial Business
Combination, we may decide to acquire one or more businesses affiliated with our
executive officers, directors or existing stockholders. Certain of
our executive officers and directors, identified below, are affiliated with the
following entities that may compete with us for combination with target
businesses: Mr. Mack with Mack-Cali Realty Corporation;
Mr. Richard Baker with Lord & Taylor and Hudson’s Bay Company;
Mr. Neibart with Linens ‘N Things; and our other directors with companies
including, without limitation, Amalgamated Bank, PBS Realty Advisors LLC, Ethan
Allen Inc., the Jim Pattison Group, National Cinemedia, LLC, Harman
International Industries, Inc., The Bear Stearns Companies, Inc., Bowne and
Company, Inc., Cablevision, Inc., Intercontinental Exchange, Inc., E.W. Scripps
Company and Canadian Imperial Bank of Commerce. Our executive
officers, directors and existing stockholders are not currently aware of any
specific opportunities to consummate a Business Combination with any entities
with which they are affiliated, and there have been no preliminary discussions
concerning a Business Combination with any such entity or
entities. Although we will not be specifically focusing on, or
targeting, any transaction with any affiliated entities, we would consider such
a transaction if we determined that such affiliated entity met our criteria for
a Business Combination as set forth in “Proposed Business—Consummating an
Initial Business Combination— Selection of a Target and Structuring of an
Initial Business Combination,” located in our Prospectus. Despite our
agreement to obtain an opinion from an independent investment banking firm
regarding the fairness to our stockholders from a financial point of view of a
Business Combination with one or more businesses affiliated with our existing
stockholders, or our current executive officers and directors, potential
conflicts of interest still may exist and, as a result, the terms of the initial
Business Combination may not be as advantageous to our public stockholders as
they would be absent any conflicts of interest.
26
We
will not generally be required to obtain a determination of the fair market
value of a target business or target businesses from an unaffiliated,
independent investment banking firm.
Our
initial Business Combination must be with one or more operating businesses whose
fair market value is at least equal to 80% of the balance in the Trust Account
(less the deferred underwriting discounts and commissions and taxes payable) at
the time of such combination. The fair market value of such business
or businesses will be determined by our board of directors based upon standards
generally accepted by the financial community, such as actual and potential
sales, earnings, cash flow and book value. If our board of directors
is not able to independently determine that the target business has a sufficient
fair market value to meet the threshold criterion or if one of our executive
officers, directors or existing stockholders is affiliated with that target
business, we will obtain an opinion from an unaffiliated, independent investment
banking firm which is a member of the Financial Industry Regulatory Authority
(FINRA) with respect to the fair market value of the target
business. In all other instances, we will have no obligation to
obtain or provide our stockholders with a fairness
opinion. Investment banking firms providing fairness opinions
typically place limitations on the purposes for which the opinion may be used,
and there can be no assurances that, as a result of such limitations or
applicable law, stockholders will be entitled to rely on the
opinion. We expect to require that any firm selected by us to provide
a fairness opinion will adhere to general industry practice in stating the
purposes for which its opinion may be used. If no opinion is obtained
or if stockholders are not permitted to rely on the opinion, our stockholders
will be relying solely on the judgment of our board of directors with respect to
the determination of the fair market value of our initial Business
Combination.
The
American Stock Exchange may delist our securities from trading on its exchange
which could limit investors’ ability to make transactions in our securities and
subject us to additional trading restrictions.
We intend
that our units, and, after the date of separation, shares of common stock and
warrants, which we refer to, collectively, as our securities, will be listed on
the American Stock Exchange on or promptly after the date of this
prospectus. We cannot assure you that our securities will be, or will
continue to be, listed on the American Stock Exchange in the future, prior to a
Business Combination. Additionally, in connection with our initial
Business Combination, it is likely that the American Stock Exchange may require
us to file a new initial listing application and meet its initial listing
requirements as opposed to its more lenient continued listing
requirements. We cannot assure you that we will be able to meet those
initial listing requirements at that time. If the American Stock
Exchange delists our securities from trading on its exchange and we are not able
to list our securities on another national securities exchange, we expect our
securities could be quoted on the OTC Bulletin Board or the “pink
sheets.” As a result, we could face significant material adverse
consequences including:
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a
limited availability of market quotations for our
securities;
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a
determination that our common stock is a “penny stock” which will require
brokers trading in our common stock to adhere to more stringent rules and
possibly result in a reduced level of trading activity in the secondary
trading market for our securities;
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a
limited amount of news and analyst coverage;
and
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a
decreased ability to issue additional securities or obtain additional
financing in the future.
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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.” Since we expect that
our units, and eventually our common stock and warrants will be listed on the
American Stock Exchange, our units, common stock and warrants will be 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, 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 the American Stock
Exchange, our
27
securities
would not be covered securities and we would be subject to regulation in each
state in which we offer our securities.
If
our common stock becomes subject to the SEC’s penny stock rules, broker-dealers
may experience difficulty in completing customer transactions and trading
activity in our securities may be adversely affected.
If at any
time our securities are no longer listed on the American Stock Exchange or
another exchange or we have net tangible assets of $5,000,000 or less or our
common stock has a market price per share of less than $5.00, transactions in
our common stock may be subject to the “penny stock” rules promulgated under the
Securities Exchange Act of 1934, as amended, which we refer to as the Securities
Exchange Act. Under these rules, broker-dealers who recommend such
securities to persons other than institutional accredited investors
must:
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make
a special written suitability determination for the
purchaser;
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receive
the purchaser’s written agreement to a transaction prior to
sale;
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provide
the purchaser with risk disclosure documents that identify certain risks
associated with investing in “penny stocks” and that describe the market
for these “penny stocks,” as well as a purchaser’s legal remedies;
and
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obtain
a signed and dated acknowledgment from the purchaser demonstrating that
the purchaser has actually received the required risk disclosure document
before a transaction in “penny stock” can be
completed.
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If our
common stock becomes subject to these rules, broker-dealers may find it
difficult to effect customer transactions and trading activity in our securities
may be adversely affected. As a result, the market price of our
securities may be depressed, and you may find it more difficult to sell our
securities.
We
may only be able to consummate one business combination, which may cause us to
be solely dependent on a single business and a limited number of services or
products.
The net
proceeds from our Offering and the Private Placement, after reserving $250,000
of the proceeds for our operating expenses, provided us with approximately
$391,966,881 excluding deferred underwriting discounts and commissions, which we
may use to consummate our initial Business Combination. Although we
are permitted to consummate our initial Business Combination with more than one
target business, we currently intend to consummate our initial Business
Combination with a single operating business whose fair market value is at least
equal to 80% of the balance in the Trust Account (less the deferred underwriting
discounts and commissions and taxes payable) at the time of the initial Business
Combination. If we acquire more than one target business, additional
issues would arise, including possible complex accounting issues, which would
include generating pro forma financial
statements reflecting the operations of several target businesses as if they had
been combined, and numerous logistical issues, which would include attempting to
coordinate the timing of negotiations, proxy statement disclosure and closing,
with multiple target businesses. In addition, we would be exposed to
the risk that conditions to closings with respect to the initial Business
Combination with one or more of the target businesses would not be satisfied,
bringing the fair market value of the initial Business Combination below the
required threshold of 80% of the balance in the Trust Account (less the deferred
underwriting discounts and commissions and taxes payable). As a
result, we are likely to consummate an initial Business Combination with only a
single operating business, which may have only a limited number of services or
products. The resulting lack of diversification may:
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result
in our being dependent upon the performance of a single operating
business;
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result
in our being dependent upon the development or market acceptance of a
single or limited number of services, processes or products;
and
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28
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•
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subject
us to numerous economic, competitive and regulatory developments, any or
all of which may have a substantial adverse impact upon the particular
industry in which we may operate subsequent to an initial Business
Combination.
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In this
case we will not be able to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses, unlike other entities that
may have the resources to consummate several Business Combinations in different
industries or different areas of a single industry so as to diversify risks and
offset losses. Further, the prospects for our success may be entirely
dependent upon the future performance of the initial target business or
businesses we acquire.
Any
attempt to consummate more than one transaction as our initial business
combination will make it more difficult to consummate our initial business
combination.
In the
event that we are unable to identify a single operating business with which to
consummate an initial Business Combination, we may seek to combine
contemporaneously with multiple operating businesses whose collective fair
market value is at least equal to 80% of the balance in the Trust Account (less
the deferred underwriting discounts and commissions and taxes payable) at the
time of those combinations. Business Combinations involve a number of
special risks, including diversion of management’s attention, legal, financial,
accounting and due diligence expenses, and general risks that transactions will
not be consummated. To the extent we try to consummate more than one
transaction at the same time, all of these risks will be exacerbated, especially
in light of our limited financial and other resources. Consummating
our initial Business Combination through more than one transaction likely would
result in increased costs as we would be required to conduct a due diligence
investigation of more than one business and negotiate the terms of the initial
Business Combination with multiple entities. In addition, due to the
difficulties involved in consummating multiple Business Combinations
concurrently, our attempt to consummate our initial Business Combination in this
manner would increase the chance that we would be unable to successfully
consummate our initial Business Combination in a timely manner. In
addition, if our initial Business Combination entails simultaneous transactions
with different entities, each entity will need to agree that its transaction is
contingent upon the simultaneous closing of the other transactions, which may
make it more difficult for us, or delay our ability, to consummate the initial
Business Combination. As a result, if we attempt to consummate our
initial Business Combination in the form of multiple transactions, there is an
increased risk that we will not be in a position to consummate some or all of
those transactions, which could result in our failure to satisfy the
requirements for an initial Business Combination and force us to
liquidate.
We
may combine with a target business with a history of poor operating performance
and there is no guarantee that we will be able to improve the operating
performance of that target business.
Due to
the competition for Business Combination opportunities, we may combine with a
target business with a history of poor operating performance if we believe that
target business has attractive attributes that we believe could be the basis of
a successful business after consummation of our initial Business
Combination. A business with a history of poor operating performance
may be characterized by, among other things, several years of financial losses,
a smaller market share than other businesses operating in a similar geographical
area or industry or a low return on capital compared to other businesses
operating in the same industry. In determining whether one of these
businesses would be an appropriate target, we would base our decision primarily
on the fair market value of such a business. We would consider, among
other things, its operating income, its current cash flows and its potential to
generate cash in the future, the value of its current contracts and our
assessment of its ability to attract and retain new
customers. However, combining with a target business with a history
of poor operating performance can be extremely risky and we may not be able to
improve operating performance. If we cannot improve the operating
performance of such a target business following our Business Combination, then
our business, financial condition and results of operations will be adversely
affected. Factors that could result in our not being able to improve
operating performance include, among other things:
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•
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inability
to predict changes in technological
innovation;
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•
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competition
from superior or lower priced services and
products;
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•
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lack
of financial resources;
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29
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•
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inability
to attract and retain key executives and
employees;
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•
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claims
for infringement of third-party intellectual property rights and/or the
availability of third-party licenses;
and
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•
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changes
in, or costs imposed by, government
regulation.
|
If
we effect an initial business combination with a business located outside of the
United States, we would be subject to a variety of additional risks that may
negatively impact our operations.
We may
effect an initial Business Combination with a business located outside of the
United States. If we do, we would be subject to any special
considerations or risks associated with businesses operating in the target’s
home jurisdiction, including any of the following:
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•
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rules
and regulations or currency conversion or corporate withholding taxes on
individuals;
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•
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tariffs
and trade barriers;
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•
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regulations
related to customs and import/export
matters;
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•
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longer
payment cycles;
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•
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tax
issues, such as tax law changes and variations in tax laws as compared to
the United States;
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•
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currency
fluctuations and exchange controls;
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•
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challenges
in collecting accounts receivable;
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cultural
and language differences;
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employment
regulations;
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•
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crime,
strikes, riots, civil disturbances, terrorist attacks and wars;
and
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•
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deterioration
of political relations with the United
States.
