UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the
year ended December 31, 2007
Commission
File Number 001-33711
SP
Acquisition Holdings, Inc.
(Exact
name of Registrant as specified in its charter)
Delaware
(State
or other jurisdiction of incorporation)
|
|
20-8523583
(IRS
Employer Identification Number)
|
590
Madison Avenue
32nd
Floor
New
York, New York 10022
(Address
of principal executive offices)
(212)
520-2300
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
|
Name
of each exchange
on
which registered
|
|
|
Units,
each consisting of one share of Common
Stock, $0.001 par value, and one Warrant
|
American
Stock Exchange
|
Common
Stock included in the Units
|
American
Stock Exchange
|
Warrants
included in the Units
|
American
Stock Exchange
|
Securities
registered pursuant to Section 12(g) of the Act:
None
(Title
of
class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act.
Yes
¨
No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes
¨
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
¨
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 the registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of
this
Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
See
definition of “accelerated filer,” “large accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
¨
Large accelerated filer
|
¨
Accelerated filer
|
x Non-accelerated
filer
|
¨
Smaller reporting company
|
Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Act).
Yes
x No
¨
The
aggregate market value of the voting common stock held by non-affiliates of
the
registrant computed by reference to the closing sales price for the registrant’s
common stock on March 19, 2008, as reported on the American Stock Exchange
was
approximately $398,264,320. (The registrant became subject to the reporting
requirements of the Exchange Act in October 2007 and, therefore, is not able
to
provide information about the market value as of the end of the second quarter
of 2007.)
In
determining the market value of the voting stock held by any non-affiliates,
shares of common stock of the registrant beneficially owned by directors,
officers and holders of more than 10% of the outstanding shares of common stock
of the registrant have been excluded. This determination of affiliate status
is
not necessarily a conclusive determination for other purposes.
The
number of shares of common stock outstanding as of March 25, 2008 was
54,112,000.
Forward-Looking
Statements
This
report, and the information incorporated by reference in it, include
“forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934,
as amended (the “Exchange Act”). Our forward-looking statements include, but are
not limited to, statements regarding our expectations, hopes, beliefs,
intentions or strategies regarding the future. In addition, any statements
that
refer to projections, forecasts or other characterizations of future events
or
circumstances, including any underlying assumptions, are forward-looking
statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,”
“expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,”
“project,” “should,” “would” and similar expressions may identify
forward-looking statements, but the absence of these words does not mean that
a
statement is not forward-looking. Forward-looking statements in this report
may
include, for example, statements about our:
|
·
|
ability
to complete a combination with one or more target
businesses;
|
|
·
|
success
in retaining or recruiting, or changes required in, our management
or
directors following a business
combination;
|
|
·
|
potential
inability to obtain additional financing to complete a business
combination;
|
|
·
|
limited
pool of prospective target
businesses;
|
|
·
|
potential
change in control if we acquire one or more target businesses for
stock;
|
|
·
|
public
securities’ limited liquidity and
trading;
|
|
·
|
failure
to list or the delisting of our securities from the American Stock
Exchange or an inability to have our securities listed on the American
Stock Exchange following a business
combination;
|
|
·
|
use
of proceeds not in trust or available to us from interest income
on the
trust account balance; or
|
The
forward-looking statements contained or incorporated by reference in this report
are based on our current expectations and beliefs concerning future developments
and their potential effects on us and speak only as of the date of such
statement. There can be no assurance that future developments affecting us
will
be those that we have anticipated. These forward-looking statements involve
a
number of risks, uncertainties (some of which are beyond our control) or other
assumptions that may cause actual results or performance to be materially
different from those expressed or implied by these forward-looking statements.
These risks and uncertainties include, but are not limited to, those factors
described under the heading “Risk Factors.” Should one or more of these risks or
uncertainties materialize, or should any of our assumptions prove incorrect,
actual results may vary in material respects from those projected in these
forward-looking statements. We undertake no obligation to update or revise
any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required under applicable securities
laws.
References
in this report to “we,” “us” or “our company” refer to SP Acquisition Holdings,
Inc. References to “public stockholders” refer to purchasers of our securities
by persons other than our founders in, or subsequent to, our initial public
offering.
Except
as otherwise indicated herein, all unit amounts reflect dividends paid by the
company of (i) 0.15 units for each unit outstanding on August 8, 2007 and (ii)
one third of a unit for each unit outstanding on September 4,
2007.
Table
of Contents
|
|
Page
|
|
|
|
ITEM
1.
|
Business
|
1
|
ITEM
1A.
|
Risk
Factors
|
19
|
ITEM
1B.
|
Unresolved
Staff Comments
|
37
|
ITEM
2.
|
Properties
|
37
|
ITEM
3.
|
Legal
Proceedings
|
37
|
ITEM
4.
|
Submission
of Matters to a Vote of Security Holders
|
37
|
ITEM
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
38
|
ITEM
6.
|
Selected
Financial Data
|
40
|
ITEM
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
40
|
ITEM
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
42
|
ITEM
8.
|
Financial
Statements and Supplementary Data
|
43
|
ITEM
9.
|
Changes
and Disagreements with Accountants on Accounting and Financial
Disclosure
|
58
|
ITEM
9A.
|
Controls
and Procedures
|
58
|
ITEM
9B.
|
Other
Information
|
58
|
ITEM
10.
|
Directors,
Executive Officers and Corporate Governance
|
58
|
ITEM
11.
|
Executive
Compensation
|
66
|
ITEM
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
67
|
ITEM
13.
|
Certain
Relationships, Related Transactions and Director
Independence
|
71
|
ITEM
14.
|
Principal
Accounting Fees and Services
|
74
|
ITEM
15.
|
Exhibits
and Financial Statement Schedules
|
75
|
PART
I
ITEM
1. Business
General
We
are a
blank check company organized under the laws of the State of Delaware on
February 14, 2007. We were formed for the purpose of acquiring, through a
merger, capital stock exchange, asset acquisition or other similar business
combination, one or more businesses or assets, which we refer to as our “initial
business combination.” Our efforts in identifying a prospective target business
are not limited to a particular industry.
A
registration statement for our initial public offering was declared effective
on
October 10, 2007. On October 16, 2007, we sold 40,000,000 units in our initial
public offering, and on October 31, the underwriters for our initial public
offering purchased an additional 3,289,600 units pursuant to an over-allotment
option. Each unit consists of one share of common stock and one warrant. Each
warrant entitles the holder to purchase one share of our common stock at a
price
of $7.50 commencing on the later of our consummation of a business combination
or October 10, 2008, provided in each case that there is an effective
registration statement covering the shares of common stock underlying the
warrants in effect. The warrants expire on October 10, 2012, unless earlier
redeemed.
On
March
22, 2007, SP Acq LLC, which is controlled by Warren G. Lichtenstein, our
Chairman, President, and Chief Executive Officer, purchased 11,500,000 of our
units, which we refer to as founder’s units (and the shares of common stock and
warrants comprising the founder’s units are referred to founder’s shares and
initial founder’s warrants, respectively). SP Acq LLC subsequently purchased on
October 16, 2007 an aggregate of 7,000,000 warrants, which we refer to as
additional founder’s warrants, at a price of $1.00 per warrant ($7.0 million in
the aggregate) in a private placement that occurred immediately prior to our
initial public offering. In addition, Steel Partners II, L.P., an affiliate
of
SP Acq LLC, has entered into an agreement with us requiring it to purchase
3,000,000 of our units, which we refer to as the co-investment units, from
us at
a price of $10.00 per unit ($30.0 million in the aggregate) in a private
placement that will occur immediately prior to the consummation of our initial
business combination.
We
received gross proceeds of approximately $439,896,000 from our initial public
offering and sale of the additional founder’s warrants. Of those gross proceeds,
approximately $17,315,840 is attributable to the portion of the underwriters’
discount, which has been deferred until the consummation of our initial business
combination. Net proceeds of approximately $425,909,120 were deposited into
a
trust account and will be part of the funds distributed to our public
stockholders in the event we are unable to complete a business combination.
Unless and until a business combination is consummated, the proceeds held in
the
trust account will not be available to us. For a more complete discussion of
our
financial information, see the section appearing elsewhere in our Annual Report
on Form 10-K entitled “Selected Financial Data.”
Our
efforts in identifying a prospective acquisition target are not limited to
a
particular industry. Instead, we focus on industries and target businesses
in
the United States, Europe, and Asia, that may provide significant opportunity
for value creation. Our investment philosophy is based on the strategies
employed by Steel Partners, which reflect a value-orientation and investment
discipline that are the result of having investments in public and private
debt
and equity, as well as distressed debt over 17 years in a diverse range of
industries. This includes investments where Steel Partners has exercised control
over the portfolio company. Steel Partners focuses on maintaining discipline
with respect to purchase price, analyzing the business based on long-term value
creation that can be achieved, extensive business and financial analysis and
utilizing numerous resources to maximize value post-acquisition.
Similar
to those strategies employed by Steel Partners, we have identified certain
criteria and guidelines that we believe are important in evaluating prospective
target businesses. However, we may decide to enter into an initial business
combination with a target business or businesses that do not meet all of these
criteria and guidelines.
We
intend
to benefit from the investment criteria employed by Steel Partners. We seek
to
acquire established businesses that are easy to understand. Additionally, we
target businesses that we believe are fundamentally sound but potentially in
need of certain financial, operational, strategic or managerial redirection
to
maximize value. We do not intend to acquire start-up companies, companies with
speculative business plans or companies that are excessively
leveraged.
Competitive
Strengths
We
believe that we have the following competitive strengths:
Experienced
management.
Warren
G. Lichtenstein,
Co-Founder
of Steel Partners II, L.P.
|
·
|
Chairman,
President and Chief Executive Officer of SP Acquisition Holdings,
Inc.
|
|
·
|
More
than 19 years of experience investing globally in public and private
companies, including debt and equity
securities.
|
|
·
|
Co-Founded
and manages Steel Partners II, L.P., Steel Partners Japan Strategic
Fund
(Offshore), L.P., Steel Partners China Access I L.P., with more than
approximately $5.3 billion under management as of December 31,
2007.
|
|
·
|
Managing
Member of Steel Partners II GP LLC, general partner of Steel Partners
II,
L.P.
|
|
·
|
Chief
Executive Officer of Steel Partners LLC, a global investment management
firm.
|
|
·
|
Extensive
global experience serving on and leading boards of directors, including
serving in Chairman and Chief Executive Officer positions of portfolio
companies.
|
Jack
L. Howard,
Co-Founder
of Steel Partners II, L.P.
|
·
|
Chief
Operating Officer and Secretary of SP Acquisition Holdings,
Inc.
|
|
·
|
More
than 22 years of experience in sourcing, evaluating, structuring
and
managing investments.
|
|
·
|
Co-Founded
Steel Partners II, L.P.
|
|
·
|
President
of Steel Partners LLC, a global investment management
firm.
|
|
·
|
Extensive
experience serving on and leading boards of directors, including
serving
in Chairman and Chief Executive Officer positions of portfolio
companies.
|
James
R. Henderson,
Managing
Director and operating partner of Steel Partners LLC
|
·
|
Executive
Vice President of SP Acquisition Holdings,
Inc.
|
|
·
|
More
than 26 years of experience as an operating executive in various
companies, including serving in senior executive
capacities.
|
|
·
|
Extensive
experience serving on and leading boards of directors, including
serving
in Chairman and Chief Executive Officer positions of portfolio
companies.
|
Access
to Steel Partners investment platform.
