This letter agreement (this "Agreement") by and among 10X Capital Venture Acquisition Corp. II (the "Company") and 10X Capital SPAC Sponsor II LLC (the "Sponsor"), dated as of the date hereof, will confirm our agreement that, commencing on the date the securities of the Company are first listed on The Nasdaq Capital Market (the . The warrant agreement provides that the terms of the public warrants generally can be amended with the approval of holders of 50% of the public warrants. If the SPAC is affiliated with a private equity group, the IPO prospectus will typically include disclosure indicating that members of the SPAC management team are employed by the private equity group, which is continuously made aware of potential business opportunities, one or more of which the SPAC may desire to pursue for a business combination. However, if additional public shares or equity-linked securities (defined as securities of the SPAC or its subsidiaries that are convertible into or exchangeable for equity of the SPAC) are issued in connection with the closing of the de-SPAC transaction (excluding shares and equity-linked securities issued to the seller of the target business), the exchange ratio upon which the founder shares convert to public shares will be adjusted to gross the founder shares up to 20% of the total founder shares and public shares and equity-linked securities outstanding. The SPAC and the sponsor enter into an agreement pursuant to which the sponsor purchases the founder warrants. The SPAC also enters into an investment management trust agreement with a trustee, which governs the investment and release of the funds held in the trust account after the IPO. If the SPAC had a target in mind, the SEC would require disclosure of the name of the target and information (financial and otherwise) about the target. com currently does not have any sponsors for you. The purchase price paid by the sponsor for the founder warrants represents the at risk capital of the sponsor in the SPAC and is calculated as an amount equal to the upfront underwriting discount (typically 2% of the gross IPO proceeds) plus typically $2 million to cover offering expenses and post-IPO working capital. (go back), Posted by Ramey Layne and Brenda Lenahan, Vinson & Elkins LLP, on, The audited financial statements of the target business in the proxy statement or tender offer materials may be audited under the American Institute of Certified Public Accountants rules, but the, Harvard Law School Forum on Corporate Governance, on Special Purpose Acquisition Companies: An Introduction, Three Years of Audited Financial Statements, Quantitative and Qualitative Disclosures About Market Risk, Director and Executive Officer Biographical Information, Security Ownership of 5% Owners, Directors and Executive Officers, Description of the Registrants Securities. (See below.) ] The SEC sometimes describes SPACs as blank check companies. Blank check companies are development stage companies that have indicated that their business plan is to engage in a merger or acquisition with an unidentified company or companies and that are issuing penny stock under Rule 3a-51 of the Exchange Act. After a record-smashing 2021, 2022 will be remembered as the year of diminished dealmaking. After an acquisition, a SPAC is usually listed on one of the major stock exchanges. Stock exchange rules permit a period as long as three years, but most SPACs designate 24 months from the IPO closing as the period. If the SPAC needs additional capital to pursue the business combination or pay its other expenses, the sponsor may loan additional funds to the SPAC. In most cases, a vote of the shareholders of the SPAC will be solicited to approve the business combination transaction with the target. A SPAC is formed by a group of sponsors, often well-known investors, private equity firms or venture capitalists. In a number of recent SPAC IPOs, affiliates of the sponsor or institutional investors have entered into a forward purchase agreement with the SPAC, committing to purchase equity (stock or units) in connection with the De-SPAC transaction to the extent the additional funds are necessary to complete the transaction. In addition, SPACs generally have a window of approximately two years or less to find a suitable acquisition target, which can increase competition and drive up the values being offered to target companies. Unlike the public warrants, which are registered in the IPO, the private placement warrants are restricted securities. Once a SPAC has completed its IPO, the sponsor will begin its search for an operating entity to combine with the SPAC. As a practical matter, SPACs typically target business combination targets that are at least two to three times the size of the SPAC in order to mitigate the dilutive impact of the 20% founder shares. (The common percentage is 20%, while SPACs set up by Shanda Consult provide the sponsors with 25% founder shares.) After the de-SPAC, the capital structure from the perspective of the target equity holders will oftentimes be similar to what it would have been had the target conducted an IPO. However, the excess of the FMV of the warrant over its exercise price generally is taxable income to the sponsor at the time the warrant becomes transferable or is not