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We cannot
assure you that we would be able to adequately address these additional
risks. If we were unable to do so, our operations might
suffer.
If
we effect an initial business combination with a business located outside of the
United States, the laws applicable to such business will likely govern all of
our material agreements and we may not be able to enforce our legal
rights.
If we
effect an initial Business Combination with a business located outside of the
United States, the laws of the country in which such business operates will
govern almost all of the material agreements relating to its
operations. We cannot assure you that the target business will be
able to enforce any of its material agreements or that remedies will be
available in this new jurisdiction. The system of laws and the
enforcement of existing laws in such jurisdiction may not be as certain in
implementation and interpretation as in the United States. The
inability to enforce or obtain a remedy under any of our future agreements could
result in a significant loss of business, business opportunities or
capital. Additionally, if we acquire a business located outside of
the United States, it is likely that substantially all of our assets would be
located outside of the United States and some of our officers and directors
might reside outside of the United States. As a result, it may not be
possible for investors in the United States to enforce their legal rights, to
effect service of process upon our directors or officers or to enforce judgments
of United States courts predicated upon civil liabilities and criminal penalties
of our directors and officers under Federal securities laws.
30
Our
existing stockholders control a substantial interest in us and thus may
influence certain actions requiring a stockholder vote.
Our
existing stockholders beneficially own approximately 20% of our issued and
outstanding shares of common stock and, at the time of our initial Business
Combination, this percentage will increase as a result of the
co-investment. In addition, there is no restriction on the ability of
our executive officers, directors and existing stockholders to purchase units,
shares of our common stock or warrants in the market after completion of the
Offering. If they were to do so, the percentage of our outstanding
common stock held by our executive officers, directors and existing stockholders
would increase. Any common stock acquired by our Sponsor or our
executive officers and directors or in the secondary market will be considered
part of the holdings of public stockholders. As a result of their
substantial beneficial ownership through their control of NRDC Capital
Management, LLC, Mr. Mack, our Chairman, Mr. Robert Baker, our Vice
Chairman, Mr. Richard Baker, our Chief Executive Officer, and
Mr. Neibart, our President, each may exert considerable influence on
actions requiring a stockholder vote, including the election of executive
officers and directors, amendments to our amended and restated certificate of
incorporation, the approval of benefit plans, mergers and similar transactions
(including approval of the initial Business Combination). Other than
in respect of the co-investment, our existing stockholders, directors and
officers have not established any specific criteria that would trigger purchases
of our securities in the aftermarket or in private transactions, but they would
most likely consider a variety of factors, including whether they believed that
such securities were undervalued and represented a good
investment. Any such purchases would be made in compliance with all
applicable securities laws and our insider trading policy.
Because
our existing stockholders, including our directors and officers, will lose their
entire investment in us if a business combination is not consummated, our
existing stockholders, directors or officers may purchase shares of our common
stock from stockholders who would otherwise choose to vote against a proposed
business combination or exercise their conversion rights in connection with such
business combination.
Our
sponsor owns shares of our common stock (which were purchased for an aggregate
of $25,000) which will be worthless if we do not consummate a Business
Combination. In addition, our sponsor’s warrants will also be
worthless if we do not consummate a Business Combination. Given the
interest that our existing stockholders, directors and officers have in a
Business Combination being consummated, it is possible that our existing
stockholders, directors or officers will acquire securities from public
stockholders that have indicated their intention to vote against the Business
Combination and exercise their conversion rights in order to help to insure that
the Business Combination will be approved. Accordingly, such
purchases could result in a Business Combination being approved that may have
otherwise not been approved by our public stockholders, but for the purchases
made by our existing stockholders, directors or officers.
Our
staggered board may entrench management and discourage unsolicited stockholder
proposals that may be in the best interests of stockholders.
Our board
of directors are divided into three classes, each of which generally will serve
for a term of three years, with only one class of directors being elected in
each year. There may not be an annual meeting of stockholders to
elect new directors prior to the consummation of an initial Business
Combination, in which case, all of the current directors will continue in office
at least until the consummation of the initial Business
Combination. As a consequence of this “staggered” board of directors,
only a minority of the board of directors would be considered for
election. Moreover, except to the extent stockholder proposals are
properly and timely submitted, our directors will determine which matters,
including prospective Business Combinations, to submit to a stockholder
vote. As a result, they will exert substantial control over actions
requiring a stockholder vote both before and following an initial Business
Combination.
Our
outstanding warrants may have an adverse effect on the market price of common
stock and make it more difficult to consummate an initial business
combination.
In
connection with the Offering, as part of the units, we issued warrants to
purchase 41,400,000 shares of common stock. In addition, in
connection with the Private Placement, we issued warrants to our Sponsor to
purchase 8,000,000 shares of common stock. Contemporaneously with the
consummation of our initial Business Combination, as part of the co-investment
units to be purchased by our Sponsor, we will issue 2,000,000 warrants to
31
purchase
2,000,000 shares of our common stock. To the extent we issue shares
of common stock to consummate an initial Business Combination, the potential for
the issuance of substantial numbers of additional shares upon exercise of these
warrants could make us a less attractive partner for a Business Combination in
the eyes of a target business, as such securities, when exercised, will increase
the number of issued and outstanding shares of our common stock and the
potential for such issuance could reduce the value of the shares that may be
issued to consummate the initial Business Combination. Accordingly,
the existence of our warrants may make it more difficult to consummate an
initial Business Combination or may increase the cost of a target business if we
are unable to consummate an initial Business Combination solely with
cash. Additionally, the sale, or potential sale, of the shares
underlying the warrants could have an adverse effect on the market price for our
securities or on our ability to obtain future public financing. If
and to the extent these warrants are exercised, you may experience dilution to
your holdings.
Our
existing stockholders’ exercise of their registration rights may have an adverse
effect on the market price of our common stock, and the existence of these
rights may make it more difficult to consummate an initial business
combination.
Our
Sponsor is entitled to demand on up to three occasions that we register the
resale of its shares of common stock and private placement warrants and its
co-investment units, including the co-investment shares of common stock, the
co-investment warrants and the shares of common stock underlying the
co-investment warrants. Our Sponsor and our directors also have
certain “piggyback” registration rights and the right to unlimited registration
on Form S-3 to the extent that we are eligible to use
Form S-3. If our Sponsor and our directors exercise their
registration rights with respect to all of their shares of common stock and
warrants, then there will be an additional 22,350,000 shares (including
1,350,000 shares sold to our Sponsor that are subject to forfeiture to the
extent the underwriters do not exercise their over-allotment option) of common
stock eligible for trading in the public market. This potential
increase in trading volume may have an adverse effect on the market price of our
common stock. In addition, the existence of these rights may make it
more difficult to consummate an initial Business Combination or may increase the
cost of a target business in the event that we are unable to consummate an
initial Business Combination solely with cash, as the stockholders of a
particular target business may be discouraged from entering into a Business
Combination with us or will request a higher price for their securities as a
result of these registration rights and the potential future effect their
exercise may have on the trading market for our common stock.
Failure
to maintain an effective registration statement and a prospectus available for
use relating to the common stock underlying our warrants may deprive our
warrants of value and the market for our warrants may be limited.
No
warrants will be exercisable and we will not be obligated to issue shares of
common stock unless at the time of exercise a registration statement relating to
shares of common stock issuable upon exercise of the warrants is effective and a
prospectus relating to shares of common stock issuable upon exercise of the
warrants is available for use and those shares of common stock have been
registered or qualified or deemed to be exempt under the securities laws of the
state of residence of the holder of our warrants. The private
placement warrants will not be exercisable at any time when a registration
statement relating to the shares of common stock underlying the public warrants
is not effective and a prospectus relating to those shares is not available for
use by the public warrant holders. So long as any of the public
warrants remain outstanding, the co-investment warrants will not be exercisable
at any time when a registration statement relating to the shares of common stock
underlying the public warrants is not effective and a prospectus relating to
those shares is not available for use by the public warrant
holders. Holders of the warrants are not entitled to net cash
settlement and the warrants may only be settled by delivery of shares of our
common stock and not cash. Under the terms of a warrant agreement
between Continental Stock Transfer & Trust Company, as warrant agent, and
us, we have agreed to use our reasonable best efforts to maintain an effective
registration statement and prospectus available for use relating to common stock
issuable upon exercise of the warrants until the expiration of the warrants, and
to take such action as is necessary to qualify the common stock issuable upon
exercise of the warrants for sale in those states in which the Offering was
initially qualified. However, we cannot assure you that we will be
able to do so. We have no obligation to settle the warrants for cash,
in any event, and the warrants may not be exercised and we will not deliver
securities therefore in the absence of an effective registration statement or a
prospectus available for use. The warrants may never become
exercisable if we never comply with these registration requirements and, in any
such case, the total price paid for each unit would effectively have been paid
solely for the shares of common stock included therein. In any case,
the warrants may be
32
deprived
of value and the market for the warrants may be limited if a registration
statement relating to the common stock issuable upon the exercise of the
warrants is not effective, a prospectus relating to the common stock issuable
upon the exercise of the warrants is not available for use or if the common
stock is not qualified or exempt from qualification in the jurisdictions in
which the holders of the warrants reside.
If
we are deemed to be an investment company, we may be required to institute
burdensome compliance requirements and our activities may be restricted, which
may make it difficult for us to consummate an initial business combination or
operate over the near term or long term in our intended manner.
We do not
plan to operate as an investment fund or investment company, or to be engaged in
the business of investing, reinvesting or trading in securities. Our
plan is to acquire, hold, operate and grow for the long term one or more
operating businesses. We do not plan to operate as a passive investor
or as a merchant bank seeking dividends or gains from purchases and sales of
securities. Our principals are experienced as officers and directors
of operating companies.
Companies
that fall within the definition of an “investment company” set forth in
Section 3 of the Investment Company Act of 1940, as amended, and the
regulations thereunder, which we refer to as the 1940 Act, are subject to
registration and substantive regulation under the 1940 Act. Companies
that are subject to the 1940 Act that do not become registered are normally
required to liquidate and are precluded from entering into transactions or
enforceable contracts other than as an incident to liquidation. The
basic definition of an “investment company” in the 1940 Act and related SEC
rules and interpretations includes a company (1) that is, proposes to be,
or holds itself out as being engaged primarily in investing, reinvesting or
trading in securities; or (2) that has more than 40% of its assets
(exclusive of U.S. government securities and cash items) in “investment
securities,” or (3) that is a “special situation investment company” (such
as a merchant bank or private equity fund).
For
example, if we were deemed to be an investment company under the 1940 Act, we
would be required to become registered under the 1940 Act (or liquidate) and our
activities would be subject to a number of restrictions, including, among
others:
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corporate
governance requirements and requirements regarding mergers and share
exchanges;
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•
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restrictions
on the nature of our investments;
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restrictions
on our capital structure and use of multiple classes of securities;
and
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restrictions
on our use of leverage and collateral;
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In
addition, we may have imposed upon us burdensome requirements,
including:
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registration
as an investment company;
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•
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adoption
of a specific form of corporate structure;
and
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reporting,
record keeping, voting, proxy, and disclosure requirements, and other
rules and regulations; compliance with which would reduce the funds we
have available outside the Trust Account to consummate our initial
Business Combination.