The
senior investment professionals of Steel Partners have extensive experience
investing in public and private equity and debt, including distressed debt,
with
various degrees of control. Steel Partners manages approximately $5.3 billion
of
assets as of December 31, 2007. We will have access to the broad capabilities
of
Steel Partners and its professionals based in New York, Los Angeles and
London.
Deal
sourcing network.
We
believe we are well positioned to source a business combination as a result
of
our access to Steel Partners’ extensive infrastructure, which includes its
offices located in New York, Los Angeles and London and 13 investment
professionals. We intend to capitalize on the diverse deal-sourcing
opportunities that we believe Steel Partners brings to us as a result of its
investment experience, track record and extensive network of relationships
including private equity sponsors, management teams of public and private
companies, investment bankers, commercial bankers, brokers, attorneys,
accountants and investors throughout the United States, Asia and
Europe.
Disciplined
investment process.
In
identifying potential target businesses, we apply Steel Partners’ investment
process. This includes analysis of, among other things: (i) the acquisition
multiple; (ii) historic and projected financials; (iii) the key drivers of
revenues and the balance between unit volume and pricing factors; (iv) key
cost
components, including raw materials, labor, overhead, insurance, etc.; (v)
capital expenditures; (vi) working capital needs; (vii) micro and macroeconomic
trends that impact the business and the industry; (viii) the business’s products
and its sales channels; (ix) qualitative analysis of company management; (x)
the
competitive dynamics of the industry and the target company’s position; and (xi)
input from third-party consultants.
Experience
with middle market companies.
We
expect
to benefit from Steel Partners’ experience, which has historically been focused
on investments in middle market companies. We use Steel Partners’ network of
relationships including private equity sponsors, management teams of public
and
private companies, investment bankers, commercial bankers, brokers, attorneys,
accountants and investors throughout the United States, Asia and Europe to
locate potential target businesses. Through Steel Partners’ experience of
investing in numerous companies, most of which are middle-market, it has
developed an extensive network of relationships and possesses valuable insights
into industry trends.
Access
to Steel Partners’ infrastructure.
Steel
Partners’ offices in New York, Los Angeles and London have more than 25
employees, including 13 investment and operating professionals, who are
available to support our operations. Steel Partners’s finance and administration
function which addresses legal, compliance, and operational matters will also
be
available to us.
Steel
Partners Senior Management
In
addition to Messrs. Lichtenstein, Howard and Henderson, the following members
of
Steel Partners senior management are involved in helping us to source, analyze
and execute a business combination. We have no agreements or understandings
between us and Steel Partners regarding the use of Steel Partners employees
(and
we incur no additional costs with respect to the use of such employees). None
of
such employees is required to devote a specific amount of time to efforts on
our
behalf.
Sanford
Antignas,
Managing
Director, Chief Operating Officer, Secretary, and investment professional of
Steel Partners LLC—
Mr.
Antignas has been associated with Steel Partners LLC and its affiliates since
November 2006. From 1996 to February 2005 he served as a senior investment
professional of Bassini, Playfair and Associates LLC, an emerging markets
private equity firm, in various capacities where his last position was Managing
Director. While there he served as its Chief Financial Officer from 1996 to
2003
and as a director of eleven of its portfolio companies in various countries,
and
as the interim Chief Executive Officer of one such company. From 1994 to 1996,
Mr. Antignas was Director of International Investments at American International
Group Inc. and served as a Managing Director of its AIG Capital Partners
subsidiary. From 1987 to 1993, he served in various capacities with GE Capital
Corporation in its Corporate Finance Group where his last position was Vice
President. From 1983 to 1985, Mr. Antignas was with the Middle/Emerging Markets
Business Services practice at Deloitte Haskins and Sells, a public accounting
firm, and then served on the staff of its national office until 1987. Mr.
Antignas graduated from the University of California, Berkeley with a B.S.
in
Business Administration. He earned an M.B.A. from New York University. Mr.
Antignas is also a degree candidate for a Master of International Affairs from
Columbia University. He is a Certified Public Accountant.
Glen
M. Kassan,
Managing
Director and operating partner of Steel Partners LLC—
Mr.
Kassan has been associated with Steel Partners LLC and its affiliates since
August 1999. He served as the Vice President, Chief Financial Officer and
Secretary of WebFinancial Corporation, which through its operating subsidiaries,
operates niche banking markets, from June 2000 until April 2007. He has served
as a director of SL Industries, Inc., a designer and manufacturer of power
electronics, power motion equipment, power protection equipment, and
teleprotection and specialized communication equipment, since January 2002,
its
Vice Chairman since August 2005 and served as its President from February 2002
to August 2005. Mr. Kassan has served as a director of WHX Corporation, a
holding company, since July 2005 and as its Vice Chairman, Chief Executive
Officer and Secretary since October 2005. Mr. Kassan has previously served
as a
director of American Magnetics Corporation, Damon Corporation, Puroflow
Incorporated, Tandycrafts Inc., United Industrial Corporation and U.S.
Diagnostic Labs, Inc. Mr. Kassan graduated from Northeastern University with
a
B.S. in Accounting. He earned a J.D. from Brooklyn Law School and an LLM in
Taxation from New York University School of Law. Mr. Kassan is a Certified
Public Accountant.
John
McNamara,
Managing
Director-Head Capital Markets and investment professional of Steel Partners
LLC—
Mr.
McNamara has been associated with Steel Partners LLC and its affiliates since
May 2006. From 1995 to April 2006, Mr. McNamara served in various capacities
at
Imperial Capital, an investment banking firm, where his last position was
Managing Director and Partner. As a member of Imperial Capital’s Corporate
Finance Group, he provided advisory services for middle market companies in
the
areas of mergers and acquisitions, restructurings and financings. From 1988
to
1995, Mr. McNamara held various positions with Bay Banks, Inc., a commercial
bank, where he served in lending and work-out capacities. Mr. McNamara has
served as a director of WHT Corporation, a holding company, since February
2008. Mr. McNamara graduated from Ithaca College with a B.S. in
Economics.
John
J. Quicke,
Managing
Director and operating partner of Steel Partners LLC—
Mr.
Quicke has been associated with Steel Partners LLC and its affiliates since
September 2005. Mr. Quicke has served as a director of Adaptec, Inc., a storage
solutions provider, since December 2007. He has served as a director of Collins
Industries, Inc., a subsidiary of BNS Holding, Inc., a manufacturer school
buses, ambulances and terminal trucks, since October 2006. He has served as
a
director of Angelica Corporation, a provider of healthcare linen management
services, since August 2006. He has served as Chairman of the Board of NOVT
Corporation, a former developer of advanced medical treatments for coronary
and
vascular disease, from January 2008and served as President and Chief Executive
Officer of NOVT from April 2006 to November 2006. He has served as a director
of
WHX Corporation, a holding company, since July 2005 and as a Vice President
since October 2005. Mr. Quicke served as a director of Layne Christensen
Company, a provider of products and services for the water, mineral construction
and energy markets, from October 2006 to June 2007. Mr. Quicke served as a
director, President and Chief Operating Officer of Sequa Corporation, a
diversified industrial company, from 1993 to March 2004, and Vice Chairman
and
Executive Officer of Sequa from March 2004 to March 2005. As Vice Chairman
and
Executive Officer of Sequa, Mr. Quicke was responsible for the Automotive,
Metal
Coating, Specialty Chemicals, Industrial Machinery and Other Product operating
segments of the company. From March 2005 to August 2005, Mr. Quicke occasionally
served as a consultant to Steel Partners II, L.P. and explored other business
opportunities. Mr. Quicke graduated from the University of Missouri with a
B.S.
in Business Administration. He is a Certified Public Accountant and a member
of
the AICPA.
Joshua
Schechter,
Managing
Director and investment professional of Steel Partners LLC—
Mr.
Schechter has been associated with Steel Partners LLC and its affiliates since
June 2001. Schechter served as a director of Jackson Products, Inc., a safety
products manufacturer, from February 2004 to December 2007. Mr. Schechter from
1998 to 2001 held various positions in the Corporate Finance Group of Imperial
Capital LLC, an investment banking firm. From 1997 to 1998, he was an Analyst
with Leifer Capital Inc., an investment bank. From 1996 to 1997, Mr. Schechter
was a Tax Consultant at Ernst & Young LLP. Mr. Schechter previously served
as a director of Puroflow Incorporated. Mr. Schechter graduated from the
University of Texas, Austin with both a B.B.A. in Accounting and a Master of
Professional Accounting.
Joonho
Um,
Managing
Director and investment professional of Steel Partners LLC—
Mr.
Um
has been associated with Steel Partners LLC and its affiliates since March
2005.
He covers Asia excluding Japan and China. From March 2003 to December 2004,
he
was the General Manager of Green Fire & Marine Insurance in Seoul, a
property and casualty insurance company, where he was responsible for the Asset
Management and Financial Planning departments. From 1999 to 2002, Mr. Um was
a
foreign currency trader with Banc of America Securities in San Francisco. From
1994 to 1997, he was an Analyst at Solomon Brothers in New York and San
Francisco. From 1992 to 1994 he was in the management training program at
Primerica Corp., a financial services firm, in New York and Baltimore. Mr.
Um
graduated from the Wharton School of the University of Pennsylvania with a
B.S.
in Economics in 1992.
Luke
Wiseman,
Managing
Director and investment professional of Steel Partners (UK)
Limited—
Mr.
Wiseman has been associated with Steel Partners (UK) Limited, the London based
research subsidiary of an affiliate of Steel Partners LLC, since April 2005.
He
has certain responsibilities related to the firm’s European investments. Since
September 2006 he has served as a non-executive director of API plc, a packaging
materials manufacturer. From October 2000 to April 2005, Mr. Wiseman was an
Analyst and Portfolio Manager at Carlson Capital, a Hedge Fund, where he managed
an equity long/short portfolio of European consumer and industrial stocks.
From
1998 to 2000, he was an Analyst with Donaldson Lufkin and Jenrette in London
in
equity research covering European retail stocks. From 1995 to 1998, Mr. Wiseman
served in the European equity sales group of UBS Securities in London. From
1991
to 1994, he was with Tayrich Ltd., a privately owned commercial carpet
distributor in the United Kingdom, where he served as a Board Member and was
responsible for developing sales in continental Europe. From 1989 to 1991,
he
was with the Institutional Sales, European Markets area, of Morgan Stanley.
From
1986 to 1988, he was with Hoare Govette, a brokerage firm in London where he
worked in institutional equity sales. From December 2005 to September 2006
he
was a non-executive director of Nettec plc.
Effecting
a Business Combination
General
We
are
not presently engaged in, and we will not engage in, any operations for an
indefinite period of time. While substantially all of the net proceeds of our
initial public offering are allocated to completing an initial business
combination, the proceeds are not otherwise designated for more specific
purposes. Accordingly, there is no current basis for shareholders to evaluate
the specific merits or risks of one or more target businesses at the time of
your investment. If we engage in an initial business combination with a target
business using our capital stock or debt financing to fund the combination,
proceeds from our initial public offering, the sale of the additional founder’s
warrants and the sale of the co-investment units will then be used to undertake
additional acquisitions or to fund the operations of the target business on
a
post-combination basis. We may engage in an initial business combination with
a
company that does not require significant additional capital but is seeking
a
public trading market for its shares, and which wants to merge with an already
public company to avoid the uncertainties associated with undertaking its own
public offering. These uncertainties include time delays, compliance and
governance issues, significant expense, a possible loss of voting control,
and
the risk that market conditions will not be favorable for an initial public
offering at the time its initial public offering is ready to be commenced.