subject to a substantial risk of forfeiture (generally when the warrant is exercised). Both the Up-C and Up-SPAC structures allow the target to remain in pass-through entity form while also providing the target owners with easier access to future liquidity. LLC, a global public speaking coaching company. focuses on legal issues of interest to M&A practitioners for private and closely held companies, providing explanation, analysis and practical application on timely topics. SPAC represents and warrants to Company Holder that this Agreement is in substantially the same form and substance (including with respect to the types and percentage of holdings of securities subject to this Agreement, the time periods for the transfer restrictions, and carve-outs from the transfer restrictions, which shall in each case be Early decision applications rose 9 percent to 4,399. . If the business combination transaction closes, investors choosing to remain with their investment will enjoy potential upside both in their shares and their warrants. The target entity that can be a party to a traditional de-SPAC transaction reorganization is normally an S corporation or a C corporation. 139. Ramey Layne and Brenda Lenahanare partners at Vinson & Elkins LLP. In those cases, the sponsor purchases founder warrants at a price of $1.50, $1.00 or $0.50 per warrant, depending on whether the public warrants are exercisable for 1/3, 1/2 or 1 share, respectively. Mallard Point Bulldogs. In many SPAC structures, the founder shares automatically convert into public shares [4] at the time of the de-SPAC transaction on a one-for-one basis. The sponsors are generally granted an initial, separate class of founders shares for a nominal cost, which normally convert to public shares on the completion of the de-SPAC transaction. The SPAC sponsors typically get about a 20% stake in the final, merged company. SPAC SPONSOR, LLC is a Delaware Limited-Liability Company filed on June 13, 2016. The equity holders of the target will typically roll most, or even all, of their equity in the target into the surviving company in the de-SPAC transaction. Additionally, the Sponsor had an incentive to minimize redemptions to "ensure greater certainty" that the SPAC could satisfy a closing condition to the merger agreement that at least $50 million be released to the combined company from the trust account at closing. The retail investor also holds warrants. These shares generally auto-convert into common shares at the completion of a business combination. Many contain features to automatically extend the period if a definitive agreement or letter of intent is signed by the end of the specified period or upon contribution of additional capital into the trust account by the sponsor. Under interim IRS guidance on new Section 4501 stock repurchase excise tax, U.S. Subsidiaries of foreign-parented groups could be subjected to the excise tax under a "per se" rule. Formed by individuals with experience and reputations to allow them to identify and acquire one or more target businesses that will ultimately be successful public company/s. Maverick Transportation is an outstanding company as recognized in 2018 and 2019 by receiving the honor of being one of the "Best Fleets To Drive. With nearly 400 US Veterans and Patriots, our mission is to deliver the highest quality, most 900 Broadway Street, San Antonio, TX 78215. SPAC . As described below, the De-SPAC transaction will require a proxy statement meeting the requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), or tender offer materials containing substantially the same information. Newcourt SPAC Sponsor LLC ("Sponsor") Sponsor is organized under the laws of the State of Delaware. On any device & OS. The timing of the issuance of the founders shares should be carefully planned to avoid undesirable tax consequences for the sponsors. The PCAOB rules require that the auditor be registered with the PCAOB, meet qualification standards and be independent of the audited company and require a lower threshold for materiality. In most instances, a SPAC will not hold a public election for directors until the De-SPAC transaction or thereafter, and some SPACs provide that only the founder shares vote in director elections until the De-SPAC transaction. Prior to consummation of a business combination, after the public shares and the public warrants separate, investors will have separate liquidity opportunities in their public shares and their public warrants. 3. This post is based on a Vinson and Elkins publication by Mr. Layne, Ms.Lenahan,Terry Bokosha, Mariam Boxwala, and Zach Swartz. SEC rules require that SPACs file a special Form 8-K within four business days following completion of a De-SPAC transaction. These White Rino shells are part of the Exacta Target line of ammunition. IPO proceeds are placed in a trust that earns interest. The process can take three to five months from the date the business combination agreement is signed to complete, but in most cases is still shorter than the corresponding review of an IPO registration statement. With proper planning, SPACs can make the process of going public faster and easier than the traditional IPO route as well as provide other benefits for the acquired company and investors. Special Purpose