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In order
not to be regulated as an investment company under the 1940 Act, unless we can
qualify for an exclusion, we must ensure that we are engaged primarily in an
initial business other than investing, reinvesting or trading of securities and
that our activities do not include investing, reinvesting, owning, holding or
trading “investment securities.” Our business will be to identify and
consummate a Business Combination and thereafter to operate the acquired
business or businesses for the long term. We do not plan to buy
operating businesses with a view to resale or profit from their
resale. We do not plan to buy unrelated businesses or to be a passive
investor. We do not believe that our anticipated principal activities
will subject us to the 1940 Act. To this end, the proceeds held in
the Trust Account may only be invested by the trustee in U.S. government
securities and in assets that are
33
considered
“cash items” for purposes of Section 3(a)(2) of the 1940
Act. Pursuant to the trust agreement, the trustee is not permitted to
invest in securities or assets that are considered “investment securities”
within the meaning of Section 3(a) of the 1940 Act. By
restricting the investment of the proceeds to these instruments, and by having a
business plan targeted at acquiring, growing and operating businesses for the
long term (rather than on buying and selling businesses in the manner of a
merchant bank or private equity fund) we intend to avoid being deemed an
“investment company” within the meaning of the 1940 Act. The Offering
is not intended for persons who are seeking a return on investments in
government securities or investment securities. The Trust Account and
the purchase of government securities for the Trust Account is intended as a
holding place for funds pending the earlier to occur of
either: (i) the consummation of our primary business objective,
which is a Business Combination, or (ii) absent a Business Combination, our
return of the funds held in the Trust Account to our public stockholders as part
of our plan of liquidation. If we do not invest the proceeds as
discussed above, we may be deemed to be subject to the 1940 Act. If
we were deemed to be subject to the 1940 Act, compliance with these additional
regulatory burdens would require additional expense for which we have not
accounted.
Certain
of our directors may not be considered “independent” under the policies of the
North American Securities Administrators Association, Inc., and, therefore, may
take actions or incur expenses that are not deemed to be independently approved
or independently determined to be in our best interest.
Under the
policies of the North American Securities Administrators Association, Inc., an
international organization devoted to investor protection, because all of our
directors may receive reimbursement for out-of pocket expenses incurred by them
in connection with activities on our behalf, such as attending meetings of the
board of directors, identifying potential target businesses and performing due
diligence on suitable Business Combinations, and all of our directors, directly
or indirectly, own shares of our securities, state securities administrators
could take the position that such individuals are not
“independent.” If this were the case, they would take the position
that we would not have the benefit of independent directors examining the
propriety of expenses incurred on our behalf and subject to
reimbursement. There is no limit on the amount of out-of pocket
expenses that could be incurred, and there will be no review of the
reasonableness of the expenses by anyone other than our board of directors,
which would include persons who may seek reimbursement, or a court of competent
jurisdiction if such reimbursement is challenged. To the extent such
out-of-pocket expenses exceed the available proceeds not deposited in the Trust
Account, such out-of-pocket expenses would not be reimbursed by us unless we
consummate an initial Business Combination. Although we believe that
all actions taken by our directors on our behalf will be in our best interests,
whether or not they are deemed to be “independent,” we cannot assure you that
this will actually be the case. If actions are taken or expenses are
incurred that actually are not in our best interests, it could have a material
adverse effect on our business and operations and the price of our stock held by
the public stockholders.
Compliance
with the Sarbanes-Oxley Act of 2002 will require substantial financial and
management resources and may increase the time and costs of completing an
acquisition.
Section 404
of the Sarbanes-Oxley Act of 2002 requires that we evaluate and report on our
system of internal controls and requires that we have such system of internal
controls audited beginning with our Annual Report on Form 10-K for the year
ending December 31, 2008. If we fail to maintain the adequacy of
our internal controls, we could be subject to regulatory scrutiny, civil or
criminal penalties and/or stockholder litigation. Any inability to
provide reliable financial reports could harm our
business. Section 404 of the Sarbanes-Oxley Act also requires
that our independent registered public accounting firm report on management’s
evaluation of our system of internal controls. A target business may
not be in compliance with the provisions of the Sarbanes-Oxley Act regarding
adequacy of their internal controls. The development of the internal
controls of any such entity to achieve compliance with the Sarbanes-Oxley Act
may increase the time and costs necessary to complete any such
acquisition. Furthermore, any failure to implement required new or
improved controls, or difficulties encountered in the implementation of adequate
controls over our financial processes and reporting in the future, could harm
our operating results or cause us to fail to meet our reporting
obligations. Inferior internal controls could also cause investors to
lose confidence in our reported financial information, which could have a
negative effect on the trading price of our securities.
Item
1B. Unresolved
Staff Comments
34
None
Item
2. Properties
We
maintain our executive office at 3 Manhattanville Road, Purchase, NY
10577. The cost for this space is included in the $7,500 per month
fee we have agreed to pay our Sponsor, NRDC Capital Management, LLC for general
and administrative services. We pay this fee from the interest earned
on the Trust Account, which we are permitted to withdraw. The
agreement for administrative services with NRDC Capital Management, LLC, which
covers the rental of this space, continues until the earlier of the completion
of a Business Combination or upon our dissolution. We consider our
current office facilities suitable for our business as it is presently
conducted. We do not own any real estate or other physical
properties.
Item
3. Legal
Proceedings
There is
no litigation currently pending or, to our knowledge, threatened against us or
any of our officers or directors in their capacity as such.
PART II
Item
4. Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchasers of Equity Securities
Market
Our
units, which consist of one share of our common stock, par value $.0001 per
share and one warrant to purchase an additional share of our common stock,
commenced trading on the American Stock Exchange under the symbol “NAQ-U,” on
October 23, 2007.
Holders
of Common Equity
As
of December 31, 2007, there was one holder of record of our units and
seven record holders of our common stock (including holders of common stock
included in our units).
Dividends
We have
not paid any dividends on our common stock to date and do not intend to pay
dividends before we complete our initial Business
Combination. Thereafter, dividend payments will depend upon our
revenues and earnings, if any, capital requirements and general financial
condition and will be within the discretion of our board of
directors. Our board of directors currently intends to retain all
earnings, if any, for use in our business operations and, accordingly, our board
does not anticipate declaring any dividends in the foreseeable
future.
Recent
Sales of Unregistered Securities
Since our
inception on July 10, 2007, we sold 8,625,000 shares of common stock (after
giving effect to our 6 for 5 stock split effected on September 4, 2007)
without registration under the Securities Act:
| Stockholders |
Number of
Shares
|
| NRDC Capital Management, LLC |
8,625,000
|
Such
shares were issued on July 13, 2007 in connection with our organization
pursuant to the exemption from registration contained in Section 4(2) of
the Securities Act as they were sold to sophisticated, accredited
entities. The shares issued to the entity above were sold for an
aggregate offering price of $25,000 at an average purchase price of
approximately $0.003 per share.
In
addition, our sponsor purchased 8,000,000 warrants at $1.00 per warrant (for an
aggregate purchase price of $8,000,000) from us immediately prior to the
completion of the Offering. These purchases were made on a
35
private
placement basis. These issuances were made pursuant to the exemption
from registration contained in Section 4(2) of the Securities
Act. The obligation to purchase the warrants undertaken by the above
individuals was made pursuant to a Subscription Agreement, dated as of
July 13, 2007 (the form of which was filed as Exhibit 10.10 to our
Registration Statement on Form S-1 and incorporated by reference
herein). Such obligation was made prior to the filing of the
Registration Statement, and the only conditions to the obligation undertaken by
such individuals are conditions outside of the investor’s
control. Consequently, the investment decision relating to the
purchase of the warrants was made prior to the filing of the Registration
Statement relating to the public offering and therefore constitutes a “completed
private placement.”
No
underwriting discounts or commissions were paid with respect to such
sales.
Use
of Proceeds from the Registered Offering and the Private Placement
On
October 23, 2007, we consummated a private placement of 8,000,000 warrants
with NRDC Capital Management, LLC, an entity owned and controlled by the
executive officers of the Company, and our initial public offering of 41,400,000
units, including 5,400,000 units pursuant to the underwriters’ over-allotment
option. We received net proceeds of approximately $384,000,000 and
also received $8,000,000 of proceeds from the private placement sale of
8,000,000 insider warrants to NRDC Capital Management, LLC. Banc of America
Securities, LLC served as the sole bookrunning manager for our initial public
offering. The securities sold in the Offering were registered under
the Securities Act of 1933 on a registration statement on Form S-1
(No. 333-144871). The Securities and Exchange Commission
declared the registration statement effective on October 17,
2007.
Substantially
all of the net proceeds of the Offering are intended to be generally applied
toward consummating a Business Combination with an operating
business. There is no assurance that the Company will be able to
successfully affect a Business Combination. Upon the closing of the
Offering and Private Placement, $406,456,881 including $14,490,000 of the
underwriters’ discounts and commissions is being held in a Trust Account and
invested in United States “government securities” within the meaning of
Section 2(a)(16) of the Investment Company Act of 1940 having a maturity of
180 days or less or in money market funds meeting certain conditions under
Rule 2a-7 promulgated under the Investment Company Act of 1940 until the
earlier of (i) the consummation of its first Business Combination and
(ii) liquidation of the Company.
No
portion of the proceeds of the Offering was paid to directors, officers or
holders of 100% or more of any class of our equity securities or their
affiliates.
Repurchases
of Equity Securities
None
Item
5. Selected
Financial Data
The
following selected financial and operating information should be read in
connection with “Item 7, Management Discussion and Analysis of Financial
Conditions and Results of Operations” and our financial statements, including
the notes, included elsewhere herein.
|
Period Ended
December 31, 2007
|
||||
|
Statement
of Income Data:
|
||||
|
Interest
Income
|
$ | 3,359,023 | ||
|
Operating
expenses
|
446,301 | |||
|
Income
before income taxes
|
2,912,722 | |||
|
Income
tax provision
|
1,178,520 | |||
|
Net
income
|
$ | 1,734,202 | ||
|
Weighted
average common shares outstanding:
|
||||
|
Basic
and diluted
|
27,198,837 | |||
|
Balance
Sheet Data:
|
||||
|
Investments
held in trust
|
$ | 395,323,737 | ||
|
Investments
held in trust from underwriter
|
14,490,000 | |||
|
Total
assets
|
410,273,506 | |||
|
Total
liabilities
|
16,266,860 | |||
|
Common
stock subject to redemption
|
117,590,055 | |||
|
Total
stockholders’ equity
|
276,416,591 | |||
36
Item
6. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
Overview
We were
formed on July 10, 2007 as a blank check company for the purpose of
acquiring, through a merger, stock exchange, asset acquisition, reorganization
or similar Business Combination, one or more operating businesses. We
intend to use cash derived from the net proceeds of our Offering, which was
consummated on October 23, 2007, and the exercise by the underwriters of
their over-allotment option, which closed on October 23, 2007, together
with any additional financing arrangements that we undertake, to effect a
Business Combination.