We
may seek to effect a business combination with more than one target business,
although our limited resources may serve as a practical limitation on our
ability to do so.
We
have not identified a target business
We
are
currently in the process of identifying and evaluating targets for a potential
transaction. We have not entered into any definitive business combination
agreement.
Subject
to the requirement that a target business or businesses have a fair market
value
of at least 80% of the sum of the balance in the trust account plus the proceeds
of the co-investment (excluding deferred underwriting discounts and commissions
of approximately $17.3 million) at the time of our initial business combination,
we have virtually unrestricted flexibility in identifying and selecting one
or
more prospective target businesses. Accordingly, there is no current basis
for
shareholders to evaluate the possible merits or risks of the target business
with which we may ultimately complete our initial business combination. Although
our management will assess the risks inherent in a particular target business
with which we may combine, we cannot assure you that this assessment will result
in our identifying all risks that a target business may encounter. Furthermore,
some of those 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.
Sources
of target businesses
We
expect
that our principal means of identifying potential target businesses will be
through the extensive contacts and relationships of our officers and directors
and Steel Partners. While our officers are not required to commit to our
business on a full-time basis and our directors have no commitment to spend
any
time in identifying or performing due diligence on potential target businesses,
our officers and directors believe that the relationships they have developed
over their careers and their access to Steel Partners professionals will
generate a number of potential business combination opportunities that will
warrant further investigation. Various unaffiliated parties, such as private
equity sponsors, management teams of public and private companies, investment
bankers, commercial bankers, brokers, attorneys, accountants and investors
throughout the United States, Asia and Europe and similar sources, may also
bring potential target businesses to our attention.
We
may
pay fees or compensation to third parties for their efforts in introducing
us to
potential target businesses that we have not previously identified. Such fees
or
compensation may be calculated as a percentage of the dollar value of the
transaction and/or may involve monthly retainer payments. We will seek to
negotiate the lowest reasonable percentage fee consistent with the
attractiveness of the opportunity and the alternatives, if any, that are then
available to us. Payment of finder’s fees is customarily tied to completion of a
transaction. Although it is possible that we may pay finder’s fees in the case
of an uncompleted transaction, we consider this possibility to be extremely
remote. In no event will we pay any of our officers or directors or any entity
with which they or we are affiliated, including Steel Partners, 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, other than reimbursement
for out-of-pocket expenses and an aggregate of $10,000 per month for office
space, secretarial and administrative services. In addition, none of our
officers or directors or any entity with which they are affiliated, including
Steel Partners, will receive any finder’s fee, consulting fees or any similar
fees from any person or entity in connection with any initial business
combination involving us other than any compensation or fees that may be
received for any services provided following such initial 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 a target
business with a fair market value that is at least 80% of the sum of the balance
in the trust account plus the proceeds of the co-investment (excluding deferred
underwriting discounts and commissions of approximately $17.3 million) at the
time of such initial business combination, our management will have virtually
unrestricted flexibility in identifying and selecting a prospective target
business. We will only consummate a business combination in which we become
the
controlling shareholder of the target. The key factors that we will rely on
in
determining controlling shareholder status would be our acquisition of at least
51% of the voting equity interests of the target company and control of the
majority of any governing body of the target company. We will not consider
any
transaction that does not meet such criteria. In addition, we will not enter
into our initial business combination with any entity in which any of our
officers, directors or Steel Partners or its affiliates has a financial
interest.
In
evaluating a prospective target business, our management will consider a variety
of criteria and guidelines, including the following:
|
·
|
financial
condition and results of
operations;
|
|
·
|
brand
recognition and potential;
|
|
·
|
experience
and skill of management and availability of additional
personnel;
|
|
·
|
stage
of development of the business and its products or
services;
|
|
·
|
existing
distribution arrangements and the potential for
expansion;
|
|
·
|
degree
of current or potential market acceptance of the products or
services;
|
|
·
|
proprietary
aspects of products and the extent of intellectual property or other
protection for products or
formulas;
|
|
·
|
impact
of regulation on the business;
|
|
·
|
seasonal
sales fluctuations and the ability to offset these fluctuations through
other business combinations, introduction of new products, or product
line
extensions;
|
|
·
|
costs
associated with effecting the business
combination;
|
|
·
|
industry
leadership, sustainability of market share and attractiveness of
market
sectors in which target business
participates;
|
|
·
|
degree
to which Steel Partners professionals have investment and operating
experience and have had success in the target business’s industry;
and
|
|
·
|
macro
competitive dynamics in the industry within which each company
competes.
|
These
criteria are not intended to be exhaustive. Any evaluation relating to the
merits of a particular initial business combination will be based, to the extent
relevant, on the above factors as well as other considerations deemed relevant
by our management to our business objective. In evaluating a prospective target
business, we expect to conduct an extensive due diligence review which will
encompass, among other things, meetings with incumbent management and employees,
document reviews, interviews of customers and suppliers, inspection of
facilities, as well as review of financial and other information which will
be
made available to us.
The
time
required to select and evaluate a target business and to structure and complete
the initial business combination, and the costs associated with this process,
are not currently ascertainable with any degree of certainty. We expect that
due
diligence of prospective target businesses will be performed by some or all
of
our officers, directors and Steel Partners professionals. We may engage market
research firms or third-party consultants to assist us with performing due
diligence and valuations of the target company. Any costs incurred with respect
to the identification and evaluation of a prospective target business with
which
a potential or initial business combination is not ultimately completed will
result in our incurring losses and will reduce the funds we can use to complete
an initial business combination.
Fair
market value of target business or businesses and determination of offering
amount
The
initial target business or businesses with which we combine must have a
collective fair market value equal to at least 80% of the sum of the balance
in
the trust account plus the proceeds of the co-investment (excluding deferred
underwriting discounts and commissions of approximately $17.3 million) at the
time of such initial business combination. Accordingly, there is no limitation
on our ability to raise funds privately or through loans that would allow us
to
acquire a target business or businesses with a fair market value considerably
greater than 80% of the sum of the balance in the trust account plus the
proceeds of the co-investment (excluding deferred underwriting discounts and
commissions as described above) at the time of our initial business combination.
If we acquire less than 100% of one or more target businesses in our initial
business combination, the aggregate fair market value of the portion or portions
we acquire must equal at least 80% of the sum of the balance in the trust
account plus the proceeds of the co-investment (excluding deferred underwriting
discounts and commissions as described above) at the time of such initial
business combination. The fair market value of a portion of a target business
will be calculated by multiplying the fair market value of the entire business
by the percentage of the target business we acquire. We may seek to consummate
our initial business combination with a target business or businesses with
a
collective fair market value in excess of the balance in the trust account.
However, we would need to obtain additional financing to consummate such an
initial business combination, and there is no assurance we would be able to
obtain such financing.
In
determining the size of our initial public offering, our management concluded,
based on their collective experience, that the size of our initial public
offering, together with the proceeds from the sale of the additional founder’s
warrants and the sale of the co-investment units, will provide us with
sufficient equity capital to execute our business plan. We believe that this
amount of equity capital, plus our ability to finance an acquisition using
stock
or debt in addition to the cash held in the trust account, will give us
substantial flexibility in selecting an acquisition target and structuring
our
initial business combination. This belief is not based on any research,
analysis, evaluations, discussions, or compilations of information with respect
to any particular investment or any such action undertaken in connection with
our organization. We cannot assure you that our belief is correct, that we
will
be able to successfully identify acquisition candidates, that we will be able
to
obtain any necessary financing or that we will be able to consummate a
transaction with one or more target businesses whose fair market value,
collectively, is equal to at least 80% of the sum of the balance in the trust
account plus the proceeds of the co-investment (excluding deferred underwriting
discounts and commissions of approximately $17.3 million) at the time of the
initial business combination.
In
contrast to many other blank check companies that must combine with one or
more
target businesses that have a fair market value equal to 80% or more of the
acquiring company’s net assets, we will not combine with a target business or
businesses unless the fair market value of such entity or entities meets a
minimum valuation threshold of 80% of the sum of the amount in the trust account
plus the proceeds of the co-investment (excluding deferred underwriting
discounts and commissions of approximately $17.3 million). We have used this
criterion to provide investors and our officers and directors with greater
certainty as to the fair market value that a target business or businesses
must
have in order to qualify for our initial business combination. The determination
of net assets requires an acquiring company to have deducted all liabilities
from total assets to arrive at the balance of net assets. Given the ongoing
nature of legal, accounting, stockholder meeting and other expenses that will
be
incurred immediately before and at the time of an initial business combination,
the balance of an acquiring company’s total liabilities may be difficult to
ascertain at a particular point in time with a high degree of certainty.
Accordingly, we have determined to use the valuation threshold of 80% of the
sum
of the amount in the trust account plus the proceeds of the co-investment
(excluding deferred underwriting discounts and commissions of approximately
$17.3 million) for the fair market value of the target business or businesses
with which we combine so that our officers and directors will have greater
certainty when selecting, and our investors will have greater certainty when
voting to approve or disapprove, a proposed initial business combination with
a
target business or businesses that such target business or businesses will
meet
the minimum valuation criterion for our initial business
combination.
Our
board
of directors will perform its own valuations and analyses in seeking to
determine that the target has a fair market value of at least 80% of the sum
of
the balance in the trust account plus the proceeds of the co-investment
(excluding deferred underwriting discounts and commissions of approximately
$17.3 million) at the time of the proposed business combination. Whether or
not
the fair market value of a target business or businesses is in excess of 80%
of
the sum of the proceeds in the trust account plus the proceeds of the
co-investment will be determined by our board of directors based upon standards
generally accepted by the financial community, such as actual and potential
gross margins, the values of comparable businesses, earnings and cash flow,
and
book value. The board of directors will make its valuation assessment based
on
all relevant information available at the time, which may differ on a
case-by-case basis depending on the specific nature of the target and the
structure of the transaction, including the projected performance of the target
based on its potential under our business plan (as determined based upon
standards generally accepted by the financial community, as well as the criteria
discussed under “Selection of a target business and structuring of a business
combination” above). Accordingly, we cannot predict at this time the precise
information that the board of directors intends to provide to stockholders
regarding the valuation of a particular target, other than whether it meets
the
80% threshold criterion. If our board is not able to determine independently
that the target business has a sufficient fair market value to meet the
threshold criterion, we will obtain an opinion in that regard from an
unaffiliated, independent investment banking firm which is a member of the
Financial Industry Regulatory Authority, Inc. We expect that any such opinion
would be included in our proxy soliciting materials furnished to our
stockholders in connection with the stockholder vote on our initial business
combination, and that such independent investment banking firm will be a
consenting expert. Although management has not consulted with any investment
banker in connection with such an opinion, it is possible that the opinion
would
only be able to be relied upon by our board of directors and not by our
stockholders. We will need to consider the cost in making a determination as
to
whether to hire an investment bank that will allow our stockholders to rely
on
its opinion, and will do so unless the cost is substantially (approximately
$50,000) in excess of what it would be otherwise. In the event that we obtain
an
opinion that we and the investment banker believe cannot be relied on by our
stockholders, we will include disclosure in the proxy statement providing
support for that belief. While our stockholders might not have legal recourse
against the investment banking firm in such case, the fact that an independent
expert has evaluated, and passed upon, the fairness of the transaction is a
factor our stockholders may consider in determining whether or not to vote
in
favor of the potential business combination. We will not be required to obtain
an opinion from an investment banking firm as to the fair market value of the
business if our board of directors independently determines that the target
business or businesses has sufficient fair market value to meet the threshold
criterion. In addition, if our board of directors has informed stockholders that
it believes that a target business meets the 80% threshold criterion, the board
will provide stockholders with valuations or quantify the value of any target.
