The Staccato Acquisition and Symphony Acquisition offerings include some significant new twists.
1) Prior to the consummation of a business combination, the company can use trust account funds to purchase and cancel up to 15% of the shares that were originally sold in the offering at prices that do not exceed the per-share amount held in the trust account.
2) The insiders are precluded from entering into any transaction for the purpose of inducing a public stockholder to vote for approval of a proposed transaction. The insiders can still purchase shares on the open market.
3) No shareholder (and its affiliates) will be allowed to exercise conversion rights for more than 10% of the shares sold in the offering, though they will still be allowed to vote against a transaction.
4) In the event that public shareholders holding more than 35% of the shares sold in the offering either sell their shares back to the company prior to the vote on the proposed transaction or exercise their conversion rights, the insiders shall return shares to the company so that they do own more than 27.78% of the pre-acquisition shares.
From the S-1s:
Permitted purchases of shares and restrictions on certain transactions
Prior to the consummation of a business combination, there can be released to us from the trust account amounts necessary to purchase up to 15% of the shares sold in this offering (918,750 shares, or 1,056,562 shares if the over-allotment option is exercised in full) at any time commencing after the filing of a preliminary proxy statement for our initial business combination and ending on the date immediately prior to the vote held to approve such business combination. Purchases will be made only at times when we are not in possession of any material non-public information. It is intended that purchases will comply with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, at prices not to exceed the per-share amount then held in trust (initially $7.72 per share). All shares purchased by us will be immediately cancelled.
Because public stockholders have the right to seek conversion of their shares if they are unhappy with a proposed transaction (as described below), such stockholders would be entitled to receive a pro rata share of the funds held in our trust account upon consummation of the transaction. However, such a stockholder would have to wait until the proposed business combination is voted upon in order to receive his share of the funds in the trust account, and then he would only be able to receive such amount if the proposed business combination was actually consummated. Alternatively, such a stockholder could seek to sell his shares in the open market prior to the consummation of a proposed business combination. As a result, we have agreed to purchase such shares at prices not to exceed the per-share amount then held in trust thereby providing a readily available market for a public stockholder wishing to sell his shares. At the same time, by agreeing to pay no more than the per-share amount then held in trust for such shares, the resulting per-share conversion or liquidation price for all of our other public stockholders increases (or at worst, remains constant) because we may have paid less to the selling stockholder than we would have had to pay had such stockholder sought conversion. The foregoing may have the effect of making it easier for us to complete our initial business combination.
We and our initial stockholders, including our officers and directors, have also agreed not to enter into any type of transaction the purpose of which is to induce a public stockholder to vote for approval of our initial business combination (including payments of money, transfers of securities or purchases of securities). This agreement, however, will not restrict our ability to purchase our securities as described above or our initial stockholders from purchasing our securities at prices not to exceed then prevailing market prices.
Conversion rights for stockholders voting to reject a business combination
<snip>
The conversion threshold will remain at 40% even if we purchase shares of common stock in the open market after the filing of the preliminary proxy statement for our initial business combination as described above. As a result, the 40% threshold will effectively represent a greater number of shares that may seek conversion to the extent we make any such purchases. The foregoing may have the effect of making it easier for us to complete our initial business combination.
Notwithstanding the foregoing, a public stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) will be restricted from seeking conversion rights with respect to 10% or more of the shares sold in this offering. Such a public stockholder would still be entitled to vote against a proposed business combination with respect to all shares owned by him or his affiliates. We believe this restriction will prevent stockholders from accumulating large blocks of stock before the vote held to approve a proposed business combination and attempt to use the conversion right as a means to force us or our management to purchase their stock at a significant premium to the then current market price. By limiting a stockholder’s ability to convert only 10% of the shares sold in this offering, we believe we have limited the ability of a small group of stockholders to unreasonably attempt to block a transaction which is favored by our other public stockholders. However, we are not restricting the stockholders’ ability to vote all of their shares against the transaction.
We view the right to seek conversion as an obligation to our stockholders and will not take any action to amend or waive this provision in our amended and restated certificate of incorporation. Our initial stockholders will not have such conversion rights with respect to any shares of common stock owned by them, directly or indirectly, whether included in or underlying their initial shares or purchased by them in this offering or in the aftermarket.
Public stockholders who convert their stock into their share of the trust account will continue to have the right to exercise any warrants they may hold.
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 business combination and the business combination is approved and completed. Additionally, we may require public stockholders, whether they are a record holder or hold their shares in “street name,” to either tender their certificates to our transfer agent at any time through the vote on the business combination or to deliver their shares to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker $35 and it would be up to the broker whether or not to pass this cost on to the converting holder.
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 through 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 can be accomplished by the stockholder, whether or not he is a record holder or his shares are held in “street name,” in a matter of hours by simply 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 an average investor.
Any request for conversion, once made, may be withdrawn at any time up to the vote on the business combination. Furthermore, if a stockholder delivered his certificate for conversion and subsequently decided prior to the meeting not to elect conversion, he may simply request that the transfer agent return the certificate (physically or electronically).
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 until 24 months from the consummation of this offering (or 30 months from the consummation of this offering if the extension criteria described elsewhere in this prospectus have been satisfied). If an 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 into 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 deliver their certificates prior to the meeting, we will promptly return such certificates to the public stockholder.
Also:
Additionally, a portion of the initial units will be forfeited by our initial stockholders and returned to us for cancellation if more than a total of 35% of the shares sold in this offering (2,143,750 shares, or 2,465,312 shares if the over-allotment option is exercised in full) are either (i) purchased by us prior to the consummation of a business combination as described above or (ii) voted by the holders of such shares against a proposed business combination with a corresponding exercise of conversion rights and such business combination is consummated so that the initial stockholders will collectively own no more than 27.78% of our outstanding shares of common stock upon consummation of such business combination (without giving effect to any shares that may be issued in the business combination). |