If we
issue additional shares of our capital stock as consideration in a Business
Combination it may result in:
|
|
•
|
significant
dilution of the interest of our public investors in our
company;
|
|
|
•
|
if
we issue a sufficient number of shares, a change in control of our
company, which may among other things, result in the resignation or
removal of our existing officers and directors and could reduce or
eliminate our ability to use our net operating loss carry forwards, if
any, for tax purposes;
|
|
|
•
|
reduced
market prices for our common stock;
and
|
|
|
•
|
due
to the fact that 850,000 unreserved shares remain, an increase in
authorized shares may be required.
|
Similarly,
if we issue debt securities or incur other forms of indebtedness, it could
result in:
|
|
•
|
increased
expenses to pay debt service;
|
|
|
•
|
if
the debt has a variable rate, increased vulnerability to changes in market
interest rates, since our revenues may not increase, or may decrease, if
interest rates rise;
|
|
|
•
|
default
and foreclosure on our assets if our operating revenues after a Business
Combination are insufficient to service our debt
obligations;
|
|
|
•
|
acceleration
of our obligations to repay the indebtedness even if we have made all
principal and interest payments when due if the debt security contains
covenants that require the maintenance of certain financial ratios or
reserves and any such covenant is breached without a waiver or
renegotiation of that covenant;
|
|
|
•
|
our
inability, or limitations on our ability, to obtain additional financing,
if necessary, if the debt contains covenants restricting our ability to
obtain additional financing while the debt is
outstanding;
|
|
|
•
|
prohibitions
or limitations on our ability to pay dividends on our common
stock;
|
37
|
|
•
|
requirements
that we dedicate a substantial portion of our cash flow to pay principal
and interest on our debt, which would reduce the funds available for
dividends on our common stock, working capital, capital expenditures,
Business Combinations and other general corporate purposes;
and
|
|
|
•
|
limitations
or prohibitions on Business Combinations, capital expenditures or other
business operations unless we meet particular financial or operational
tests.
|
Results
of Operation and Liquidity
Our
entire activity since inception has been limited to organizational activities,
activities relating to our initial public offering and, since our initial public
offering, activities relating to identifying and evaluating prospective
acquisition targets. We have neither engaged in any operations nor
generated any revenues to date, other than interest income earned on the
proceeds of our initial public offering.
For the
period ended December 31, 2007 the Company earned interest income of $3,359,023
and had general and administrative expenses of $446,301. The Company
had a provision for income taxes of $1,178,520 resulting in net income for the
period of $1,734,202.
The gross
proceeds from the sale of the units in our initial public offering and the
private placement were $422,000,000. Of that amount, after deducting
offering expenses of $15,193,556 (including reimbursement of $200,000 advanced
by our Sponsor to pay offering expenses), and working capital of $349,563, we
deposited $406,456,881 in the Trust Account (including $14,490,000 of the
underwriters’ discounts and commissions)
The funds
held in the Trust Account are currently invested in Treasury Bills issued by the
United States government having a maturity of 180 days or less. We
also have the option to invest the funds in money market funds meeting the
criteria under Rule 2a-7 under the 1940 Act. Interest earned
will be applied in the following order of priority:
|
|
•
|
payment
of taxes on Trust Account interest;
|
|
|
•
|
our
working capital requirements before we complete a Business Combination, to
a maximum of $2,700,000, and, if necessary, funding of the costs of our
potential dissolution and
liquidation;
|
|
|
•
|
solely
if we complete a Business Combination, payment of interest on the amount
of deferred underwriters’ compensation payable to the underwriters in our
initial public offering; and
|
|
|
•
|
the
balance, if any, to us if we complete a Business Combination or to our
public stockholders if we do not complete a Business
Combination.
|
We
believe that the interest earned on Trust Account funds in the period before we
effect a Business Combination will be sufficient to fund our operations and
costs relating to the acquisition of a target business or to fund the costs and
expenses relating to our liquidation and dissolution if we do not consummate a
Business Combination.
We expect
to use substantially all of the net proceeds of our initial public offering and
the private placement to acquire a target business, including payment of
expenses we incur in identifying and evaluating prospective acquisition
candidates, selecting the target business, and structuring, negotiating and
consummating the Business Combination. To the extent that we use debt
or equity securities as consideration in a Business Combination and do not use
all of the funds in the Trust Account, we will use the remaining Trust Account
funds to finance the operations of the target business. We believe
that the $2,700,000 that we are allowed to draw from interest earned on the
Trust Account will be sufficient to allow us to operate until at least
October 23, 2009, even if we do not complete a Business Combination during
that time.
Before
our initial public offering, our Sponsor loaned us $200,000 without interest,
which we used to pay a portion of the expenses of our initial public offering,
such as SEC registration fees, NASD registration fees, blue sky
38
fees and
expenses, fees relating to listing our securities on the American Stock Exchange
and legal and accounting fees and expenses. We repaid this loan from
the proceeds of our initial public offering, as referred to above.
Critical
Accounting Policies
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
expenses during the reporting period. Actual results could differ
from those estimates.
Management
does not believe that any recently issued, but not yet effective, accounting
standards if currently adopted would have a material effect on the accompanying
financial statements.
Off-Balance
Sheet Arrangements
We have
issued warrants in conjunction with our initial public offering and private
placement, and have also issued incentive warrants. These warrants
may be deemed to be equity linked derivatives and, accordingly, represent off
balance sheet arrangements. See Note 2 to the notes to our financial
statements. We account for these warrants as stockholders’ equity and
not as derivatives since they meet the scope exception in paragraph 11(a) of the
Financial Accounting Standards (FAS 133).
Contractual
Obligations
We did
not have any long term debt, capital lease obligations, operating lease
obligations, purchase obligations or other long term liabilities. We
entered into a Service Agreement with the parent of our Sponsor requiring us to
pay $7,500 per month. The agreement terminates on the earlier of the
completion of a Business Combination or upon our dissolution.
Item
7. Quantitative
and Qualitative Disclosures About Market Risk
Market
risk is the sensitivity of income to changes in interest rates, foreign
exchanges, commodity prices, equity prices, and other market-driven rates or
prices. We are not presently engaged in and, if a suitable business
target is not identified by us prior to the prescribed liquidation date of the
Trust Account, we may not engage in, any substantive commercial
business. Accordingly, we are not and, until such time as we
consummate a Business Combination, we will not be, exposed to risks associated
with foreign exchange rates, commodity prices, equity prices or other
market-driven rates or prices.
39
Item
8. Financial
Statements and Supplementary Data
Index
to Financial Statements
|
Financial Statements
|
Page
|
|||
|
Report of Independent Registered Public Accounting
Firm
|
41 | |||
|
Balance Sheet at December 31,
2007
|
42 | |||
|
Statement of Income for the period from July 10,
2007 (inception) through December 31, 2007
|
43 | |||
|
Statement of Stockholders’ Equity for the period
from July 10, 2007 (inception) through December 31,
2007
|
44 | |||
|
Statement of Cash Flows for the period from July
10, 2007 (inception) through December 31, 2007
|
45 | |||
|
Notes to Financial
Statements
|
46 | |||
40
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders
NRDC
Acquisition Corp.
We have
audited the accompanying balance sheet of NRDC Acquisition Corp. (a corporation
in the development stage) as of December 31, 2007 and the related
statements of income, stockholders’ equity and cash flows for the period from
July 10, 2007 (inception) to December 31, 2007. These financial
statements are the responsibility of the company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The 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 audit provides a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of NRDC Acquisition Corp. as of
December 31, 2007 and the results of its operations and its cash flows for
the period from July 10, 2007 (inception) to December 31, 2007 in
conformity with U.S. generally accepted accounting principles.
/s/ McGladrey & Pullen,
LLP
McGladrey
& Pullen, LLP
New York,
New York
April 4,
2008
41
NRDC
ACQUISITION CORP.
(a
corporation in the development stage)
BALANCE
SHEET
|
December 31,
2007
|
||||
|
ASSETS
|
||||
|
Current
assets
|
||||
|
Cash
& cash equivalents
|
$ | 198,570 | ||
|
Investments
held in trust
|
395,323,737 | |||
|
Investments
held in trust from underwriter
|
14,490,000 | |||
|
Prepaid
expenses
|
128,130 | |||
|
Deferred
tax asset
|
133,069 | |||
|
Total
assets
|
$ | 410,273,506 | ||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||
|
Current
liabilities
|
||||
|
Accounts
payable
|
$ | 26,310 | ||
|
Income
taxes payable
|
1,311,589 | |||
|
Accrued
expenses
|
369,961 | |||
|
Accrued
offering costs
|
69,000 | |||
|
Deferred
underwriting fee
|
14,490,000 | |||
|
Total
liabilities
|
$ | 16,266,860 | ||
|
Common
Stock, subject to possible conversion of 12,419,999 shares at conversion
value
|
117,590,055 | |||
|
Stockholders’
Equity:
|
||||
|
Preferred
stock, par value of $0.0001, authorized 5,000 shares; no shares issued and
outstanding
|
$ | — | ||
|
Common
stock, par value of $0.0001, authorized 106,000,000 shares; issued and
outstanding 51,750,000 shares (which includes 12,419,999 shares subject to
possible conversion)
|
5,175 | |||
|
Additional
paid-in capital
|
274,677,214 | |||
|
Earnings
accumulated during development stage
|
1,734,202 | |||
|
Total
stockholders’ equity
|
276,416,591 | |||
|
Total
liabilities and stockholders’ equity
|
$ | 410,273,506 | ||
See
notes to financial statements
42
NRDC
ACQUISITION CORP.
(a
corporation in the development stage)
STATEMENT
OF INCOME
|
For
the
period
from July 10, 2007 (inception) to December 31, 2007
|
||||
|
Interest
income
|
$ | 3,359,023 | ||
|
General
& administrative expenses
|
$ | 446,301 | ||
|
Income
before Provision for Income Taxes
|
2,912,722 | |||
|
Provision
for Income Taxes (Note 6)
|
1,178,520 | |||
|
Net
Income for the period
|
$ | 1,734,202 | ||
|
Weighted
average shares outstanding
|
||||
|
Basic
& diluted
|
27,198,837 | |||
|
Net
Income per share
|
||||
|
Basic
& diluted
|
$ | 0.06 | ||
See
notes to financial statements
43
NRDC
ACQUISITION CORP.
(a
corporation in the development stage)
STATEMENT
OF STOCKHOLDERS’ EQUITY
For the period from
July 10, 2007 (inception) to December 31, 2007
|
Common
Stock
|
||||||||||||||||||||
|
Shares
|
Amount
|
Additional
paid-in
capital
|
Earnings
accumulated
during
development
stage
|
Stockholders’
Equity
|
||||||||||||||||
|
Issuance
of units to Founders on July 13, 2007 at approximately $0.002 per
share
|
10,350,000 | 1,035 | $ | 23,965 | $ | — | $ | 25,000 | ||||||||||||
|
Sale
of Private Placement Warrants
|
— | — | 8,000,000 | 8,000,000 | ||||||||||||||||
|
Sale
of 41,400,000 units through public offering (net of underwriter’s discount
and offering expenses) including 12,419,999 shares subject to possible
conversion
|
41,400,000 | 4,140 | 384,243,304 | 384,247,444 | ||||||||||||||||
|
Proceeds
subject to possible conversion
|
(117,590,055 | ) | (117,590,055 | ) | ||||||||||||||||
|
Net
Income
|
1,734,202 | 1,734,202 | ||||||||||||||||||
|
Balance
at December 31, 2007
|
51,750,000 | $ | 5,175 | $ | 274,677,214 | $ | 1,734,202 | $ | 276,416,591 | |||||||||||
See
notes to financial statements.
44
NRDC
ACQUISITION CORP.