Further, in the event that we issue shares in order to acquire a target and
such
issuance causes the investors in our initial public offering to collectively
become minority stockholders, we will not be required to obtain an opinion
or
independently opine on whether the transaction is fair to our stockholders.
However, any such issuance shall not affect the requirement that a majority
of
the shares of common stock voted by our public stockholders must approve any
initial business combination.
Lack
of business diversification
While
we
may seek to effect business combinations with more than one target business,
our
initial business combination must involve one or more target businesses whose
collective fair market value meets the criteria discussed above at the time
of
such initial business combination. Consequently, we expect to complete only
a
single initial business combination, although this may entail a simultaneous
combination with several operating businesses. 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, we may need to present pro forma financial
statements reflecting the operations of several target businesses as if they
had
been combined historically.
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. 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 businesses could fall below the required fair market value
threshold described above.
Accordingly,
while it is possible that our initial business combination may involve 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 target business. Unlike other entities that have the
resources to complete 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 our initial business combination with only a single
entity, our lack of diversification may subject us to negative economic,
competitive and regulatory developments, in the particular industry in which
we
operate after our initial business combination.
If
we
complete our initial business combination structured as a merger in which the
consideration is our stock, we could have a significant amount of cash available
to make subsequent add-on acquisitions.
Limited
ability to evaluate the target business’s management
We
will
independently evaluate the quality and experience of the existing management
of
a target business and will make an assessment as to whether or not they should
be replaced on a case-by-case basis. As an example, a company in weak financial
condition may be experiencing difficulties because of its capitalization and
not
because of its operations, in which case operating management may not need
to be
replaced.
Although
we intend to closely scrutinize the management of a prospective target business
when evaluating the desirability of effecting an initial business combination
with that business, we cannot assure you that our assessment of the target
business’s management will prove to be correct. In addition, we cannot assure
you that management of the target business will have the necessary skills,
qualifications or abilities to manage a public company. Furthermore, the future
role of our officers and directors, if any, in the target business cannot
presently be stated with any certainty. While it is possible that one or more
of
our officers and directors will remain associated in some capacity with us
following our initial business combination, a final determination of their
continued involvement with the business upon completion of an initial business
combination will be made jointly with our board of directors and based on the
facts and circumstances at the time. The goal of our board of directors will
be
to ensure that they select the best management team to pursue our business
strategy. If they determine that the incumbent management of an acquired
business should be replaced and that one or more of our officers and directors
is the best available replacement, it is possible that some of our officers
or
directors will devote some or all of their efforts to our affairs subsequent
to
our initial business combination.
Following
our initial business combination, we may seek to recruit additional managers
to
supplement the incumbent management of the target business. We cannot assure
you
that we will have the ability to recruit additional managers, or that additional
managers will have the requisite skills, knowledge or experience necessary
to
enhance the incumbent management.
Opportunity
for stockholder approval of business combination
Prior
to
the completion of our initial business combination, we will submit the
transaction to our stockholders for approval, even if the nature of the
transaction is such as would not ordinarily require stockholder approval under
applicable state law. At the same time, we will submit to our stockholders
for
approval a proposal to amend our amended and restated certificate of
incorporation to permit our continued corporate existence if the initial
business combination is approved and consummated. The quorum required to
constitute this meeting, as for all meetings of our stockholders in accordance
with our bylaws, is a majority of our issued and outstanding common stock
(whether or not held by public stockholders). We will consummate our initial
business combination only if the required number of shares are voted in favor
of
both the initial business combination and the amendment to extend our corporate
life. 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 effect our initial
business combination until October 10, 2009, the date that is 24 months from
the
date of our final prospectus. In connection with seeking stockholder approval
of
our 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 target
business and audited historical financial statements of the target business
based on United States generally accepted accounting principles.
In
connection with the stockholder vote required to approve our initial business
combination, SP Acq LLC, Steel Partners II, L.P. and Anthony Bergamo, Ronald
LaBow, Howard M. Lorber, Leonard Toboroff and S. Nicholas Walker, each a
director of our company, have agreed to vote all of their founder’s shares
either for or against a business combination, as determined by the totality
of
the public stockholder vote. SP Acq LLC, Steel Partners II, L.P. and Messrs.
Bergamo, LaBow, Lorber, Toboroff and Walker and each of our officers and
directors have also agreed that if it, he or she acquires shares of common
stock, it, he or she will vote all such acquired shares in favor of our initial
business combination. Any such purchases of common stock will be based solely
upon the judgment of such person or entity (and may be made to impact the
shareholder vote to approve a business combination) and are expected to be
effected through open market purchases or privately negotiated transactions.
As
a result, neither SP Acq LLC, Steel Partners II, L.P. nor any of our officers
or
directors will be able to exercise the conversion rights with respect to any
of
our shares that it, he or she may acquire. However, with the exception of the
co-investment none of SP Acq LLC, Steel Partners II, L.P., our officers or
our
directors has indicated to us any intent to purchase our securities. We believe
that SP Acq LLC, Steel Partners II, L.P. and our officers and directors will
often be in possession of material non-public information about us that will
restrict their ability to make purchases of our securities. We will proceed
with
our initial business combination only if a quorum is present at the
stockholders’ meeting and, as required by our amended and restated certificate
of incorporation, a majority of the shares of common stock voted by the public
stockholders are voted, in person or by proxy, in favor of our initial business
combination and stockholders owning no more than 30% of the shares sold in
our
initial public offering (minus one share) vote against the business combination
and exercise their conversion rights. Under the terms of the Company’s amended
and restated certificate of incorporation, this provision may not be amended
without the unanimous consent of the Company’s stockholders prior to
consummation of an initial business consummation. Even though the validity
of
unanimous consent provisions under Delaware law has not been settled, neither
we
nor our board of directors will propose any amendment to this 30% threshold,
or
support, endorse or recommend any proposal that stockholders amend this
threshold (subject to any fiduciary obligations our management or board may
have). In addition, we believe we have an obligation in every case to structure
our initial business combination so that up to 30% of the shares sold in our
initial public offering (minus one share) may be converted to cash by public
stockholders exercising their conversion rights and the business combination
will still go forward. Provided that a quorum is in attendance at the meeting,
in person or by proxy, a failure to vote on the initial business combination
at
the stockholders’ meeting will have no outcome on the transaction. Voting
against our initial business combination alone will not result in conversion
of
a stockholder’s shares into a pro rata share of the trust account. In order to
convert its shares, a stockholder must have also exercised the conversion rights
described below.
Conversion
rights
At
the
time we seek stockholder approval of our initial business combination, we will
offer our public stockholders the right to have their shares of common stock
converted to cash if they vote against the business combination and the business
combination is approved and completed. Stockholders who wish to exercise their
conversion rights must (i) vote against the business combination, (ii) demand
that the company convert their shares into cash, (iii) continue to hold their
shares through the closing of the business combination and (iv) then deliver
their shares to our transfer agent. In lieu of delivering their certificate,
shareholders may deliver their shares to the transfer agent electronically
using
Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System. The
actual per-share conversion price will be equal to the aggregate amount then
on
deposit in the trust account (before payment of deferred underwriting discounts
and commissions and including accrued interest, net of any income taxes payable
on such interest, which shall be paid from the trust account, and net of
interest income of up to $3.5 million previously released to us to fund our
working capital requirements), calculated as of two business days prior to
the
consummation of the proposed initial business combination, divided by the number
of shares sold in our initial public offering. The initial per-share conversion
price is expected to be approximately $9.84, or $0.16 less than the per-unit
offering price of $10.00. A public 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 initial business combination at a
meeting held for that purpose, but the request will not be granted unless the
stockholder votes against our initial business combination and our initial
business combination is approved and completed. If stockholders vote against
our
initial business combination but do not properly exercise their conversion
rights, such stockholders will not be able to convert their shares of common
stock into cash at the conversion price. 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. 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 (which we intend would
be
a minimum interval of 20 days) to tender 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.
However, because we do not have any control over this process, it may take
significantly longer than we anticipated. Traditionally, in order to perfect
conversion rights in connection with a blank check company’s business
combination, a holder could simply vote against a proposed business combination
and check a box on the proxy card indicating such holder was seeking to convert.
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. Thus, the conversion right, to which stockholders were aware
they needed to commit before the stockholder meeting, would survive past the
consummation of the business combination until the converting holder delivered
his certificate. For the avoidance of any doubt we will not allow the
traditional method of conversion for a blank check company. The requirement
for
physical or electronic delivery prior to the meeting ensures that a converting
holder’s election to convert is irrevocable once the business combination is
approved. 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
$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 — the need to deliver shares is a requirement of
conversion regardless of the timing of when such delivery must be effectuated.
Accordingly, assuming a business combination is approved, the exercise of
conversion rights would not result in any increased cost to shareholders when
compared to the traditional process. However, if a business combination is
not
approved, shareholders will have incurred additional costs that they would
not
have otherwise incurred as a result of having already converted their
shares.
Any
request for conversion, once made, may be withdrawn at any time up to the vote
taken with respect to the proposed 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). It is
anticipated that the funds to be distributed to stockholders entitled to convert
their shares who elect conversion will be distributed promptly after completion
of a business combination. Public stockholders who obtained their stock in
the
form of units and who subsequently convert their stock into their pro rata
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 complete our proposed initial
business combination if public stockholders owning 30% or more of the shares
sold in our initial public offering exercise their conversion
rights.
In
connection with a vote on our initial business combination, public stockholders
may elect to vote a portion of their shares for and a portion of their shares
against the initial business combination. If the initial business combination
is
approved and consummated, public stockholders who elected to convert the portion
of their shares voted against the initial business combination will receive
the
conversion price with respect to those shares and may retain any other shares
they own.
We
expect
the initial conversion price to be approximately $9.84 per share. As this amount
is lower than the $10.00 per unit offering price and it may be less than the
market price of a share of our common stock on the date of conversion, there
may
be a disincentive to public stockholders to exercise their conversion
rights.
If
a vote
on an initial business combination is held and the business combination is
not
approved, we may continue to try to consummate an initial business combination
with a different target until October 10, 2009. 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
into a pro rata share of the aggregate amount then on deposit in the trust
account. Those 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 dissolution and
liquidation.
Liquidation
if no business combination
Our
amended and restated certificate of incorporation provides that we will continue
in existence only until October 10, 2009. If we consummate our initial business
combination prior to that date, we will seek to amend this provision in order
to
permit our continued existence. If we have not completed our initial business
combination by that date, 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. Because of this provision in our amended
and restated certificate of incorporation, no resolution by our board of
directors and no vote by our stockholders to approve our dissolution would
be
required for us to dissolve and liquidate. Instead, we will notify the Delaware
Secretary of State in writing on the termination date that our corporate
existence is ceasing, and include with such notice payment of any franchise
taxes then due to or assessable by the state.
If
we are
unable to complete a business combination by October 10, 2009, we will
automatically dissolve and 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 dissolution. 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.