Acquisition Companies (SPACs) are companies formed to raise capital in an initial public offering (IPO) with the purpose of using the proceeds to acquire one or more unspecified businesses or assets to be identified after the IPO. The sponsors investment in the private placement warrants is referred to as at-risk capital because if the SPAC does not complete a business combination, the amount of the at-risk capital will be lost. SPAC Warrants and 8 Frequently Asked Questions. Try Now! To the extent that any of the SPACs contacts and documents do not terminate at the De-SPAC transaction by their terms, they are often amended in connection with the De-SPAC transaction. However, SPAC sponsors also have a deadline by which they have to find a suitable deal, typically within. If the public warrants are exercisable and the public shares trade above a fixed price (usually $18.00 per share) for a period of time, the public warrants will become redeemable by the company for nominal consideration, effectively forcing holders of the public warrants to exercise or lose the value of the warrants. They do, however, disclose the industry or geographic focus of the target business(es) they will pursue and the experience of their management in the relevant industry. If any party, affiliated or unaffiliated with the registrant, has approached you with a possible candidate or candidates, then so disclose or advise the staff. However, the transaction will need to be structured in a manner so that the SPAC does not become an investment company under the Investment Company Act of 1940. For federal income tax purposes, the warrants received are treated as investment warrants as long as the issuance of the warrants is not dependent on the sponsors employment status or in exchange for services provided as an employee of the SPAC. Management teams need to plan ahead and be prepared for the financial reporting and SEC filing . As a result, at least 20% of the SPACs outstanding shares will be committed to vote in favor of a transaction, requiring only 37.5% of the public shares to achieve a majority vote and approve the transaction. From the beginning of 2014 through November 30, 2017, almost 80 SPAC IPOs have closed, raising approximately $19 billion in gross proceeds. While the staff of the SEC is reviewing and providing its initial comments on the registration statement, the sponsor selects its underwriter, its management team and board members, and investors in the at-risk capital. In a de-SPAC transaction, price is determined early on through negotiation. As a result, the SEC comments are usually few and not particularly cumbersome. Board of Directors Declared Total Dividends of $0.66 per Share for First Quarter 2023. A sponsor creates a SPAC with a goal of $250 million in capital, investing roughly $6 million to $8 million to cover administrative costs that include underwriting, attorney, and due diligence. In a remarkable departure from the 20% promote model, the sponsor (Pershing Square TH Sponsor, LLC) of a recent SPAC (Pershing Square Tontine Holdings, Ltd.) has not taken any founder shares. The de-SPAC transaction is generally structured to be tax-free to the target shareholders, provided the merger meets the statutory requirements needed to qualify as a tax-free reorganization for federal income tax purposes. In return, the parties would receive 200,000 sponsor shares if Some, like the certificate of incorporation and registration rights agreement, have analogs in traditional IPOs of operating companies, while others are unique to SPACs. The features of the SPAC world described in this primer give some insight into why this may be so. The absence of any promote in the Pershing The criteria that will inform the search include: For founders or investors in a pre-IPO company, an initial public offering has traditionally been regarded as one exit strategy of choice. The public warrants compensate the IPO investors for investing in a blind pool. Although SPACs can provide advantages over other deal structures, the SPAC IPO process and the de-SPAC transaction are highly regulated and complex transactions that require intensive planning and preparation. The remaining ~80% interest is held by public shareholders through "units" offered in an IPO of the SPAC's shares. Pricing is complete once agreements are executed for the business combination transaction and the PIPE, which can occur within four to six weeks after signing of a letter of intent. SPAC IPO. After the sponsors disgorged the profitspurportedly in response to plaintiffs' demand lettersplaintiffs . In Calenture, LLC v. Eos Energy Enterprises, Inc., shareholders of a post-merger SPAC alleged that the SPAC sponsors had realized over $430,000 in short-swing profits from a series of trades that straddled the de-SPAC transaction. For one, the target equity holders will suffer a measure of dilution on account of the founder shares and private placement warrants in the surviving company held by the sponsor and any PIPE investors, and on account of the warrants issued to the SPAC IPO investors. The sponsor and the SPACs officers and directors will waive redemption rights with respect to their founder shares (and any public shares they may purchase) in connection with the De-SPAC transaction or a charter