(a
corporation in the development stage)
STATEMENT
OF CASH FLOWS
|
For
the period from
July 10,
2007
(inception)
to
December 31,
2007
|
||||
|
CASH
FLOW FROM OPERATING ACTIVITIES
|
||||
|
Net
income
|
$ | 1,734,202 | ||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||
|
Interest
on investments held in trust
|
(3,356,856 | ) | ||
|
Changes
in operating assets and liabilities
|
||||
|
Prepaid
expenses
|
(128,130 | ) | ||
|
Deferred
tax asset
|
(133,069 | ) | ||
|
Accounts
payable
|
26,310 | |||
|
Income
taxes payable
|
1,311,589 | |||
|
Accrued
expenses
|
369,961 | |||
|
Net
cash used in operating activities
|
(175,993 | ) | ||
|
CASH
FLOW FROM INVESTING ACTIVITIES
|
||||
|
Investments
placed in trust
|
(406,456,881 | ) | ||
|
CASH
FLOW FROM FINANCING ACTIVITIES
|
||||
|
Proceeds
from sale of units to public
|
$ | 414,000,000 | ||
|
Proceeds
from private placements of warrants
|
8,000,000 | |||
|
Proceeds
from sale of units to Founders
|
25,000 | |||
|
Proceeds
from notes payable to affiliates of Founders
|
200,000 | |||
|
Repayment
of notes payable to affiliates of Founders
|
(200,000 | ) | ||
|
Payment
of offering costs
|
(15,193,556 | ) | ||
|
Net
cash provided by financing activities
|
406,831,444 | |||
|
Net
increase in cash
|
198,570 | |||
|
Cash
and cash equivalents at beginning of period
|
— | |||
|
Cash
and cash equivalents at end of period
|
$ | 198,570 | ||
|
Supplemental
disclosure of noncash financing activities:
|
||||
|
Accrual
of offering costs
|
$ | 69,000 | ||
|
Accrual
of deferred underwriting fee
|
$ | 14,490,000 | ||
See
notes to financial statements
45
NRDC
ACQUISITION CORP.
(a
corporation in the development stage)
NOTES
TO FINANCIAL STATEMENTS
1. Organization,
Proposed Business Operations and Summary of Significant Accounting
Policies
Nature
of Operations
NRDC
Acquisition Corp. (the “Company”) is a blank check company incorporated on
July 10, 2007 for the purpose of effecting a merger, capital stock
exchange, stock purchase, asset acquisition or other similar Business
Combination with one or more existing operating businesses.
At
December 31, 2007 the Company had not commenced any
operations. All activity through December 31, 2007 relates to
the Company’s formation, a private placement (“Private Placement”) and the
initial public offering (“Public Offering” and, together with the Private
Placement, the “Offerings”) described below.
The
registration statement for the Company’s Offering (as described in Note 3) was
declared effective on October 17, 2007 (the “Effective Date”). The
Company consummated the offering on October 23, 2007, and received net proceeds
of approximately $384,000,000 and also received $8,000,000 of proceeds from the
private placement (“the Private Placement”) sale of 8,000,000 insider warrants
to NRDC Capital Management, LLC (the “Sponsor”). The warrants sold in
the Private Placement are identical to the warrants sold in the offering, but
the purchasers in the Private Placement have waived their rights to receive any
distributions upon liquidation in the event the Company does not complete a
Business Combination as described below.
The
Company’s management has broad discretion with respect to the specific
application of the net proceeds of this Offering, although substantially all of
the net proceeds of this Offering are intended to be generally applied toward
consummating a Business Combination (“Business Combination”). There
is no assurance that the Company will be able to successfully affect a Business
Combination. Upon the closing of the Offering and Private Placement,
$406,456,881 including $14,490,000 of the underwriters’ discounts and
commissions as described in Note 3, is being held in a trust account (“Trust
Account”) and invested in United States “government securities” within the
meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a
maturity of 180 days or less or in money market funds meeting certain conditions
under Rule 2a-7 promulgated under the Investment Company Act of 1940 until the
earlier of (i) the consummation of its first Business Combination and (ii)
liquidation of the Company. The placing of funds in the Trust Account may not
protect those funds from third party claims against the
Company. Although the Company will seek to have all vendors,
providers of financing, prospective target businesses or other entities it
engages execute agreements with the Company waving any right, title, interest or
claim of any kind in or to any monies held in the Trust Account, there is no
guarantee that they will execute such agreements. NRDC Capital
Management, LLC and the Company’s executive officers have agreed that they will
be liable under certain circumstances to ensure that the proceeds in the Trust
Account are not reduced by the claims of target businesses or vendors, providers
of financing, service providers or other entities that are owed money by the
Company for services rendered to or contracted for or products sold to the
Company. There can be no assurance that they will be able to satisfy
those obligations. The net proceeds not held in the Trust Account may
be used to pay for business, legal and accounting due diligence on prospective
acquisitions and continuing general and administrative
expenses. Additionally, up to an aggregate of $2,700,000 of interest
earned on the Trust Account balance may be released to the Company to fund
working capital requirements and additional funds may be released to fund tax
obligations.
The
Company, after signing a definitive agreement for the acquisition of a target
business, is required to submit such transaction for stockholder
approval. In the event that stockholders owning 30% or more of the
shares sold in the Offering vote against the Business Combination and exercise
their conversion rights described below, the Business Combination will not be
consummated. All of the Company’s stockholders prior to the offering
(“Founders”), have agreed to vote their founding shares of common stock in
accordance with the vote of the majority of the shares voted by all other
stockholders of the Company (“Public Stockholders”) with respect to any Business
Combination and in favor of an amendment to our certificate of incorporation to
provide for the
46
Company’s
perpetual existence. After consummation of a Business Combination,
these voting safeguards will no longer be applicable.
With
respect to a Business Combination which is approved and consummated, any Public
Stockholder who voted against the Business Combination may demand that the
Company convert his or her shares. The per share conversion price
will equal the amount in the Trust Account, calculated as of two business days
prior to the consummation of the proposed Business Combination, divided by the
number of shares of common stock held by Public Stockholders at the consummation
of the offering. Accordingly, Public Stockholders holding 12,419,999
shares sold in the Offering may seek conversion of their shares in the event of
a Business Combination. Such Public Stockholders are entitled to
receive their per share interest in the Trust Account computed without regard to
the shares of common stock held by the Founders prior to the consummation of the
Offering. Accordingly, a portion of the net proceeds from the
Offering (29.99% of the amount held in Trust Fund, including the deferred
portion of the Underwriters’ discount and commission) has been classified as
common stock subject to possible conversion on the accompanying December 31,
2007 balance sheet.
The
Company’s Certificate of Incorporation provides that the Company will continue
in existence only until 24 months from the Effective Date of the
Offering. If the Company has not completed a Business Combination by
such date, its corporate existence will cease and it will dissolve and liquidate
for the purposes of winding up its affairs. In the event of
liquidation, it is likely that the per share value of the residual assets
remaining available for distribution (including Trust Fund assets) will be less
than initial public offering price per share in the Offering (assuming no value
is attributed to the Warrants contained in the Units to be offered in the
Offering discussed in Note 3).
2. Summary
of Significant Accounting Policies
Income taxes—Deferred income
taxes are provided for the differences between bases of assets and liabilities
for financial reporting and income tax purposes. A valuation is
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
Cash and Cash Equivalents—The
carrying amount approximates the fair value. Cash equivalents consist
of highly liquid commercial paper investments that have a maturity of less than
three months. The Company’s cash and cash equivalents were $198,570
at December 31, 2007.
Earnings per common
share—Earnings per share is computed by dividing net income by the
weighted-average number of shares of common stock outstanding during the
period. The effect of the 41,400,000 warrants issued in connection
with the Offering and the 8,000,000 outstanding warrants issued in connection
with the Private Placement has not been considered in diluted income per share
calculations since such warrants are contingently exercisable.
Use of Estimates—The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
expenses during the reporting period. Actual results could differ
from those estimates.
Fair value of Financial
Instruments—The
following methods and assumptions are used to estimate the fair value of each
class of financial instruments for which it is practical to
estimate. The fair value of the Company’s assets and
liabilities that qualify as financial instruments under SFAS No. 107
“Disclosures about Fair Value of Financial Instrument,” approximate their
carrying amounts presented in the balance sheet at December 31,
2007. The following methods and assumptions are used to estimate the
fair value of each class of financial instruments for which it is practical to
estimate:
Investment in Treasury
Bills—This investment is considered a trading security. The
investment is carried at market value, which approximates cost plus accrued
interest.
47
Accounting Policies—In July
2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” an
interpretation of FASB Statement No. 109 (“FIN 48”), which provides criteria for
the recognition, measurement, presentation and disclosure of uncertain tax
position. A tax benefit from an uncertain position may be recognized
only if it is “more likely than not” that the position is sustainable based on
its technical merits. The provisions of FIN 48 are effective from the
Company’s inception. Since the Company is a development stage company
that has began operations in 2007, the Company has not yet filed tax returns as
of December 31, 2007.
In
December 2007, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 141R, “Business Combinations” (“SFAS 141R”)
that is effective for business combinations for which the acquisition date is on
or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. The pronouncement resulted from a joint project
between the FASB and the International Accounting Standards Board and continues
the movement toward the greater use of fair values in financial reporting. SFAS
141R is expected to significantly change how future business acquisitions are
accounted for and will impact financial statements both on the acquisition date
and in subsequent periods.
In
December 2007, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 160 “Non-controlling Interests in
Consolidated Financial Statements”( “SFAS 160”) that is effective for annual
periods beginning on or after December 15, 2008. The pronouncement resulted
from a joint project between the FASB and the International Accounting Standards
Board and continues the movement toward the greater use of fair values in
financial reporting. Upon adoption of SFAS 160, the Company will re-classify any
non-controlling interests as a component of equity.
The
Company does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
3. Initial
Public Offering
On
October 23, 2007, the Company sold 41,400,000 units (“Units”) in the Offering at
a price of $10 per unit. Each Unit consists of one share of the
Company’s common stock and one Redeemable Common Stock Purchase Warrant
(“Warrants”), including 5,400,000 units sold by the underwriters in their
exercise of the full amount of their over-allotment option. Each
Warrant will entitle the holder to purchase from the Company one share of common
stock at an exercise price of $7.50 commencing the later of the completion of a
Business Combination and 12 months from the effective date of the Offering and
expiring four years from the effective date of the Offering. The
Company may redeem all of the Warrants, at a price of $.01 per Warrant upon 30
days’ notice while the Warrants are exercisable, only in the event that the last
sale price of the common stock is a least $14.25 per share for any 20 trading
days within a 30 trading day period ending on the third day prior to the date on
which notice of redemption is given. In accordance with the warrant
agreement relating to the warrants sold and issued in the Offering, the Company
is only required to use its best efforts to maintain the effectiveness of the
registration statement covering the Warrants. The Company will not be
obligated to deliver securities, and there are no contractual penalties for
failure to deliver securities, if a registration statement is not effective at
the time of exercise. Additionally, in the event that a registration
is not effective at the time of exercise, the holder of such Warrant shall not
be entitled to exercise such Warrant and in no event (whether in the case of a
registration statement not being effective or otherwise) will the Company be
required to net cash settle the warrant exercise. Consequently, the
Warrants may expire unexercised and unredeemed.
In
connection with the Offering, the Company paid Banc of America Securities LLC,
the underwriter of the Offering and underwriting discount of 7% of the gross
proceeds of the Offering, of which 3.5% of the gross proceeds ($14,490,000) will
be held in the Trust Account and payable only upon the consummation of a
Business Combination and have waived their right to receive such payment upon
the Company’s liquidation if it is unable to complete a Business
Combination.
Simultaneously
with the consummation of the offering, the Company’s Sponsor purchased 8,000,000
warrants (“Private Placement Warrants”) at a purchase price of $1.00 per
warrant, in a private placement. The proceeds of $8,000,000 were
placed in the Trust Account. The Private Placement Warrants are
identical to the Warrants underlying the units sold in the Offering except that
the Private Placement Warrants will be exercisable on
48
a
cashless basis as long as they are still held by the initial
purchasers. The purchasers have agreed that the Private Placement
Warrants will not be sold or transferred by them until after the completion of a
Business Combination. The purchase price of the Private Placement
Warrants approximates the fair value of such warrants.