We
expect
that all costs and expenses associated with implementing our plan of
distribution, as well as payments to any creditors, will be funded from amounts
remaining out of the $100,000 of proceeds held outside the trust account and
from the $3.5 million in interest income on the balance of the trust account
that may be released to us to fund our working capital requirements. However,
if
those funds are not sufficient to cover the costs and expenses associated with
implementing our plan of distribution, to the extent that there is any interest
accrued in the trust account not required to pay income taxes on interest income
earned on the trust account balance, we may request that the trustee release
to
us an additional amount of up to $75,000 of such accrued interest to pay those
costs and expenses. Should there be no such interest available or should those
funds still not be sufficient, SP Acq LLC and Mr. Lichtenstein have agreed
to
reimburse us for our out-of-pocket costs associated with our dissolution and
liquidation, excluding any special, indirect or consequential costs, such as
litigation, pertaining to the dissolution and liquidation.
Upon
its
receipt of notice from counsel that our existence has terminated, the trustee
will commence liquidating the investments constituting the trust account and
distribute the proceeds to our public stockholders. SP Acq LLC, Steel Partners
II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have waived
their right to participate in any liquidation distribution with respect to
the
founder’s shares. As the proceeds from the sale of the co-investment units will
not be received by us until immediately prior to our consummation of a business
combination, these proceeds will not be deposited into the trust account and
will not be available for distribution to our public stockholders in the event
of a dissolution and liquidation. Additionally, if we do not complete an initial
business combination and the trustee must distribute the balance of the trust
account, the underwriters have agreed to forfeit any rights or claims to their
deferred underwriting discounts and commissions then in the trust account,
and
those funds will be included in the pro rata liquidation distribution to the
public stockholders. There will be no distribution from the trust account with
respect to any of our warrants, which will expire worthless if we are
liquidated, and as a result purchasers of our units will have paid the full
unit
purchase price solely for the share of common stock included in each
unit.
The
proceeds deposited in the trust account could, however, become subject to claims
of our creditors that are in preference to the claims of our stockholders,
and
we therefore cannot assure you that the actual per-share liquidation price
will
not be less than approximately $9.84, the conversion price at the closing of
the
initial public offering, including the over-allotment option. Although prior
to
completion of our initial business combination, we will seek to have all third
parties (including any vendors or other entities we engage) and any prospective
target businesses enter into valid and enforceable agreements with us 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.
We
have not engaged any such third parties or asked for or obtained any such waiver
agreements at this time. It is also possible that such waiver agreements would
be held unenforceable, and there is no guarantee that the third parties would
not otherwise challenge the agreements and later bring claims against the trust
account for monies owed them. If a target business or other third party were
to
refuse to enter into such a waiver, we would enter into discussions with such
target business or engage such other third party only if our management
determined that we could not obtain, on a reasonable basis, substantially
similar services or opportunities from another entity willing to enter into
such
a waiver. 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.
SP
Acq
LLC has agreed that it will be liable to the Company if and to the extent claims
by third parties reduce the amounts in the trust account available for payment
to our stockholders in the event of a liquidation and the claims are made by
a
vendor for services rendered, or products sold, to us, or by a prospective
target business. A “vendor” refers to a third party that enters into an
agreement with us to provide goods or services to us. However, the agreement
entered into by SP Acq LLC specifically provides for two exceptions to the
indemnity given: there will be no liability (1) as to any claimed amounts owed
to a third party who executed a legally enforceable waiver, or (2) as to any
claims under our indemnity of the underwriters of our initial public offering
against certain liabilities, including liabilities under the Securities Act.
Furthermore, there could be claims from parties other than vendors, third
parties with which we entered into a contractual relationship or target
businesses that would not be covered by the indemnity from SP Acq LLC, such
as
shareholders and other claimants who are not parties in contract with us who
file a claim for damages against us. To the extent that SP Acq LLC refuses
to
indemnify us for a claim we believe should be indemnified, our officers and
directors by virtue of their fiduciary obligation will be obligated to bring
a
claim against SP Acq LLC to enforce such indemnification. Based on the
representation as to its accredited investor status (as such term is defined
in
Regulation D under the Securities Act), we currently believe that SP Acq LLC
is
capable of funding its indemnity obligations, even though we have not asked
it
to reserve for such an eventuality. We cannot assure you, however, that it
would
be able to satisfy those obligations.
Under
Delaware law, creditors of a corporation have a superior right to stockholders
in the distribution of assets upon liquidation. Consequently, if the trust
account is liquidated and paid out to our public stockholders shares prior
to
satisfaction of the claims of all of our creditors, it is possible that our
stockholders may be held liable for third parties’ claims against us to the
extent of the distributions received by them.
If
we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us that is not dismissed, the proceeds held in the trust account could
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, we cannot assure you that we will be able to return at least
approximately $9.84 per share to our public stockholders.
A
public
stockholder will be entitled to receive funds from the trust account only in
the
event that we do not consummate an initial business combination by October
10,
2009 or if the stockholder converts its shares into cash after voting against
an
initial business combination that is actually completed by us and exercising
its
conversion rights. In no other circumstances will a stockholder have any right
or interest of any kind to or in the trust account. Prior to our completing
an
initial business combination or liquidating, we are permitted to have released
from the trust account only (i) interest income to pay income taxes on interest
income earned on the trust account balance and (ii) interest income earned
of up
to $3.5 million to fund our working capital requirements.
Certificate
of Incorporation
Our
amended and restated certificate of incorporation sets forth certain provisions
designed to provide certain rights and protections to our stockholders prior
to
the consummation of a business combination, including that:
|
·
|
prior
to the consummation of our initial business combination, we shall
submit
the initial business combination to our stockholders for
approval;
|
|
·
|
we
may consummate our initial business combination if approved by a
majority
of the shares of common stock voted by our public stockholders at
a duly
held stockholders meeting, and public stockholders owning up to 30%
of the
shares (minus one share) sold in our initial public offering vote
against
the business combination and exercise their conversion
rights;
|
|
·
|
if
a proposed initial business combination is approved and consummated,
public stockholders who exercised their conversion rights and voted
against the initial business combination may convert their shares
into
cash at the conversion price on the closing date of the initial business
combination;
|
|
·
|
if
our initial business combination is not consummated by October 10,
2009,
then our existence will terminate and we will distribute all amounts
in
the trust account (except for such amounts as are paid to creditors
or
reserved for payment to creditors in accordance with Delaware law)
and any
net assets remaining outside the trust account on a pro rata basis
to all
of our public stockholders;
|
|
·
|
we
may not consummate any other business combination, merger, capital
stock
exchange, asset acquisition, stock purchase, reorganization or similar
transaction prior to our initial business
combination;
|
|
·
|
prior
to our initial business combination, we may not issue additional
stock
that participates in any manner in the proceeds of the trust account,
or
that votes as a class with the common stock sold in our initial public
offering on a business combination;
|
|
·
|
our
audit committee shall monitor compliance on a quarterly basis with
the
terms of our initial public offering and, if any noncompliance is
identified, the audit committee is charged with the immediate
responsibility to take all action necessary to rectify such noncompliance
or otherwise cause compliance with the terms of our initial public
offering; and
|
|
·
|
the
audit committee shall review and approve all payments made to our
officers, directors and our and their affiliates, other than the
payment
of an aggregate of $10,000 per month to Steel Partners, Ltd. for
office
space, secretarial and administrative services, and any payments
made to
members of our audit committee will be reviewed and approved by our
board
of directors, with any interested director abstaining from such review
and
approval.
|
Our
amended and restated certificate of incorporation requires that prior to the
consummation of our initial business combination we obtain unanimous consent
of
our stockholders to amend these provisions. However, the validity of unanimous
consent provisions under Delaware law has not been settled. A court could
conclude that the unanimous consent requirement constitutes a practical
prohibition on amendment in violation of the stockholders’ statutory rights to
amend the corporate charter. In that case, these provisions could be amended
without unanimous consent, and any such amendment could reduce or eliminate
the
protection these provisions afford to our stockholders. However, we view all
of
the foregoing provisions as obligations to our stockholders. Neither we nor
our
board of directors will propose any amendment to these provisions, or support,
endorse or recommend any proposal that stockholders amend any of these
provisions at any time prior to the consummation of our initial business
combination (subject to any fiduciary obligations our management or board may
have).
Competition
In
identifying, evaluating and selecting a target business for our initial business
combination, we may encounter intense competition from other entities having
a
business objective similar to ours, including other blank check companies,
private equity groups and leveraged buyout funds, as well as operating
businesses seeking acquisitions. Many of these entities are well established
and
have extensive experience identifying and effecting business combinations
directly or through affiliates. Moreover, many of these competitors possess
greater financial, technical, human and other resources than us. While we
believe there are numerous potential target businesses with which we could
combine, our ability to acquire larger target businesses will be limited by
our
available financial resources. This inherent limitation gives others an
advantage in pursuing the acquisition of a target business.
Furthermore:
|
·
|
our
obligation to seek stockholder approval of our initial business
combination or obtain necessary financial information may delay the
completion of a transaction;
|
|
·
|
our
obligation to convert into cash shares of common stock held by our
public
stockholders who vote against the initial business combination and
exercise their conversion rights may reduce the resources available
to us
for an initial business
combination;
|
|
·
|
our
outstanding warrants and the future dilution they potentially represent
may not be viewed favorably by certain target businesses;
and
|
|
·
|
the
requirement to acquire an operating business that has a fair market
value
equal to at least 80% of the sum of the balance of the trust account
plus
the proceeds of the co-investment at the time of the acquisition
(excluding deferred underwriting discounts and commissions of
approximately $17.3 million) could require us to acquire the assets
of
several 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.
|
Any
of
these factors may place us at a competitive disadvantage in successfully
negotiating a business combination.
Employees
We
currently have three officers. These individuals are not our employees and
are
not obligated to devote any specific number of hours to our business and intend
to devote only as much time as they deem necessary to our business. We do not
expect to have any full-time employees prior to the consummation of a business
combination.
ITEM
1A. Risk
Factors
An
investment in our securities involves a high degree of risk. You should consider
carefully all of the material risks described below, together with the other
information contained in this report before making a decision to invest in
our
securities. If any of the following events occur, our business, financial
condition and operating results may be materially adversely affected. In that
event, the trading price of our securities could decline, and you could lose
all
or part of your investment. This report also contains forward-looking statements
that involve risks and uncertainties. Our actual results could differ materially
from those anticipated in the forward-looking statements as a result of specific
factors, including the risks described below.
We
may proceed with a business combination if public stockholders owning less
than
30% of the shares sold in our initial public offering properly exercise their
conversion rights. This requirement may make it easier for us to have a business
combination approved over stockholder dissent.
When
we
seek stockholder approval of a business combination or any extension of the
time
period within which we must complete our business combination, we will offer
each public stockholder the right to have his, her or its shares of common
stock
converted to cash if the stockholder votes against the business combination
or
extension and the business combination is approved and consummated or the
extension is approved. We will consummate the business combination only if
the
following two conditions are met: (i) a majority of the shares of common stock
voted by the public stockholders are voted in favor of the business combination
and (ii) public stockholders owning less than 30% of the shares sold in our
initial public offering cumulatively vote against the business combination
or an
extension of the time period within which we must consummate our business
combination and exercise their conversion rights. There can be no assurance
that
any converting stockholder will receive an amount that is equal to or more
than
his, her or its full invested amount.
We
are a development stage company with no operating history and no revenues,
and
you have no basis on which to evaluate our ability to achieve our business
objective.