amendment to permit an extended period to consummate the De-SPAC transaction, effectively agreeing to stay invested in the SPAC through the closing of the De-SPAC transaction or until liquidation. If the business combination is approved by the shareholders (if required) and the financing and other conditions specified in the acquisition agreement are satisfied, the business combination will be consummated (referred to as the De-SPAC transaction), and the SPAC and the target business will combine into a publicly traded operating company. SPAC sponsors and insiders ("initial shareholders") typically purchase an initial stake of "founder shares" in the company for a nominal amount before the IPO. Once the SPAC is public, the SPAC must identify potential acquisition targets, undertake due diligence, and complete the acquisition (known as the de-SPAC transaction) on terms that will maximize the sponsors return on investment. Only after pricing is determined does the SPAC file a proxy or registration statement and undergo SEC review with respect to the target company information. These funds are used solely to acquire an operating company, referred to as a target, in a business combination transaction. Of the sponsor capital, the initial underwriting fees of 2% of the SPAC and the costs of the IPO will be deducted at the closing of the IPO. There is no maximum size of transaction for the De-SPAC transaction. In 2006, Google moved into about 300,000 square feet (27,900 m 2) of office space at 111 Eighth Avenue in Manhattan, New York City. SPACs are required to have a majority of independent board members under stock exchange listing requirements, subject to the same phase-in exceptions as are applicable to all newly public companies. A de-SPAC transaction will ordinarily take less time overall to consummate than an IPO. the SPAC's merger agreement with Perella Weinberg.10 The plaintiff shareholders argued that FinTech's . The sponsor of the SPAC will purchase warrants in an amount equal to the 2.0% upfront underwriting discount of the IPO (see below), plus funds to cover the offering expenses and expenses to find a target, with the aggregate price of the purchased warrants in most recent deals hovering between 2.3% to 3.0% of the gross IPO proceeds. In part, this is attributable to the SEC staffs typically lengthy review of an IPO registration statement. Sponsors may reduce their exposure by having institutional investors purchase a portion of the at-risk capital. Who should lead the charge? Some of these restrictions were adopted by the SEC in 2005 in response to the perceived use of certain shell companies as vehicles to commit fraud and abuse the SECs regulatory processes. Aria, a portfolio company of funds managed by the Infrastructure and Power strategy of Ares Management Corp (NYSE: ARES) ("Ares"), is being acquired for $680 million and brings a comprehensive. Post-closing, the surviving company will file with the SEC a Super 8-K, to put into the public record any information that was not contained in the proxy statement but that is required to allow affiliates to sell their shares under Rule 144. Securely download your document with other editable templates, any time, with PDFfiller. 1NYSE and NASDAQ listing requirements would permit an amount less than 100% of the gross IPO proceeds to be funded into the trust account, but market practice is to fund 100% or more so that, when the SPAC liquidates or conducts redemption offers, the public shareholders should receive at least $10.00 for each public share purchased. To attract capital, the sponsor must be a sophisticated and experienced investor that is well known in private equity circles and the financial markets. This results in the founder shares equaling 20% of the total shares outstanding after completion of the IPO, including any exercise or expiration of the green shoe. This primer provides you with an introduction to SPACs. Since a SPAC is not operating a business, the SEC staff review can be more streamlined, and the SPACs registration statement will take considerably less time than an operating companys registration statement to be declared effective. In addition, stockholders of former SPACs are required to hold their equity for a period of twelve months, measured from the date of the filing of the Super 8-K, before they can rely on Rule 144 under the Securities Act. Rushing through the process without the right expertise can put a successful outcome at risk, not to mention loss of funding and reputation of the sponsors. By electing to use a basis step-up adjustment mechanism and a tax receivable agreement, the partners are paid for a portion of the public companys tax benefits in the form of an earnout. A sponsor will want to select lead underwriters with experience in SPACs. As is typical in PIPE transactions, the SPAC agrees to register for resale the SPAC securities acquired in the PIPE by the investors. A SPAC can provide several benefits for target companies, including: The SPAC approach to an IPO takes much less time to complete as compared to a traditional IPO, therefore the amount of time needed to work with investment bankers, attorneys and other professionals to take a company public is potentially reduced.
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