Our
Sponsor will be entitled to make up to three demands that we register the
10,350,000 shares of common stock (the “Founder’s shares”), the 8,000,000
Private Placement warrants and the shares for which they are exercisable, and
the 2,000,000 co-investment shares and the 2,000,000 co-investment warrants
(described in Note 5) and the shares of common stock for which they are
exercisable, pursuant to an agreement signed prior to the Effective
Date. Our Sponsor may elect to exercise its registration rights at
any time beginning on the date three months prior to the expiration of the
applicable transfer restrictions. The restricted transfer period for
the shares and the co-investment shares of common stock expires on the date that
is one year after the consummation of the initial Business Combination, and the
restricted transfer period for the Private Placement Warrants and the shares for
which they are exercisable expires on the consummation of our initial Business
Combination. Our directors will have “piggy-back” registration rights
with respect to the shares of common stock that they own prior to the completion
of this offering, subject to the same limitations with respect to the transfer
restriction period. In addition, our Sponsor and our directors each
have certain “piggy-back” registration rights with respect to the shares held by
them on registration statements filed by us on or subsequent to the expiration
of the applicable transfer restriction period and unlimited registration rights
with respect to a registration statement on Form S-3. We will bear
the expenses incurred in connection with the filing of any registration
statement. Pursuant to the registration rights agreement, our Sponsor
and our executive officers and directors will waive any claims to monetary
damages for any failure by us to comply with the requirements of the
registration rights agreement.
4.
Notes Payable to Affiliate
The
Company issued an aggregate $200,000 unsecured promissory note to NRDC Capital
Management, LLC on July 13, 2007. The note was non-interest
bearing and was payable on the earlier of the consummation of the offering by
the Company or July 13, 2009. The Company repaid the notes in
full on October 23, 2007.
5. Commitments
The
Company has agreed to pay up to $7,500 a month in total for office space and
general and administrative services to NRDC Capital Management,
LLC. Services commenced on the effective date of the offering,
October 17, 2007 and will terminate upon the earlier of (i) the completion of
the Business Combination, or (ii) the Company’s liquidation. For the
period ended December 31, 2007, the Company has incurred $16,451 of expense
relating to this agreement which is included in general/administrative services
in the accompanying Statement of Income.
NRDC
Capital Management, LLC has agreed to purchase from the Company an aggregate of
2,000,000 of its units at a price of $10.00 per unit for an aggregate purchase
price of $20,000,000 in a transaction that will occur immediately prior to the
consummation of our initial Business Combination (the
“Co-Investment”). Each unit will consist of one share of common stock
and one warrant.
These
co-investment units will be identical to the units sold in the Offering except
that the common stock and the warrants included in the co-investment units, and
the common stock issuable upon exercise of those warrants, with certain limited
exceptions, may not be transferred or sold for one year after the consummation
of our initial business combination. Additionally, the warrants included in the
co-investment units are (1) exercisable only after the date on which the last
sales price of our common stock on the American Stock Exchange, or other
national securities exchange on which our common stock may be traded, equals or
exceeds $14.25 per share for any 20 trading days within any 30-trading-day
period beginning at least 90 calendar days after the consummation of our initial
business combination, (2) exercisable on a cashless basis so long as they are
held by the original purchaser or its permitted transferees and (3) not subject
to redemption by us.
Pursuant
to letter agreements our sponsor and directors have waived their right to
receive distributions with respect to their founding shares upon the Company’s
liquidation.
49
The
Sponsor will be entitled to registration rights with respect to their founding
shares or Private Placement Warrants (or underlying securities) pursuant to an
agreement signed prior to the Effective Date of the Offering.
6.
Income Taxes
The
components of the provision for income taxes are as follows:
|
For
the period from
|
||||
|
July
10, 2007 (inception) to
|
||||
|
December
31, 2007
|
||||
|
Current:
|
||||
|
Federal
|
$ | 1,026,445 | ||
|
State
|
285,144 | |||
|
Deferred:
|
||||
|
Federal
|
(133,069 | ) | ||
|
State
|
- | |||
|
Total
provision for income taxes
|
$ | 1,178,520 | ||
The
components of the deferred tax asset are as follows:
|
For
the period from
|
||||
|
July
10, 2007 (inception)to
|
||||
|
December
31, 2007
|
||||
|
Expenses
deferred for income tax purposes
|
155,377 | |||
|
Valuation
allowance
|
(22,308 | ) | ||
|
Deferred
Tax asset
|
133,069 | |||
The
Company has recorded a valuation allowance against the state deferred tax asset
since it cannot determine realizability for tax purposes and therefore cannot
conclude that the deferred tax asset is more likely than not recoverable at this
time.
The
Company’s effective tax rate differs from the effective tax rate of 34%
principally due to the following:
|
For
the period from
|
||||
|
July
10, 2007 (inception) to
|
||||
|
December
31, 2007
|
||||
|
Federal
statutory rate
|
34.0 | % | ||
|
State
|
5.70 | % | ||
|
Valuation
allowance
|
0.8 | % | ||
| 40.5 | % | |||
7. Preferred
Stock
The
Company is authorized to issue 5,000 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.
50
8.
Common Stock
At
December 31, 2007, the Company had 106,000,000 shares of authorized common stock
with 51,750,000 issued and outstanding. Included in shares issued and
outstanding were 12,419,999 shares which are subject to possible
conversion.
On
September 4, 2007, the Company’s Board of Directors authorized a 6 for 5 stock
split with respect to all outstanding shares of the Company’s common stock. On
October 17, 2007, the Company’s Board of Directors authorized an additional 6
for 5 stock split with respect to all outstanding shares of the Company’s common
stock. On September 4, 2007, the Company’s Certificate of Incorporation was
amended to increase the authorized shares of common stock from 70,000,000 to
106,000,000 shares of common stock. All references in the accompanying financial
statements to the number of shares of stock have been retroactively restated to
reflect these transactions.
51
Item
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
At
December 31, 2007, there were no changes in or disagreements with accountants on
accounting and financial disclosure to be discussed.
Item
9A. Controls and Procedures
As of the
end of the period covered by this annual report on Form 10-K, our chief
executive officer and chief financial officer conducted an evaluation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) of the
Securities Exchange Act). Based upon this evaluation, our chief
executive officer and chief financial officer concluded that our disclosure
controls and procedures are effective in timely alerting them of any material
information relating to us that is required to be disclosed by us in the reports
we file or submit under the Securities Exchange Act.
Item
9B. Internal Control Over Financial Reporting
This
annual report does not include a report of our management’s assessment regarding
internal control over financial reporting or an attestation report of our
registered public accounting firm due to a transition period established by
rules of the SEC for newly public companies.
During
the period covered by this report, there have been no significant changes in our
internal control over financial reporting (as defined in Rule 13-15(f) of
the Securities Exchange Act) that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
52
PART
III
Item
10. Directors,
Executive Officers and Corporate Governance
Our
current directors and executive officers are as follows:
|
Name
|
Age
|
Position
|
||
|
William
L. Mack
|
68
|
Chairman
of the Board
|
||
|
Robert
C. Baker
|
73
|
Vice–Chairman
of the Board
|
||
|
Richard
A. Baker
|
42
|
Chief
Executive Officer and Director
|
||
|
Lee
S. Neibart
|
57
|
President
and Director
|
||
|
Michael
J. Indiveri
|
55
|
Director
|
||
|
Edward
H. Meyer
|
81
|
Director
|
||
|
Laura
H. Pomerantz
|
60
|
Director
|
||
|
Vincent
S. Tese
|
65
|
Director
|
||
|
Ronald
W. Tysoe
|
55
|
Director
|
Below is
a summary of the business experience of each of our executive officers and
directors.
William L. Mack — Chairman.
Mr. Mack is a founder of NRDC Real Estate Advisors, LLC and NRDC Equity
Partners. He is also a founder and Senior Partner of Apollo Real
Estate Advisors since its inception in 1993 and the President of the corporate
general partners of the Apollo real estate funds. Since 1993, Apollo
has overseen the investment of 16 real estate funds and numerous joint ventures,
through which it has invested over $7 billion in more than 350
transactions. The Apollo real estate funds target a broad range of
opportunistic, value-added and debt investments in real estate assets and
portfolios throughout the United States, Europe and
Asia. Mr. Mack is also a Senior Partner of the Mack
Organization, a national owner of industrial buildings and other
income-producing real estate investments. Mr. Mack serves as
non-executive Chairman of the Board of Directors of Mack-Cali Realty
Corporation, a publicly traded real estate investment trust. He has
been a Director of Mack-Cali since the 1997 merger of the Mack Organization’s
office portfolio into Mack-Cali. Mr. Mack also serves as Vice
Chairman of the Board of Trustees of the University of Pennsylvania, as an
Overseer of the Wharton School of Business, as Vice Chairman of the Board and as
an Executive Committee Member of the North Shore Long Island Jewish Health
System and as the Chairman of the Solomon R. Guggenheim
Foundation. Mr. Mack attended the University of Pennsylvania’s
Wharton School of Business and received a B.S. in Business Administration from
the New York University School of Business.
Robert C. Baker —
Vice-Chairman. Mr. Baker is a founder of NRDC Real Estate Advisors,
LLC and NRDC Equity Partners. He is also the Chairman and CEO of
National Realty & Development Corporation and has been since its founding in
1978. National Realty & Development Corporation has amassed a
real estate portfolio in excess of 18 million square feet, which includes
shopping centers, corporate business centers and residential communities in 20
states. The company’s tenants include prominent retailers such as
Wal-Mart, Kohl’s, Lowe’s, Toys ‘R Us, The Home Depot, Sears, Staples, Supervalu,
and T.J. Maxx, among others. National Realty & Development
Corporation remains one of the largest privately owned development companies in
the United States. Mr. Baker has over 46 years experience in
land acquisition, construction, financing and
management. Mr. Baker is a graduate of Yale University and Yale
Law School. He has recently funded the Dean’s Discretionary Fund at
Yale Law School and is a member of the Yale Law School Executive
Committee. Mr. Baker is a Trustee of the Guggenheim Museum and
is a member of the Executive Committee and the Real Estate and Development
Committee. Mr. Baker is also a member of the Board of Directors
of Johns Hopkins Medicine. Mr. Robert Baker is the father of
Mr. Richard Baker, our Chief Executive Officer.
Richard A. Baker — Chief Executive
Officer. Mr. Baker is a founder and President and Chief Executive
Officer of NRDC Real Estate Advisors, LLC and NRDC Equity
Partners. Mr. Baker is also vice chairman of National Realty
& Development Corporation, a privately owned real estate development company
owned by him and Mr. Robert Baker. Mr. Baker is Chairman of
Lord & Taylor Holdings, LLC, and a director of the Hudson’s Bay Company and
Brunswick School. Mr. Baker is a graduate of Cornell University
and serves on the Dean’s Advisory Board of the hotel and real estate
program. Mr. Richard Baker is the son of Mr. Robert Baker,
our Vice-Chairman.
53
Lee S. Neibart — President.
Mr. Neibart is a founder of NRDC Real Estate Advisors, LLC and NRDC Equity
Partners. He has been a Senior Partner of Apollo Real Estate Advisors
since 1993. Mr. Neibart oversees the global day-to-day
activities of Apollo Real Estate Advisors, including portfolio company and fund
management, strategic planning and new business development. From
1989 to 1993, most recently as Executive Vice President and Chief Operating
Officer, Mr. Neibart worked at the Robert Martin Company, a real estate
development and management firm. Mr. Neibart is a director of
Linens ‘N Things. Mr. Neibart serves on the Advisory Boards of
both The Enterprise Foundation and The Real Estate Institute of New York
University. He is a past President of the New York Chapter of the
National Association of Industrial and Office Parks. Mr. Neibart
graduated with a B.A. from the University of Wisconsin and an M.B.A. from New
York University.