We
are a
recently incorporated development stage company with no operating results to
date. Because we lack an operating history, you have no basis on which to
evaluate our ability to achieve our business objective of completing an initial
business combination with one or more target businesses, as described in this
report. We are currently in the process of evaluating and identifying
prospective target businesses concerning an initial business combination but
may
be unable to complete an initial business combination. We will not generate
any
revenues from operating activities until, at the earliest, after completing
an
initial business combination. We cannot assure you as to when, or if, an initial
business combination will occur. If we expend all of the $100,000 in proceeds
from our initial public offering not held in trust and interest income earned
of
up to $3.5 million on the balance of the trust account that may be released
to
us to fund our working capital requirements in seeking an initial business
combination, but fail to complete such an initial combination, we may never
generate any operating revenues.
We
may not be able to consummate our initial business combination within the
required time frame, in which case we would be forced to dissolve and
liquidate.
We
must
complete our initial business combination with one or more target businesses
that have a fair market value of at least 80% of the sum of the amount held
in
our trust account at the time of the initial business combination plus the
proceeds of the co-investment at the time of our initial business combination
(excluding deferred underwriting discounts and commissions of approximately
$17.3 million) by October 10, 2009. If we fail to consummate a business
combination within the required time frame, we will be forced to dissolve and
liquidate. 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 liquidate before concluding an initial business combination, our public
stockholders will receive less than $10.00 per share on distribution of trust
account funds and our warrants will expire worthless.
If
we are
unable to complete an initial business combination and must liquidate our
assets, the per-share liquidation distribution will be less than $10.00 because
of the expenses of our initial public offering, our general and administrative
expenses and the planned costs of seeking an initial business combination.
Furthermore, our outstanding warrants are not entitled to participate in a
liquidation distribution and the warrants will therefore expire worthless if
we
liquidate before completing an initial business combination; and as a result
purchasers of our units will have paid the full unit purchase price solely
for
the share of common stock included in each unit.
An
effective registration statement must be in place in order for a warrant holder
to be able to exercise the warrants.
No
warrants will be exercisable and we will not be obligated to issue shares of
common stock upon exercise of warrants by a holder unless, at the time of such
exercise, we have an effective registration statement under the Securities
Act
covering the shares of common stock issuable upon exercise of the warrants
and a
current prospectus relating to them is available. Although we have undertaken
in
the warrant agreement, and therefore have a contractual obligation, to use
our
best efforts to have an effective registration statement covering shares of
common stock issuable upon exercise of the warrants from the date the warrants
become exercisable and to maintain a current prospectus relating to that common
stock until the warrants expire or are redeemed, and we intend to comply with
our undertaking, we cannot assure you that we will be able to do so. Our initial
founder’s warrants are identical to the warrants sold in our initial public
offering except that (i) they only become exercisable after our consummation
of
our initial business combination if and when the last sales price of our common
stock exceeds $14.25 per share for any 20 trading days within a 30 trading
day
period beginning 90 days after such business combination and (ii) they are
non-redeemable. Our additional founder’s warrants are identical to the warrants
sold in our initial public offering except that they are non-redeemable. Our
co-investment warrants are identical to the warrants sold in our initial public
offering except that they will be non-redeemable. Holders of warrants may not
be
able to exercise their warrants, the market for the warrants may be limited
and
the warrants may be deprived of any value if there is no effective registration
statement covering the shares of common stock issuable upon exercise of the
warrants or the prospectus relating to the common stock issuable upon the
exercise of the warrants is not current. In such event, the holder of a unit
will have paid the entire unit purchase price for the common stock contained
in
the unit as the warrant will be worthless. Holders of warrants will not be
entitled to a cash settlement for their warrants if we fail to have an effective
registration statement or a current prospectus available relating to the common
stock issuable upon exercise of the warrants, and the holders’ only remedies in
such event will be those available if we are found by a court of law to have
breached our contractual obligation to them by failing to do so.
An
investor will only be able to exercise a warrant if the issuance of common
stock
upon such exercise has been registered or qualified or is deemed exempt under
the securities laws of the state of residence of the holder of the
warrants.
No
warrants will be exercisable and we will not be obligated to issue shares of
common stock unless the common stock issuable upon such exercise has been
registered or qualified or deemed to be exempt under the securities laws of
the
state of residence of the holder of the warrants. Because the exemptions from
qualification in certain states for resales of warrants and for issuances of
common stock by the issuer upon exercise of a warrant may be different, a
warrant may be held by a holder in a state where an exemption is not available
for issuance of common stock upon an exercise and the holder will be precluded
from exercise of the warrant. Nevertheless, we expect that resales of the
warrants as well as issuances of common stock by us upon exercise of a warrant
may be made in every state because at the time that the warrants become
exercisable (following our completion of an initial business combination),
we
expect to either continue to be listed on a national securities exchange, which
would provide an exemption from registration in every state, or we would
register the warrants in every state (or seek another exemption from
registration in such states). To the extent an exemption is not available,
we
will use our best efforts to register the underlying common stock in all states
where the holders of our warrants reside. Accordingly, we believe holders in
every state will be able to exercise their warrants as long as our prospectus
relating to the common stock issuable upon exercise of the warrants is current.
However, we cannot assure you of this fact. As a result, the warrants may be
deprived of any value, the market for the warrants may be limited and the
holders of warrants may not be able to exercise their warrants and they may
expire worthless if the common stock issuable upon such exercise is not
qualified or exempt from qualification in the jurisdictions in which the holders
of the warrants reside.
You
will not be entitled to protections normally afforded to investors in blank
check companies.
Since
the
net proceeds of our initial public offering are intended to be used to complete
a business combination with a target business that has not been identified,
we
may be deemed a “blank check” company under the United States securities laws.
However, because upon the consummation of our initial public offering we had
net
tangible assets in excess of $5 million and at that time filed a Form 8-K with
the SEC that included an audited balance sheet demonstrating this fact, the
SEC
has taken the position that we are exempt from Rule 419 under the Securities
Act
which is designed to protect investors in blank check companies. Accordingly,
our public stockholders will not receive the benefits or protections of Rule
419. Among other things, this means we will have a longer period of time to
complete a business combination in some circumstances than do companies subject
to Rule 419. Moreover, offerings subject to Rule 419 would prohibit the release
of any interest earned on funds held in the trust account to us unless and
until
the funds in the trust account were released to us in connection with our
consummation of an initial business combination.
Under
Delaware law, a court could invalidate the requirement that certain provisions
of our amended and restated certificate of incorporation be amended only by
unanimous consent of our stockholders; amendment of those provisions could
reduce or eliminate the protections they afford to our
stockholders.
Our
amended and restated certificate of incorporation contains certain requirements
and restrictions that will apply to us until the consummation of our initial
business combination. Specifically, our amended and restated certificate of
incorporation provides, among other things, that:
|
·
|
prior
to the consummation of our initial business combination, we shall
submit
the initial business combination to our stockholders for
approval;
|
|
·
|
we
may consummate our initial business combination if approved by a
majority
of the shares of common stock voted by our public stockholders at
a duly
held stockholders meeting, and public stockholders owning up to 30%
of the
shares (minus one share) sold in our initial public offering vote
against
the business combination and exercise their conversion
rights;
|
|
·
|
if
a proposed initial business combination is approved and consummated,
public stockholders who exercised their conversion rights and voted
against the initial business combination may convert their shares
into
cash at the conversion price on the closing date of the initial business
combination;
|
|
·
|
if
our initial business combination is not consummated by October 10,
2009,
then our existence will terminate and we will distribute all amounts
in
the trust account (except for such amounts as are paid to creditors
or
reserved for payment to creditors in accordance with Delaware law)
and any
net assets remaining outside the trust account on a pro rata basis
to all
of our public stockholders;
|
|
·
|
we
may not consummate any other business combination, merger, capital
stock
exchange, asset acquisition, stock purchase, reorganization or similar
transaction prior to our initial business
combination;
|
|
·
|
prior
to our initial business combination, we may not issue additional
stock
that participates in any manner in the proceeds of the trust account,
or
that votes as a class with the common stock sold in our initial public
offering on a business combination;
|
|
·
|
our
audit committee shall monitor compliance on a quarterly basis with
the
terms of our initial public offering and, if any noncompliance is
identified, the audit committee is charged with the immediate
responsibility to take all action necessary to rectify such noncompliance
or otherwise cause compliance with the terms of our initial public
offering; and
|
|
·
|
the
audit committee shall review and approve all payments made to our
officers, directors and our and their affiliates, other than the
payment
of an aggregate of $10,000 per month to Steel Partners, Ltd. for
office
space, secretarial and administrative services, and any payments
made to
members of our audit committee will be reviewed and approved by our
board
of directors, with any interested director abstaining from such review
and
approval.
|
Our
amended and restated certificate of incorporation requires that prior to the
consummation of our initial business combination we obtain unanimous consent
of
our stockholders to amend these provisions. However, the validity of unanimous
consent provisions under Delaware law has not been settled. A court could
conclude that the unanimous consent requirement constitutes a practical
prohibition on amendment in violation of the stockholders’ statutory rights to
amend the corporate charter. In that case, these provisions could be amended
without unanimous consent, and any such amendment could reduce or eliminate
the
protection these provisions afford to our stockholders. However, we view all
of
the foregoing provisions as obligations to our stockholders. Neither we nor
our
board of directors will propose any amendment to these provisions, or support,
endorse or recommend any proposal that stockholders amend any of these
provisions at any time prior to the consummation of our initial business
combination (subject to any fiduciary obligations our management or board may
have). In addition, we believe we have an obligation in every case to structure
our initial business combination so that not less than 30% of the shares sold
in
our initial public offering (minus one share) have the ability to be converted
to cash by public stockholders exercising their conversion rights and the
business combination will still go forward.
If
third parties bring claims against us, or if we go bankrupt, the proceeds held
in trust could be reduced and the per-share liquidation price received by you
will be less than approximately $9.84 per share.
Our
placing of funds in the trust account may not protect those funds from
third-party claims against us. Although prior to completion of our initial
business combination, we will seek to have all third parties (including any
vendors or other entities we engage) and any prospective target businesses
enter
into valid and enforceable agreements with us 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. It is possible that such
waiver agreements would be held unenforceable and there is no guarantee that
the
third parties would not otherwise challenge the agreements and later bring
claims against the trust account for monies owed them. 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 trust could be subject to claims
that
would take priority over the claims of our public stockholders and, as a result,
the per-share liquidation price could be less than approximately $9.84, the
conversion price at the closing of our initial public offering including the
over-allotment exercise. SP Acq LLC and Mr. Lichtenstein have agreed that they
will be liable to the company if and to the extent claims by third parties
reduce the amounts in the trust account available for payment to our
stockholders in the event of a liquidation and the claims are made by a vendor
for services rendered, or products sold, to us or by a prospective business
target. However, the agreement entered into by SP Acq LLC and Mr. Lichtenstein
specifically provides for two exceptions to the indemnity given: there will
be
no liability (1) as to any claimed amounts owed to a third party who executed
a
legally enforceable waiver, or (2) as to any claims under our indemnity of
the
underwriters of our initial public offering against certain liabilities,
including liabilities under the Securities Act. Furthermore, there could be
claims from parties other than vendors, third parties with which we entered
into
a contractual relationship or target businesses that would not be covered by
the
indemnity from SP Acq LLC and Mr. Lichtenstein, such as shareholders and other
claimants who are not parties in contract with us who file a claim for damages
against us. To the extent that SP Acq LLC and Mr. Lichtenstein refuse to
indemnify us for a claim we believe should be indemnified, our officers and
directors by virtue of their fiduciary obligations will be obligated to bring
a
claim against SP Acq LLC and Mr. Lichtenstein to enforce such indemnification.
