. 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 Public Broadcasting Service (PBS) is an American public broadcaster and non-commercial, free-to-air television network based in Arlington, Virginia.PBS is a publicly funded nonprofit organization and the most prominent provider of educational [citation needed] programming to public television stations in the United States, distributing shows such as Frontline, Nova, PBS NewsHour, Arthur . Some, like the certificate of incorporation and registration rights agreement, have analogs in traditional IPOs of operating companies, while others are unique to SPACs. These requirements include: In addition, the merger must meet certain continuity of shareholder interest, continuity of business enterprise and business purpose requirements. If the business combination transaction closes, investors choosing to remain with their investment will enjoy potential upside both in their shares and their warrants. Both the Nasdaq and the NYSE require as well that independent directors comprise a majority of the board, and that the SPAC have an audit committee and compensation committee made up of independent directors. 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. SPACs cannot identify acquisition targets prior to the closing of 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. In essence, the IPO registration statement is mostly boilerplate language plus director and officer biographies. 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. These follow-on equity raises customarily take the form of a forward purchase agreement or a PIPE commitment. 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. The necessary audit or reaudit of the target companys financial statements is thus often a gating item for the De-SPAC transaction, and if the financial statements are not auditable, the target business is not suitable for a SPAC acquisition. Nary a day goes by when we do not get an inquiry about SPACs. 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. (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. For that amount, the sponsor purchases founder warrants at a price of $1.50, $1.00 or $0.50 per warrant, depending on whether each unit sold in the IPO includes 1/3, 1/2 or 1 public warrant, respectively. The merger generally needs to happen within 18-24 months of the IPO. 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. These shares generally auto-convert into common shares at the completion of a business combination. The promissory note covers any organizational or offering expenses until the SPAC can repay the loan from the proceeds of the IPO and sale of the founder warrants at the closing of the IPO. Read about the challenges and opportunities that could lie ahead. ClearThink Capital's experience and expertise in SPACs spans three . (The common percentage is 20%, while SPACs set up by Shanda Consult provide the sponsors with 25% founder shares.) SPAC formation and funding. 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. The retail investor also holds warrants. Exhibit 10.16 . Finally, SPACs typically enter into agreements with their directors and officers to provide them with contractual indemnification in addition to the indemnification provided for in the charter. Much of the information in the Super 8-K will already have been included in the SPACs proxy statement or tender offer materials for the De-SPAC transaction, but the Super 8-K may require additional financial statement information for the target business. There is also inherent uncertainty as a result of the SPAC investors' redemption rights, which could result in the surviving company having insufficient cash to fund its operational needs of the surviving company or a shortfall in the cash consideration, if any, owed to the selling stockholders. Depending on the timing of the transaction, the proxy statement or tender offer materials are required to include two or three years of audited [9] financial statements of the target business, plus unaudited interim financial statements. This primer provides you with an introduction to SPACs. [5] In addition to the founder warrants purchased at IPO, most SPACs contemplate that an additional $1.5 million of warrants can be issued to the sponsor at the De-SPAC transaction on conversion of any loans from the sponsor to the SPAC. Please note that, in particular, we are not seeking simply whether a potential business combination candidate has been selected but, rather, are looking more to the type, nature and results to date of any and all diligence, discussions, negotiations and/or other similar activities undertaken, whether directly by the registrant or an affiliate thereof, or by an unrelated third party, with respect to a business combination transaction involving the registrant. The units sold to the public typically include a fraction of a warrant to purchase a whole share, while the sponsor purchases whole warrants. If the target holders cash out a portion of their equity in the de-SPAC transaction, this would be the equivalent of a secondary offering in conjunction with an IPO. SPACs intending to seek an offshore target are organized mainly in the Cayman Islands, although a few SPACs have been formed in the British Virgin Islands and the Marshall Islands. We have not, nor has anyone on our behalf, taken any measure, directly or indirectly, to identify or locate any suitable acquisition candidate for us, nor have we engaged or retained any agent or other representative to identify or locate any such acquisition candidate., We have not (nor have any of our agents or affiliates) been approached by any candidates (or representatives of any candidates) with respect to a possible acquisition transaction with us.. 4. PIPE transactions have ranged from $100 million to billions of dollars, and are funded at the closing of the business combination with the target. Responsible for the coordination and execution of observational or non-interventional research