Michael J. Indiveri —
Director. Michael J. Indiveri currently serves as Chief Financial Officer
of Amalgamated Bank in New York. From 1997 until July 2007,
Mr. Indiveri served as the Executive Vice President & Chief Financial
Officer of City & Suburban Federal Savings Bank, where he was also a
director. Mr. Indiveri served as Senior Vice President &
Chief Financial Officer of New York Federal Savings Bank from 1994 to
1997. Mr. Indiveri received a B.A. in Political Science from
Rutgers University and an M.B.A. from Fordham University.
Edward H. Meyer — Director.
Edward H. Meyer was Chairman and CEO of the advertising firm Grey Global Group
from 1970 until 2006. Prior to becoming Chairman, he was President of
Grey from 1968 until 1970. Prior to Grey, he was an associate at
Bloomingdales. He also served as a director of the May Department
Stores for 17 years. Since leaving Grey in 2006, Mr. Meyer has
acted as a director for a number of companies. He is currently on the
board of Ethan Allen Inc., the Jim Pattison Group, National Cinemedia, LLC, and
Harman International Industries, Inc. Mr. Meyer serves as Treasurer and
Trustee of the Solomon R. Guggenheim Museum and as a Trustee of the New York
University Medical Center. Mr. Meyer received a B.A. in
Economics from Cornell University.
Laura H. Pomerantz —
Director. Laura Pomerantz is a Principal at PBS Realty Advisors LLC.
Prior to joining PBS in 2001, Ms. Pomerantz was a Senior Managing Director
at Newmark & Company Real Estate. Prior to joining Newmark in
1996, Ms. Pomerantz was Executive Managing Director of S.L. Green and prior
to that she was the Executive Vice President of The Leslie Fay Companies, Inc.,
having responsibility for supervising several of its upscale fashion
divisions. She was with Leslie Fay for over 18 years and served on
the company’s Board of Directors. Ms. Pomerantz is a member of
the Carnegie Hall Board of Trustees. She graduated from Miami Dade
Community College.
Vincent S. Tese — Director.
Mr. Tese co-founded Cross Country Cable, Inc. in 1976 and served as its
Chairman until its sale to Pacific Telesis in 1995. Since 1995,
Mr. Tese has been managing personal investments. Mr. Tese
served as New York State Superintendent of Banks from 1983 to 1985, Chairman and
Chief Executive Officer of the Urban Development Corporation from 1985 to 1994,
director of economic development for New York State from 1987 to 1994 and
Commissioner and Vice Chairman of the Port Authority of New York and New Jersey
from 1991 to 1995. Mr. Tese also served as a partner in the law
firm of Tese & Tese, a partner in the Sinclair Group, a commodities trading
and investment management company, and a co-founder of Cross Country Cable TV.
Mr. Tese is a director of The Bear Stearns Companies, Inc., Bowne and
Company, Inc., Cablevision, Inc., Intercontinental Exchange, Inc. and Mack-Cali
Realty Corporation. In addition, he is Trustee of New York University
School of Law and The New York Presbyterian Hospital. Mr. Tese
received a B.S. in Accounting from Pace University and received a J.D. from
Brooklyn Law School and an L.L.M. in Taxation from New York
University School of Law.
Ronald W. Tysoe — Director.
Mr. Tysoe was a Senior Advisor at Perella Weinberg Partners LP, a boutique
investment banking firm, from October 2006 until September
2007. Prior to that he was Vice Chairman of Federated Department
Stores, Inc., a position he held since April of 1990. Mr. Tysoe
served as Chief Financial Officer of Federated from 1990 to 1997 and served on
the Federated board of directors from 1988 until May
2005. Mr. Tysoe is currently a member of the board of directors
of E.W. Scripps Company, Canadian Imperial Bank of Commerce, Taubman Centers,
Inc. and Cintas Corporation. Mr. Tysoe received both his
Bachelor of Commerce and Bachelor of Law degrees at the University of British
Columbia.
54
Information
Concerning the Audit Committee
Our board
of directors has an Audit Committee that reports to the board of
directors. Michael J. Indiveri, Vincent S. Tese and Ronald W. Tysoe
serve as members of our Audit Committee. Under the American Stock
Exchange listing standards and applicable SEC rules, we are required to have
three members of the Audit Committee, all of whom must be
independent. All of the members of our Audit Committee are
independent.
Michael
J. Indiveri, serves as the Chairman of the Audit Committee. Each
member of the Audit Committee is financially literate and our board of directors
has determined that Michael J. Indiveri qualifies as an “audit committee
financial expert” as defined in applicable SEC rules.
The Audit
Committee is responsible for:
|
|
•
|
meeting
with our independent accountants regarding, among other issues, audits,
and adequacy of our accounting and control
systems;
|
|
|
•
|
monitoring
the independence of the independent
auditor;
|
|
|
•
|
verifying
the rotation of the lead (or coordinating) audit partner having primary
responsibility for the audit and the audit partner responsible for
reviewing the audit as required by
law;
|
|
|
•
|
inquiring
and discussing with management our compliance with applicable laws and
regulations;
|
|
|
•
|
pre-approving
all audit services and permitted non-audit services to be performed by our
independent auditor, including the fees and terms of the services to be
performed;
|
|
|
•
|
appointing
or replacing the independent
auditor;
|
|
|
•
|
determining
the compensation and oversight of the work of the independent auditor
(including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose of
preparing or issuing an audit report or related
work;
|
|
|
•
|
establishing
procedures for the receipt, retention and treatment of complaints received
by us regarding accounting, internal accounting controls or reports which
raise material issues regarding our financial statements or accounting
policies;
|
|
|
•
|
monitoring
compliance on a quarterly basis with the terms of the Offering and, if any
noncompliance is identified, immediately taking all action necessary to
rectify such noncompliance or otherwise causing compliance with the terms
of the Offering; and
|
|
|
•
|
reviewing
and approving all payments made to our existing stockholders, sponsors,
officers or directors and their respective affiliates, other than a
payment of an aggregate of $7,500 per month to our sponsor for office
space and administrative services. Any payments made to members
of our Audit Committee will be reviewed and approved by our board of
directors, with the interested director or directors abstaining from such
review and approval.
|
Compensation
Committee
Our board
of directors has a Compensation Committee that reports to the board of
directors. Edward H. Meyer, Laura Pomerantz and Ronald W. Tysoe, each
of whom is “independent” as defined in the rules of the American Stock Exchange
and the SEC, serve as members of our Compensation Committee. Ronald
W. Tysoe serves as the Chairman of the Compensation Committee. The
functions of our Compensation Committee include:
|
|
•
|
Establishing
overall employee compensation policies and recommending to our board of
directors major compensation
programs;
|
55
|
|
•
|
Subsequent
to our consummation of a Business Combination, reviewing and approving the
compensation of our officers and directors, including salary and bonus
awards;
|
|
|
•
|
Administering
our various employee benefit, pension and equity incentive
programs;
|
|
|
•
|
Reviewing
officer and director indemnification and insurance matters;
and
|
|
|
•
|
Following
the completion of the Offering, preparing an annual report on executive
compensation for inclusion in our proxy
statement.
|
Governance
and Nominating Committee
We do not
currently have a Governance and Nominating Committee. The independent
members of our board of directors perform the functions of a Governance and
Nominating Committee.
Item
11. Executive
Compensation
No
compensation of any kind, including finder’s and consulting fees, will be paid
to any of our executive officers, directors, or existing stockholders, or any of
their respective affiliates (except as otherwise set forth in this prospectus),
for services rendered prior to or in connection with an initial Business
Combination. However, our executive officers and directors will be
reimbursed for any out-of-pocket expenses incurred in connection with activities
on our behalf, such as attending board of directors meetings, participating in
the offering process, identifying potential target businesses and performing due
diligence on suitable Business Combinations. There is no limit on the
amount of out-of-pocket expenses reimbursable by us and there will be no review
of the reasonableness of the expenses by anyone other than our board of
directors, which includes persons who may seek reimbursement, or a court of
competent jurisdiction if such reimbursement is challenged. To the
extent such out-of-pocket expenses exceed the available proceeds not deposited
in the Trust Account, such out-of-pocket expenses would not be reimbursed by us
unless we consummate an initial Business Combination.
In
addition, our current executive officers and directors may or may not remain
with us following an initial Business Combination, depending on the type of
business acquired and the industry in which the target business
operates. If they do remain with our company, we may enter into
employment or other compensation arrangements with them following an initial
Business Combination, the terms of which have not yet been
determined. We cannot assure you that our current executive officers
and directors will be retained in any significant role, or at all, and have no
ability to determine what remuneration, if any, will be paid to them if they are
retained following an initial Business Combination.
Code
of Ethics
We have
adopted a Code of Ethics that applies to our officers, directors and
employees. We have filed a copy of our Code of Ethics as an exhibit
to the registration statement of which this prospectus is a part. You
will be able to review this document by accessing our public filings at the
SEC’s web site at www.sec.gov. In addition, a copy of the Code of
Ethics will be provided without charge upon request from us. We
intend to disclose any amendments to or waivers of certain provisions of our
Code of Ethics in a Form 8-K.
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
The
following table sets forth information regarding the beneficial ownership of our
common stock as of December 31, 2007, by each of our directors and
executive officers, all of our directors and executive officers as a group and
other persons who beneficially own 5% or more of our outstanding common
stock. Unless otherwise indicated, we believe that all persons named
in the table have sole voting and investment power with respect to all shares of
common stock beneficially owned by them.
56
This
information is reported in accordance with the beneficial ownership rules of the
SEC under which a person is deemed to be the beneficial owner of a security if
that person has or shares voting power or investment power with respect to such
security or has the right to acquire such ownership within 60
days. Shares of common stock which an individual or group has a right
to acquire within 60 days pursuant to the exercise or conversion of options,
warrants or other similar convertible or derivative securities are deemed to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person shown in the
table.
|
Name
and Address of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership
|
Percent
of Class
|
||||||
|
William
L. Mack
|
10,125,000 | 19.57 | % | |||||
|
Robert
C. Baker
|
10,125,000 | 19.57 | % | |||||
|
Richard
A. Baker
|
10,125,000 | 19.57 | % | |||||
|
Lee
S. Neibart
|
10,125,000 | 19.57 | % | |||||
|
Michael
J. Indiveri
|
45,000 | .09 | % | |||||
|
Edward
H. Meyer
|
45,000 | .09 | % | |||||
|
Laura
H. Pomerantz
|
45,000 | .09 | % | |||||
|
Vincent
S. Tese
|
45,000 | .09 | % | |||||
|
Ronald
W. Tysoe
|
45,000 | .09 | % | |||||
|
All
directors and officers as a group (9 individuals)
|
10,350,000 | 20.00 | % | |||||
|
QVT
Financial
|
3,314,867 | 6.41 | % | |||||
|
Glenhill
Advisors, LLC
|
3,000,000 | 5.80 | % | |||||
|
Baupost
Group
|
2,700,000 | 5.22 | % | |||||
Securities Authorized for
Issuance Under Equity Compensation Plans
We
currently do not have any equity compensation plans.
Item
13. Certain
Relationships and Related Transactions, and Director Independence
On
October 23, 2007, we consummated a private placement of 8,000,000 warrants
with NRDC Capital Management, LLC, an entity owned and controlled by the
executive officers of the Company, and our initial public offering of 41,400,000
units, including 5,400,000 units pursuant to the underwriters’ over-allotment
option. We received net proceeds of approximately $384,000,000 and
also received $8,000,000 of proceeds from the private placement sale of
8,000,000 insider warrants to NRDC Capital Management, LLC.