Based on representations as to its status as an accredited investor (as such
term is defined in Regulation D under the Securities Act), we currently believe
that SP Acq LLC and Mr. Lichtenstein are capable of funding their indemnity
obligations, even though we have not asked them to reserve for such an
eventuality. We cannot assure you, however, that they would be able to satisfy
those obligations.
In
addition, if we are forced to file a bankruptcy case or an involuntary
bankruptcy case is filed against us that is not dismissed, the proceeds held
in
the trust account could 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, we cannot assure you that we will be able
to
return at least approximately $9.84 per share to our public
stockholders.
Since
we have not yet selected a particular industry or any target business with
which
to complete our initial business combination, you will be unable to currently
ascertain the merits or risks of the industry or business in which we may
ultimately operate.
We
may
consummate an initial business combination with a company in any industry we
choose and we are not limited to any particular industry or type of business.
Accordingly, there is no current basis for you to evaluate the possible merits
or risks of the particular industry in which we may ultimately operate or the
target business or businesses with which we may ultimately enter an initial
business combination. Although the members of our management team will evaluate
the risks inherent in a particular target business, we cannot assure you that
we
will properly ascertain or assess all of the significant risks present in that
target business. Even if we properly assess those risks, some of them may be
outside of our control or ability to affect. We also cannot assure you that
an
investment in our securities will not ultimately prove to be less favorable
our
public stockholders than a direct investment, if an opportunity were available,
in a target business.
Our
stockholders may be held liable for third parties’ claims against us to the
extent of distributions received by them following our
dissolution.
Our
amended and restated certificate of incorporation provides that we will continue
in existence only until October 10, 2009. If we consummate our initial business
combination prior to that date, we will seek to amend this provision to permit
our continued existence. If we have not completed our initial business
combination by that date, 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. Under the Delaware General Corporation
Law, stockholders may be held liable for claims by third parties against a
corporation to the extent of distributions received by those stockholders in
a
dissolution. However, if the corporation complies with certain procedures
intended to ensure that it makes reasonable provision for all claims against
it,
the liability of stockholders with respect to any claim against the corporation
is limited to the lesser of such stockholder’s pro rata share of the claim or
the amount distributed to the stockholder. In addition, if the corporation
undertakes additional specified procedures, including a 60-day notice period
during which any third-party claims can be brought against the corporation,
a
90-day period during which the corporation may reject any claims brought, and
an
additional 150-day waiting period before any liquidation distributions are
made
to stockholders, any liability of stockholders would be barred with respect
to
any claim on which an action, suit or proceeding is not brought by the third
anniversary of the dissolution (or such longer period directed by the Delaware
Court of Chancery). While we intend to adopt a plan of distribution making
reasonable provision for claims against the company in compliance with the
Delaware General Corporation Law, we do not intend to comply with these
additional procedures, as we instead intend to distribute the balance in the
trust account to our public stockholders as promptly as practicable following
termination of our corporate existence. Accordingly, any liability our
stockholders may have could extend beyond the third anniversary of our
dissolution. We cannot assure you that any reserves for claims and liabilities
that we believe to be reasonably adequate when we adopt our plan of dissolution
and distribution will suffice. If such reserves are insufficient, stockholders
who receive liquidation distributions may subsequently be held liable for claims
by creditors of the company to the extent of such distributions.
We
depend on the limited funds available outside of the trust account and a portion
of the interest earned on the trust account balance to fund our search for
a
target business or businesses and to complete our initial business
combination.
Of
the
net proceeds of our initial public offering, $100,000 was available to us
initially outside the trust account to fund our working capital requirements.
We
depend on sufficient interest being earned on the proceeds held in the trust
account to provide us with the additional working capital we will need to
identify one or more target businesses and to complete our initial business
combination. While we are entitled to have released to us for such purposes
interest income of up to a maximum of $3.5 million, a substantial decline in
interest rates may result in our having insufficient funds available with which
to structure, negotiate or close an initial business combination. In such event,
we could seek to borrow funds or raise additional investments from our officers
and directors or others to operate, although our officers and directors are
under no obligation to advance funds to, or to invest in, us. If we have
insufficient funds available, we may be forced to liquidate.
Because
of our limited resources and the significant competition for business
combination opportunities we may not be able to consummate an attractive initial
business combination.
We
expect
to encounter intense competition from other entities having a business objective
similar to ours, including venture capital funds, leveraged buyout funds,
private equity funds and public and private companies (including blank check
companies like ours). Many of these entities are well established and have
extensive experience in identifying and effecting 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.
While we believe that there are numerous potential target businesses that we
could acquire, our ability to compete in acquiring certain sizable target
businesses will be limited by our available financial resources. This inherent
competitive limitation gives others an advantage in pursuing the acquisition
of
certain target businesses. In addition, the fact that only a limited number
of
blank check companies have completed 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 ours. Further:
|
·
|
our
obligation to seek shareholder approval of a business combination
may
materially delay the consummation of a
transaction;
|
|
·
|
our
obligation to convert into cash not less than 30% of the shares of
common
stock held by public stockholders (minus one share) in certain instances
may materially reduce the resources available for a business combination;
and
|
|
·
|
our
outstanding warrants, and the future dilution they potentially represent,
may not be viewed favorably by certain target
businesses.
|
Any
of
these obligations may place us at a competitive disadvantage in successfully
negotiating a business combination. We cannot assure you that we will be able
to
successfully compete for an attractive business combination. Additionally,
because of these factors, we cannot assure you that we will be able to
effectuate a business combination within the required time periods. If we are
unable to find a suitable target business within the required time periods,
we
will be forced to liquidate.
We
may be unable to obtain additional financing if necessary to complete our
initial business combination or to fund the operations and growth of a target
business, which could compel us to restructure or abandon a particular business
combination.
We
believe that the net proceeds of our initial public offering, the sale of the
founder’s units and the sale of the additional founder’s warrants and the
proceeds we will receive from the sale of the co-investment units will be
sufficient to allow us to consummate our initial business combination. However,
because we have no oral or written agreements or letters of intent to engage
in
a business combination with any entity, we cannot assure you that we will be
able to complete our initial business combination or that we will have
sufficient capital with which to complete a combination with a particular target
business. If the net proceeds of our initial public offering, and the sale
of
the additional founder’s warrants and the proceeds we will receive from the sale
of the co-investment units are not sufficient to facilitate a particular
business combination because:
|
·
|
of
the size of the target business;
|
|
·
|
the
offering proceeds not in trust and funds available to us from interest
earned on the trust account balance are insufficient to fund our
search
for and negotiations with a target business;
or
|
|
·
|
the
amount of cash that we will have available to be used as consideration
in
connection with our initial business combination will be directly
affected
by the amount of cash we must use to convert into cash the number
of
shares of common stock owned by public stockholders who elect to
exercise
their conversion rights,
|
we
will
be required to seek additional financing. We cannot assure you that such
financing will be available on acceptable terms, if at all. If additional
financing is unavailable to consummate a particular business combination, we
would be compelled to restructure or abandon the combination and seek an
alternative target business.
In
addition, it is possible that we could use a portion of the funds not in the
trust account (including amounts we borrowed, if any) to make a deposit, down
payment or fund a “no-shop” provision with respect to a particular proposed
business combination, although we do not have any current intention to do so.
In
the event that we were ultimately required to forfeit such funds, and we had
already used up the funds allocated to due diligence and related expenses in
connection with the aborted transaction, we could be left with insufficient
funds to continue searching for, or conduct due diligence with respect to,
other
potential target businesses.
Even
if
we do not need additional financing to consummate an initial business
combination, we may require additional capital — in the form of debt, equity, or
a combination of both — to operate or grow any potential business we may
acquire. There can be no assurance that we will be able to obtain such
additional capital if it is required. If we fail to secure such financing ,
this
failure could have a material adverse effect on the operations or growth of
the
target business. Other than the co-investment, none of our officers or directors
or any other party is required to provide any financing to us in connection
with, or following, our initial business combination.
If
we issue capital stock or convertible debt securities to complete our initial
business combination, your equity interest in us could be reduced or there
may
be a change in control of our company.
Our
amended and restated certificate of incorporation authorizes the issuance of
up
to 200,000,000 shares of common stock, par value $0.001 per share, and 1,000,000
shares of preferred stock, par value $0.001 per share. There are 84,776,000
authorized but unissued shares of our common stock available for issuance (after
appropriate reservation for the issuance of shares upon full exercise of our
outstanding warrants, including the initial founder’s warrants and the
additional founder’s warrants), and all of the shares of preferred stock
available for issuance. Upon consummation of the co-investment, there will
be
78,776,000 authorized but unissued shares of our common stock available for
issuance (after appropriate reservation for the issuance of shares upon full
exercise of our outstanding warrants, including the initial founder’s warrants,
the additional founder’s warrants and the co-investment warrants). We have no
other commitments to date to issue any additional securities. We may issue
a
substantial number of additional shares of our common stock or may issue
preferred stock, or a combination of both, including through convertible debt
securities, to complete an initial business combination. Our issuance of
additional shares of common stock or any preferred stock:
|
·
|
may
significantly reduce your equity interest in
us;
|
|
·
|
will
likely cause a change in control if a substantial number of our shares
of
common stock are issued, which may among other things limit our ability
to
use any net operating loss carry forwards we have, and may result
in the
resignation or removal of our officers and directors;
and
|
|
·
|
may
adversely affect the then-prevailing market price for our common
stock.
|
The
value
of your investment in us may decline if any of these events occur.
If
we issue debt securities to acquire or finance a target business, our liquidity
may be adversely affected and the combined business may face significant
interest expense.
We
may
elect to enter into a business combination that requires us to issue debt
securities as part of the purchase price for a target business. If we issue
debt
securities, such issuances may result in an increase in interest expense for
the
post-combination business and may adversely affect our liquidity in the event
of:
|
·
|
a
default and foreclosure on our assets if our operating cash flow
after a
business combination were insufficient to pay principal and interest
obligations on our debt;
|
|
·
|
an
acceleration, which could occur even if we are then current in our
debt
service obligations if the debt securities have covenants that require
us
to meet certain financial ratios or maintain designated reserves,
and such
covenants are breached without waiver or
renegotiation;
|
|
·
|
a
required immediate payment of all principal and accrued interest,
if any,
if the debt securities are payable on demand;
or
|
|
·
|
our
inability to obtain any additional financing, if necessary, if the
debt
securities contain covenants restricting our ability to incur
indebtedness.
|
SP
Acq LLC, Steel Partners II, L.P. and our Directors collectively own
approximately 20% of our shares of common stock and may influence certain
actions requiring a stockholder vote.
SP
Acq
LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and
Walker collectively own approximately 20% of our issued and outstanding shares
of common stock (and together with its affiliate Steel Partners II, L.P., SP
Acq
LLC will own approximately 24.2% of our issued and outstanding shares of common
stock upon consummation of the co-investment). SP Acq LLC, Steel Partners II,
L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed, in
connection with the stockholder vote required to approve our initial business
combination, to vote all of their founder’s shares either for or against the
initial business combination as determined by the totality of the stockholder
vote and each of them together with our officers and directors has agreed that
if it, he or she acquires additional shares of common stock, it, he or she
will
vote all such acquired shares in favor of our initial business combination.