studies (including Post Authorization studies), in compliance with Good Pharmacoepidemiology Practice (GPP) and Standard Operating Procedures (SOPs). The time horizon for a typical de-SPAC transaction is three to four months, while a traditional IPO often requires six to nine months from commencement to completion. Under the Up-C/Up-SPAC structures, either a C corporation or a SPAC raises funds through an IPO, which are then used to acquire an interest in the target partnership. The sponsor will typically purchase founder shares prior to the SPAC IPO filing. As is typical in PIPE transactions, the SPAC agrees to register for resale the SPAC securities acquired in the PIPE by the investors. The redemption offer does not apply to the public warrantsthey remain outstanding regardless of whether the originally associated public share is redeemed or not, until they are exercised or otherwise cancelled or exchanged pursuant to their terms or a vote. The target stockholders rights to seek monetary damages for breaches by the SPAC or any financing failures are limited. The SPAC sponsors (or founders) are responsible for forming the SPAC entity, raising capital with investment groups, and taking the SPAC public. There is no maximum size of transaction for the De-SPAC transaction. Unlike the public shares, the founder shares are subject to contractual transfer restrictions, and their resale would either need to be registered under the Securities Act or be made in reliance on an exemption from registration. 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. In the current market environment, SPAC sponsorship represents an unprecedented opportunity for a qualified sponsor team to access capital and engage in the acquisition of established companies in the sector or sectors in which the sponsor team has expertise and experience. Contract Type . Who should lead the charge? Sponsors and their investors get the opportunity to invest in a growth stage company or other attractive target, carefully selected to match their investment criteria, with substantial upside opportunity. Try Now! Google signed an agreement with an Iowa wind farm to buy 114 megawatts of power for 20 years. Partner, National Corporate Tax and Mergers & Acquisitions Technical Practice Leader, Managing Director, National Corporate Tax and Mergers & Acquisitions, Business Restructuring & Turnaround Services, Total Tax Transparency & ESG Tax Strategy, Financial Institutions & Specialty Finance, Important Tax Issues When Navigating a SPAC Transaction, BDO Knows SPACs: Tax Treatment of SPAC Founders Shares, Special Purpose Acquisition Companies Resources page, Do Not Sell My Personal Information as to BDO Investigative Due Diligence, Strategic partners and management expertise; and. In addition to the contracts and documents described above, the SPAC also adopts bylaws in connection with its formation, which are relatively standardized among Delaware SPACs and contain customary provisions for a publicly traded Delaware corporation. The timing of the issuance of the founders shares should be carefully planned to avoid undesirable tax consequences for the sponsors. However, most will not be prohibited from pursuing businesses or assets in any industry sector or geography. Unlike the public warrants, which are registered in the IPO, the private placement warrants are restricted securities. On June 21, 2002, upon completion of claimant's orientation, he signed and dated an agreement entitled "MAVERICK TRANSPORTATION, INC. Maverick Transportation Orientation. 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. 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. In addition, each SPAC's warrant agreement amendment thresholds may vary. The proceeds of the forward purchase arrangement and/or the PIPE transaction are used to finance a portion of the purchase price for the business combination, meet minimum cash conditions required to consummate the business combination (including by compensating for redemptions of public shares by exiting investors) and fund the working capital needs of the surviving entity. Following the IPO, the units become separable, such that the public can trade units, shares, or whole warrants, with each security separately listed on a securities exchange. On any device & OS. Partners that materially participate in the business can avoid the net investment income tax on the exchange of their partnership interest for the publicly traded shares. For example, the warrant agreement can be amended by a vote of the warrant holders, the registration rights agreement can be superseded by a stockholders agreement, charters and bylaws are often amended, etc. The sponsor team will consist of the sponsor, a management team and the directors of the SPAC. 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. 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. 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. [10] SEC regulations prohibit or limit the use by shell companies (SPACs) and former shell companies (former SPACs) of a number of exemptions, safe harbors and forms that are available for other registrants. Learn more. 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. SPAC sponsors and insiders ("initial shareholders") typically purchase an initial stake of "founder shares" in the company for a nominal amount before the IPO. The sponsor will be looking to the underwriters to fill their book with investors who have a long-term investment horizon and/or a strong interest in the industry in which the sponsor will seek a target. 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. SPACs, as registrants with assets consisting solely of cash and cash equivalents, are shell companies under the Securities Act of 1933, as amended (the Securities Act), and forms and regulations thereunder. Accordingly, SPACs expressly state in their registration statements that they have not identified a target. 