These
co-investment units are identical to the units sold in the offering except that
the common stock and the warrants included in the co-investment units, and the
common stock issuable upon exercise of those warrants, with certain limited
exceptions, may not be transferred or sold for one year after the consummation
of our initial Business Combination and those warrants may be exercised after
that date only if the last sales price of our common stock on the American Stock
Exchange, or other national securities exchange on which our common stock may be
traded, equals or exceeds $11.50 per share for any 20 trading days within a
30-trading-day period and that the warrants included therein will be exercisable
on a cashless basis so long as they are held by the original purchaser or its
permitted transferees.
The
warrants will expire at 5:00 p.m., New York City time, on October 17,
2011 or earlier upon redemption of the warrants by us.
We also
pay NRDC Capital Management, LLC a monthly fee of $7,500 for general and
administrative services, including office space, utilities, and secretarial
support.
57
Other
than the $7,500 administrative services arrangement for services rendered to us,
no compensation of any kind, including finder’s and consulting fees, will be
paid to any of our executive officers, directors, or existing stockholders or
any of their respective affiliates prior to or in connection with the initial
business combination. However, our executive officers and directors
will receive reimbursement for any out-of-pocket expenses incurred by them in
connection with activities on our behalf, such as identifying potential target
businesses, and performing due diligence on suitable business
combinations. For the fiscal year ended December 31, 2007,
approximately $3,000 in out-of-pocket expenses were incurred by our executive
officers and directors, which expenses are expected to be reimbursed in the
coming fiscal year. Although our executive officers currently intend
to continue to be involved in the management of the combined company after our
initial business combination, because the role of our current executive officers
and directors after an initial business combination is uncertain, we have no
current ability to determine what remuneration, if any, will be paid to current
officers and directors after an initial business combination.
All
ongoing and future transactions between us and any of our officers and directors
or their respective affiliates, will be on terms no less favorable to us than
could be obtained from independent parties and will require prior approval by
the Audit Committee and by a majority of the independent directors who do not
have an interest in the transaction. In addition, we have
agreed to obtain an opinion from an independent investment banking firm
regarding the fairness to our stockholders from a financial point of view of a
business combination with one or more businesses affiliated with our existing
stockholders, or our current executive officers and directors.
Director
Independence
The
American Stock Exchange listing standards require that a majority of our board
of directors be independent. Our board of directors has determined
that Michael J. Indiveri, Edward H. Meyer, Laura Pomerantz, Vincent Tese and
Ronald W. Tysoe are “independent directors” as defined in the American Stock
Exchange listing standards and applicable SEC rules. Our independent
directors will have regularly scheduled meetings at which only independent
directors are present.
Item
14. Principal
Accountant Fees and Services
As
previously disclosed in our December 13, 2007 8-K filing, certain partners of
Goldstein Golub Kessler LLP (GGK) became partners of McGladrey & Pullen, LLP
(M&P). As a result, GGK resigned as auditors of the Company effective
December 10, 2007 and M&P was appointed as our independent registered public
accounting firm for the year ended December 31, 2007. M&P and RSM
McGladrey, Inc. (RSM), an affiliate of M&P and GGK, have billed and
anticipate billing the Company as follows for the year ended December 31,
2007.
|
Fee
Category
|
|
|
Audit
fees – McGladrey & Pullen, LLP
|
$25,000
|
|
Audit
Fees – Goldstein Golub Kessler LLP
|
$55,500
|
|
Other
fees- RSM McGladrey, Inc.
|
$26,000
|
Audit
Fees
Audit
fees consist of fees for professional services rendered for the audit of the
Company's financial statements for the year ended December 31, 2007 and review
of the interim financial statements included in our quarterly report on form
10-Q for the period ended September 30, 2007 and services rendered in connection
with our registration statement on form S-1.
Audit-Related
Fees
We did
not incur any audit-related fees with M&P or GGK for the year ended December
31, 2007.
58
Tax
fees
We did
not incur any tax-related fees with RSM for the year ended December 31, 2007.
All
Other Fees
For the
year ended December 31, 2007, RSM provided due diligence services relating to a
potential acquisition target.
Pre-Approval of
Services
Upon the
completion of the Offering and the effectiveness of our registration statement
in connection therewith, and on a going-forward basis, in accordance with
Section 10A(i) of the Securities Exchange Act of 1934, before we engage our
independent accountant to render audit and non-audit services, the engagement
has been and will be approved by our audit committee. Prior to such
time, our board of directors, as a whole, functioned as our audit
committee.
Item
15. Exhibits
and Financial Statement Schedules
|
1. Financial
Statements
|
Page
|
|
Index
to Financial Statements
|
40
|
|
Report
of Independent Registered Public Accounting Firm
|
41
|
|
Balance
Sheet at December 31, 2007
|
42
|
|
Statement
of Operations for the period ended December 31, 2007
|
43
|
|
Statement
of Stockholders’ Equity for the period ended December 31,
2007
|
44
|
|
Statement
of Cash Flows for the period ended December 31, 2007
|
45
|
|
Notes
to Financial Statements
|
46
|
|
2. Financial
Statement Schedules
|
|
|
None
|
|
|
3. Exhibits
|
|
|
Exhibit No.
|
Description
|
||
|
1.1
|
Form
of Underwriting Agreement(2)
|
||
|
3.1
|
Second
Amended & Restated Certificate of Incorporation(3)
|
||
|
3.2
|
By-Laws(4)
|
||
|
4.1
|
Specimen
Unit Certificate(2)
|
||
|
4.2
|
Specimen
Common Stock Certificate(3)
|
||
|
4.3
|
Specimen
Warrant Certificate(2)
|
||
|
4.4
|
Form
of Warrant Agreement between Continental Stock Transfer &
Trust Company and NRDC Acquisition Corp.(2)
|
||
|
5.1
|
Opinion
of Sidley Austin LLP(2)
|
||
|
10.1
|
Letter
Agreement among NRDC Acquisition Corp., Banc of America Securities LLC and
NRDC Capital Management, LLC(2)
|
||
|
10.2
|
Letter
Agreement among NRDC Acquisition Corp., Banc of America Securities LLC and
William L. Mack(1)
|
||
|
10.3
|
Letter
Agreement among NRDC Acquisition Corp., Banc of America Securities LLC and
Robert C. Baker(1)
|
||
|
10.4
|
Letter
Agreement among NRDC Acquisition Corp., Banc of America Securities LLC and
Richard A. Baker(1)
|
||
|
10.5
|
Letter
Agreement among NRDC Acquisition Corp., Banc of America Securities LLC and
Lee S. Neibart(1)
|
||
|
10.6
|
Letter
Agreement among NRDC Acquisition Corp., Banc of America Securities LLC and
Michael J. Indiveri(2)
|
||
|
10.7
|
Letter
Agreement among NRDC Acquisition Corp., Banc of America Securities LLC and
Edward H. Meyer(2)
|
||
59
|
10.8
|
Letter
Agreement among NRDC Acquisition Corp., Banc of America Securities LLC and
Laura Pomerantz(2)
|
||
|
10.9
|
Letter
Agreement among NRDC Acquisition Corp., Banc of America Securities LLC and
Vincent Tese(2)
|
||
|
10.10
|
Letter
Agreement among NRDC Acquisition Corp., Banc of America Securities LLC and
Ronald W. Tysoe(2)
|
||
|
10.11
|
Form
of Investment Management Trust Agreement between Continental Stock
Transfer & Trust Company and NRDC Acquisition Corp.(1)
|
||
|
10.12
|
Form
of Letter Agreement between NRDC Capital Management, LLC and NRDC
Acquisition Corp. regarding office space and administrative services(3)
|
||
|
10.13
|
Promissory
Note issued by NRDC Acquisition Corp. to NRDC Capital Management, LLC(4)
|
||
|
10.14
|
Form
of Registration Rights Agreement between NRDC Acquisition Corp. and NRDC
Capital Management, LLC(2)
|
||
|
10.15
|
Subscription
Agreement between NRDC Acquisition Corp. and NRDC Capital Management,
LLC(4)
|
||
|
10.16
|
Private
Placement Warrant Purchase Agreement between NRDC Acquisition Corp. and
NRDC Capital Management, LLC(1)
|
||
|
10.17
|
Form
of Right of First Offer Agreement among NRDC Acquisition Corp. and NRDC
Capital Management, LLC, NRDC Real Estate Advisors, LLC, NRDC Equity
Partners, William L. Mack, Robert C. Baker, Richard A. Baker, Lee S.
Neibart, Michael J. Indiveri, Edward H. Meyer, Laura Pomerantz, Vincent
Tese and Ronald W. Tysoe(2)
|
||
|
10.18
|
Co-investment
Agreement between NRDC Acquisition Corp. and NRDC Capital Management,
LLC(1)
|
||
|
10.19
|
Letter
Agreement between NRDC Acquisition Corp. and Apollo Real Estate
Advisors(1)
|
||
|
14
|
Code
of Ethics(3)
|
||
|
23.1
|
Consent
of Goldstein Golub Kessler LLP(1)
|
||
|
23.2
|
Consent
of Sidley Austin LLP (included in Exhibit 5.1)(2)
|
||
|
99.1
|
Audit
Committee Charter(3)
|
||
|
99.2
|
Nominating
Committee Charter(3)
|
___________________
|
(1)
|
Incorporated
by reference to NRDC Acquisition Corp.’s registration statement on
Form S-1/A filed on October 17, 2007) (File No.
333-144871).
|
|
(2)
|
Incorporated
by reference to NRDC Acquisition Corp.’s registration statement on
Form S-1/A filed on September 9, 2007 (File
No. 333-144871).
|
|
(3)
|
Incorporated
by reference to NRDC Acquisition Corp.’s registration statement on
Form S-1/A filed on September 9, 2007 (File
No. 333-144871).
|
|
(4)
|
Incorporated
by reference to NRDC Acquisition Corp.’s registration statement on
Form S-1 filed on July 26, 2007 (File
No. 333-144871).
|
60
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized
| NRDC ACQUISITION CORP. | |||
|
Date:
April 4, 2008
|
By:
|
/s/ Richard A. Baker | |
|
Richard
A. Baker
|
|||
|
Chief
Executive Officer
|
|||
| (Principal Financial Officer) | |||
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons in the capacities and on the dates
indicated. This document may be executed by the signatories hereto on
any number of counterparts, all of which shall constitute one and the same
instrument.
|
Signature
|
Title
|
Date
|
||
|
/s/
Richard A. Baker
|
Chief
Executive Officer
|
April 4,
2008
|
||
|
Richard
A. Baker
|
(Principal
Financial Officer)
|
|||
|
/s/
William L. Mack
|
Chairman
of the Board
|
April 4,
2008
|
||
|
William
L. Mack
|
||||
|
/s/
Robert C. Baker
|
Vice–Chairman
of the Board
|
April 4,
2008
|
||
|
Robert
C. Baker
|
||||
|
/s/
Lee S. Neibart
|
President
and Director
|
April 4,
2008
|
||
|
Lee
S. Neibart
|
||||
|
/s/
Michael J. Indiveri
|
Director
|
April 4,
2008
|
||
|
Michael
J. Indiveri
|
||||
|
/s/
Edward H. Meyer
|
Director
|
April 4,
2008
|
||
|
Edward
H. Meyer
|
||||
|
/s/
Laura Pomerantz
|
Director
|
April 4,
2008
|
||
|
Laura
Pomerantz
|
||||
|
/s/
Vincent Tese
|
Director
|
April 4,
2008
|
||
|
Vincent
Tese
|
||||
|
/s/
Ronald W. Tysoe
|
Director
|
April 4,
2008
|
||
|
Ronald
W. Tysoe
|
61