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. All organizational and offering expenses are paid by the SPAC from proceeds of the IPO and sale of the founder shares and founder warrants. Read about their experiences and a few lessons learned along the way. Effectively, if the De-SPAC transaction never occurs, the public shareholders get their money back and the public warrants, founder shares and founder warrants expire without value. The per unit purchase price is almost always $10.00. 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. From the beginning of 2014 through November 30, 2017, almost 80 SPAC IPOs have closed, raising approximately $19 billion in gross proceeds. Additionally, the IPO prospectus will typically include a statement that the SPAC will not consider a business combination with any company that has already been identified to the private equity group as a suitable acquisition candidate. Attorney advertising. The SPAC and the transfer agent will enter into a warrant agreement that specifies the terms of the warrants. This SPONSOR FORFEITURE AGREEMENT (this "Agreement") is made and entered into as of August 15, 2022, by and among Founder SPAC, a Cayman Islands exempted company ("Founder"), Founder SPAC Sponsor LLC, a Delaware limited liability company ("Sponsor"), and Rubicon Technologies, LLC, a . The founder shares are sometimes. The offerings of the founder warrants and the shares issuable upon exercise of the public warrants and founder warrants are not registered at the time of the IPO, but are typically subject to a registration rights agreement entered into at the time of the IPO that entitles the holders of these securities to certain demand and piggyback registration rights after the De-SPAC transaction. The warrants become exercisable on the later of 30 days after the consummation of the business combination or 12 months from the IPO closing, and expire five years after the business combination. 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. . In return, the investors who are party to the agreement will receive 1 million of the SPAC's sponsor shares. We do so with your approval. The restrictions apply to SPACs and former SPACs for varying periods depending on the specific rule. 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. Servicemaster Fm ApplicationAt ServiceMaster Facilities Maintenance, we provide both one-time and routine cleaning services for your commercial facility in Memphis and the surrounding . The holders of the founder shares will agree, to the extent the green shoe is not exercised in full, to forfeit a number of shares so that their number of founder shares continues to equal 25% of the number of public shares actually sold to the public. A special purpose acquisition company (SPAC) is a corporation formed for the sole purpose of raising investment capital through an initial public offering (IPO). (See KL Alert: SEC Provides Disclosure Guidance on SPAC IPO and Subsequent Business Combination Transactions (January 6, 2021).). All bids for the University of Alabama in Huntsville are handled through Vendor Registry. Office Depot #646 - 201 E Tudor Road in Anchorage, Alaska 99503: store location & hours, services, holiday hours, map, driving directions and more. We may have further comment. (go back), 9The target business financial statements must be audited for the most recent year only to the extent practicable, and earlier years need not be audited if they were not previously audited. Recognizing the potential in SPACs, private equity firms and professionals have been assuming the role of SPAC sponsors in recent years. 2023 They also limit the ability of the SPAC to utilize funds in the trust account, (excepting certain specified uses), require the SPAC to offer to redeem the public shares, and set the minimum size for the target business in a De-SPAC transaction. Importantly, a SPAC cannot have identified a target for a business combination at the time of the IPO. Such a business structure allows investors to contribute money towards a fund, which is then used to acquire one or more unspecified businesses to be identified after the IPO. 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. SPACs must meet the relevant initial listing standards of Nasdaq or the NYSE applicable to all companies, and must also comply with specific SPAC-related requirements. In its IPO, the SPAC offers units, with each unit comprising one share of common stock, typically designated as class A shares, and either a fraction of a warrant to purchase a share of common stock, or one warrant to purchase a fraction of one share of common stock. (go back), 3Occasionally, the unit includes a whole warrant to purchase a fraction of a share of common stock, rather than a fraction of a warrant. Alternatively, the types of assets the SPAC is designed to pursue may not be within the general investment mandate of an existing fund. Every corporation has a certificate of incorporation or similar constituent document (for example, Cayman Islands corporations have a hybrid charter and bylaws document titled the memorandum and articles of association). Ramey Layne and Brenda Lenahanare partners at Vinson & Elkins LLP. Analyst Report: Hyatt Hotels Corporation Hyatt is an operator of 1,162 owned (5% of total rooms) and. (go back), 7Some SPACs have shorter periods to consummate the De-SPAC transaction, with examples as short as 12 months, or more frequently 18 or 21 months. SPAC Organizational Documentation (charter, bylaws) Sponsor Constituent Documents (LLC agreement, etc.) In fact, there have been instances where a sponsor has multiple SPACs that are simultaneously seeking a business combination. 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. EisnerAmper discusses a summary of CARES Act and how self-employed individuals . A SPAC is a special purpose acquisition company that raises a pool of cash in an initial public offering, or IPO, and deposits the cash proceeds from the IPO into a trust account. However, within 52 days after the IPO, the units are severed, and the class A shares, often referred to as the public shares, and the warrants, often referred to as the public warrants, may be traded separately. The directors will be chosen on the basis of their experience in M&A transactions and deal sourcing. In a SPAC IPO, the typical discount structure is for 2% of the gross proceeds to be paid at the closing of the IPO, with another 3.5% deposited into the trust account and payable to the underwriters on closing of the De-SPAC transaction. Warrants received by sponsors that have employment arrangements with the SPAC may be treated as compensatory warrants issued for services. Further, SPACs and former SPACs (i) are not eligible to be well-known seasoned issuers until at least three years after the De-SPAC transaction, (ii) are limited in their ability to incorporate by reference information into long-form registration statements on Form S-1, and (iii) may not use the Baby Shelf Rule (which permits registrants with a public float of less than $75 million to use short-form registration statements on Form S-3 for primary offerings of their shares) for twelve months after the Super 8-K filing. 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. However, in recent years companies such as Whisker Seeker and Team Catfish have stepped up to the mark and filled a well-undeserved space the big name brands are lagging far behind. SPACs typically file as emerging growth companies, which allows for confidential submission and review of the IPO registration statement, reduces financial statement audit and disclosure requirements and offers the ability to test the waters with certain qualified investors. Often, existing investors in the SPAC will invest in the PIPE transaction, demonstrating their support for the de-SPAC business combination. Base Dividend Increased to $0.41 Per Share, Reflecting Improved Earnings Power of Fidus' Por 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. These include, for example: While a partnership target cannot be acquired by a SPAC in a tax-free reverse triangular reorganization or merger, businesses operating as partnerships that want to go public have the option of a traditional incorporation and IPO, an umbrella partnership C corporation (Up-C) structure, or an umbrella partnership SPAC (Up-SPAC) structure, all of which have their own tax consequences. SPACs have the following characteristics: 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. The sponsor is often a new limited liability company formed solely for the purpose of sponsoring the SPAC. The owners of the sponsor (e.g., a private equity fund and the independent management team of the SPAC) may document their relationship and relative participation in the SPAC, such as the relative amount of the founder warrant purchase price each will fund, and economic ownership of the founder warrants and founder shares in the constituent documents. In connection with the De-SPAC transaction, SPACs are required to offer the holders of public shares the right to redeem their public shares for a pro rata portion of the proceeds held in the trust account, which typically results in a redemption amount equal to approximately $10.00 per public share. For a SPAC IPO, the typical lock-up runs until one year from the closing of the De-SPAC transaction, subject to early termination if the common shares trade above a fixed price (usually $12.00 per share) for 20 out of 30 trading days starting 150 days after closing of the De-SPAC transaction. The answer is provided below. The founder warrants may be net settled (also referred to as a cashless exercise)meaning the holder is not required to deliver cash but is issued a number of shares of stock with a fair market value equal to the difference between the trading price of the stock and the warrant strike price. Recent SPAC IPOs suggest that sponsors are increasingly agreeing to a smaller percentage of promote. The over-allotment option in traditional IPOs (commonly referred to as a green shoe or just the shoe) typically extends for 30 days from pricing, while the option in SPAC IPOs typically extends for 45 days. Stock exchange rules permit a period as long as three years, but most SPACs designate 24 months from the IPO closing as the period. SPAC overview and lifecycle. Here is an incomplete list of SPAC sponsors: Citigroup alum Michael Klein Chinh Chu, formerly of Blackstone Group Gary Cohn, formerly of the Trump administration and Goldman Sachs Reid Hoffman,. Alternatively and/or in addition to the forward purchase arrangements, an investment bank, often another division of the IPO underwriter, acts as a placement agent in conducting a private placement of debt and/or equity securities of the SPAC in the form of a PIPE transaction. The best way to use this guide is to identify issues that may impact you, and then discuss them with your tax advisor. To this end, most SPAC IPO prospectuses contain disclosure that says that the SPAC will only complete [a] business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940. Occasionally, readers of SPAC IPO prospectuses interpret this as a maximum size for a target business of two times the size of the SPAC. In cases where the forward purchase commitment comes from a private equity fund or other investor with a limited investment mandate, it may be appropriate to condition the obligation of the investor on the De-SPAC transaction satisfying the investment mandate of the investor. Since the funds in the trust account are to be used solely to redeem the public shares, counterparties typically waive their rights to seek recourse against the trust account in the absence of a business combination closing. Directors of the SPAC are selected by the sponsor at IPO, and thereafter additional directors, if necessary, are appointed by the SPAC board. Connecting with our core purpose through a renewed lens. In part, this is attributable to the SEC staffs typically lengthy review of an IPO registration statement.