Accordingly, shares of common stock owned by SP Acq LLC, Steel Partners II,
L.P.
and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker will not have the same
voting or conversion rights as our public stockholders with respect to a
potential initial business combination, and none of SP Acq LLC, Steel Partners
II, L.P., nor any of our officers or directors will be able to exercise the
conversion rights with respect to any of our shares that it, he or she may
acquire. Any purchases of stock will be based solely upon the judgment of such
person or entity (and may be made to impact the shareholder vote to approve
a
business combination) and are expected to be effected through open market
purchases or privately negotiated transactions. However, with the exception
of
the co-investment none of SP Acq LLC, Steel Partners II, L.P., our officers
or
our directors has indicated to us any intent to purchase our securities We
believe that SP Acq LLC, Steel Partners II, L.P. and our officers and directors
will often be in possession of material non-public information about us that
will restrict their ability to make purchases of our securities.
Some
of our current officers and directors may resign upon consummation of our
initial business combination.
Our
ability to effect our initial business combination successfully will be largely
dependent upon the efforts of our officers and directors. However, while it
is
possible that some of our officers and directors will remain associated with
us
in various capacities following our initial business combination, some of them
may resign and some or all of the management of the target business may remain
in place.
We
may have only limited ability to evaluate the management of the target
business.
We
may
have only limited ability to evaluate the management of the target business.
Although we intend to closely scrutinize the management of a prospective target
business in connection with evaluating the desirability of effecting a business
combination, we cannot assure you that our assessment of management will prove
to be correct. These individuals may be unfamiliar with the requirements of
operating a public company and the securities laws, which could increase the
time and resources we must expend to assist them in becoming familiar with
the
complex disclosure and financial reporting requirements imposed on U.S. public
companies, including the requirement to maintain an effective system of internal
controls. This could be expensive and time-consuming and could lead to various
regulatory issues that may adversely affect the price of our stock.
We
may seek to effect our initial business combination with one or more privately
held companies, which may present certain challenges to us, including the lack
of available information about these companies.
In
pursuing our acquisition strategy, we may seek to effect our initial business
combination with one or more privately held companies. By definition, very
little public information exists about these companies, and we could be required
to make our decision on whether to pursue a potential initial business
combination on the basis of limited information.
We
will not be required to obtain an opinion from an investment banking firm as
to
the fair market value of a proposed business combination if our board of
directors independently determines that the target business has sufficient
fair
market value and it is possible that any opinion that we obtain would only
be
able to be relied upon by our board of directors and not by our
stockholders.
The
initial target business that we acquire must have a fair market value equal
to
at least 80% of the sum of the balance in the trust account plus the proceeds
of
the co-investment (excluding deferred underwriting discounts and commissions
of
approximately $17.3 million) at the time of our initial business combination.
There is no limitation on our ability to raise funds privately or through loans
that would allow us to acquire a target business or businesses with a fair
market value in an amount considerably greater than 80% of the sum of the
balance in the trust account plus the proceeds of the co-investment (excluding
deferred underwriting discounts and commissions as described above) at the
time
of our initial business combination. Other than the co-investment, we have
not
had any preliminary discussions, nor have any plans, agreements or commitments,
with respect to financing arrangements with any third party. The fair market
value of such business will be determined by our board of directors based on
all
relevant information available at the time, which may differ on a case-by-case
basis depending on the specific nature of the target and the structure of the
transaction, including the projected performance of the target based on its
potential under our business plan (as determined in part upon standards
generally accepted by the financial community). If our board is not able to
independently determine that the target business has a sufficient fair market
value, we will obtain an opinion from an unaffiliated, independent investment
banking firm which is a member of the Financial Industry Regulatory Authority,
Inc. with respect to the satisfaction of such criteria. We expect that any
such
opinion would be included in our proxy solicitation materials furnished to
our
stockholders in connection with the stockholder vote on our initial business
combination, and that such independent investment banking firm will be a
consenting expert. Although management has not consulted with any investment
banker in connection with such an opinion, it is possible that the opinion
would
only be able to be relied upon by our board of directors and not by our
stockholders. We will need to consider the cost in making a determination as
to
whether to hire an investment bank that will allow our stockholders to rely
on
its opinion, and will do so unless the cost is substantially (approximately
$50,000) in excess of what it would be otherwise. In the event that we obtain
an
opinion that we and the investment banker believe cannot be relied on by our
stockholders, we will include disclosure in the proxy statement providing
support for that belief. While our stockholders might not have legal recourse
against the investment banking firm in such case, the fact that an independent
expert has evaluated, and passed upon, the fairness of the transaction is a
factor our stockholders may consider in determining whether or not to vote
in
favor of the potential business combination. We will not be required to obtain
an opinion from an investment banking firm as to the fair market value of the
business if our board of directors independently determines that the target
business or businesses has sufficient fair market value to meet the threshold
criteria. In addition, if our board of directors has informed stockholders
that
it believes that a target business meets the 80% threshold criterion, the board
will provide stockholders with valuations or quantify the value of any target.
Further, in the event that we issue shares in order to acquire a target and
such
issuance causes our public stockholders to collectively become minority
stockholders, we will not be required to obtain an opinion or independently
opine on whether the transaction is fair to our stockholders.
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 convert their shares in connection
with
a proposed business combination to either tender their certificates to our
transfer agent at any time prior to the vote taken at the stockholder meeting
relating to such initial business combination or to deliver their shares to
the
transfer agent electronically using the Depository Trust Company’s DWAC
(Deposit/Withdrawal At Custodian) System. 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 this process or over the brokers or DTC, it may take significantly
longer than two weeks to obtain a physical stock certificate. 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, if it takes longer than we
anticipate for stockholders to deliver their shares, stockholders who wish
to
convert may be unable to meet the deadline for exercising their conversion
rights and thus may be unable to convert their shares. In addition, 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 $35 and it would
be up
to the broker whether or not to pass this cost on to the converting
holder.
We
may compete with investment vehicles of Steel Partners for access to Steel
Partners.
Certain
of the entities comprising Steel Partners sponsor and currently manage various
investment vehicles, and may in the future sponsor or manage additional
investment vehicles which, in each case, could result in us competing for access
to the benefits that we expect our relationship with Steel Partners to provide
to us.
We
expect to rely upon our access to Steel Partners investment professionals in
completing an initial business combination.
We
expect
that we will depend, to a significant extent, on our access to the investment
professionals of Steel Partners and the information and deal flow generated
by
Steel Partners investment professionals in the course of their investment and
portfolio management activities to identify and complete our initial business
combination. Consequently, the departure of a significant number of the
investment professionals of Steel Partners, could have a material adverse effect
on our ability to consummate an initial business combination.
Members
of our management team and our directors are and may in the future become
affiliated with entities engaged in business activities similar to those
intended to be conducted by us, and may have conflicts of interest in allocating
their time and business opportunities.
Members
of our management and our directors may in the future become affiliated with
other entities including other blank check companies engaged in business
activities similar to those intended to be conducted by us. As a result, members
of our management team may become aware of business opportunities that may
be
appropriate for presentation to us as well as the other entities with which
they
are or may be affiliated. Moreover, members of our management team are not
obligated to expend a specific number of hours per week or month on our
affairs.
Howard
M.
Lorber, a director of our company, is also the Chairman of the Board of Open
Acquisition Corp., which is a blank check company that intends to engage in
activities similar to those conducted by us. While the registration statement
filed by Open Acquisition has not been declared effective by the SEC and Open
Acquisition’s registration statement states that it intends to have
approximately $118.75 million in its trust account to fund acquisitions (as
opposed to over $400 million in our trust account), if and when the registration
statement of Open Acquisition is declared effective by the SEC Mr. Lorber may
owe fiduciary duties to present Open Acquisition with business opportunities
before presenting such opportunities to us.
Our
business opportunity right of first review agreement with Mr. Lichtenstein
and
Steel Partners II GP LLC (formerly Steel Partners, L.L.C.), does not apply
to
companies targeted for acquisition by any business in which Steel Partners
II,
L.P. directly or indirectly has an investment.
We
have
entered into a business opportunity right of first review agreement with Mr.
Lichtenstein and Steel Partners II GP LLC (formerly Steel Partners, L.L.C.)
that
provides that from the date of our initial public offering until the earlier
of
the consummation of our initial business combination or our liquidation in
the
event we do not consummate an initial business combination, we will have a
right
of first review with respect to business combination opportunities of Steel
Partners relating to companies that are not publicly traded on a stock exchange
or over-the-counter market with an enterprise value of between $300 million
and
$1.5 billion. However, this right of first review does not apply to companies
targeted for acquisition by any businesses in which Steel Partners II, L.P.
directly or indirectly has an investment (including Steel Partners Japan
Strategic Fund (Offshore), L.P. or businesses headquartered in or organized
under the laws of China. Currently, members of our management team are officers
or directors of the following entities in which Steel Partners II, L.P.,
directly or indirectly, has an investment: Adaptec, Inc., Angelica Corporation,
BNS Holding, Inc., Collins Industries, Inc., CoSine Communications, Inc., Del
Global Technologies Corp., Gateway Industries, Inc., GenCorp, Inc., Nathan’s
Famous Inc., NOVT Corporation, SL Industries, Inc., Vector Group Ltd., WebBank,
WebFinancial Corporation and WHX Corporation. In addition, such members of
our
management team could in the future become officers or directors of other
entities in which Steel Partners II, L.P., directly or indirectly, has an
investment. Due to those existing and future affiliations, members of our
management team and our directors may have fiduciary obligations to present
potential business opportunities to those entities prior to presenting them
to
us which could cause additional conflicts of interest. Accordingly, members
of
our management team may have conflicts of interest in determining to which
entity a particular business opportunity should be presented.
We
may use resources in researching acquisitions that are not consummated, which
could materially and adversely affect subsequent attempts to effect our initial
business combination.
We
expect
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. If a decision is
made
not to complete a specific business combination, the costs incurred up to that
point for the proposed transaction likely would not be recoverable. Furthermore,
even if an agreement is reached relating to a specific target business, we
may
fail to consummate the transaction for any number of reasons, including reasons
beyond our control, such as that 30% or more of our public stockholders vote
against the transaction and opt to convert their stock into a pro rata share
of
the trust account even if a majority of our stockholders approve the
transaction. Any such event will result in a loss to us of the related costs
incurred, which could materially and adversely affect subsequent attempts to
consummate an initial business combination.
Because
the founder’s shares will not participate in liquidation distributions by us, SP
Acq LLC, directors and our management team may have a conflict of interest
in
deciding if a particular target business is a good candidate for an initial
business combination.
SP
Acq
LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and
Walker have waived their right to receive distributions with respect to the
founder’s shares if we liquidate because we fail to complete a business
combination. Those shares of common stock and all of the warrants owned by
SP
Acq LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff
and Walker will be worthless if we do not consummate our initial business
combination. Since Mr. Lichtenstein may be deemed the beneficial owner of shares
held by SP Acq LLC and Steel Partners II, L.P., he may have a conflict of
interest in determining whether a particular target business is appropriate
for
us and our stockholders. This ownership interest may influence his motivation
in
identifying and selecting a target business and timely completing an initial
business combination.
The
exercise of discretion by our officers and directors in identifying and
selecting one or more suitable target businesses may 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
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 an initial
business combination and in the public stockholders’ best
interest.
Unless
we
consummate our initial business combination, our officers and directors and
Steel Partners and its employees 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 and the
amount of interest income from the trust account up to a maximum of $3.5 million
that may be released to us as working capital. These amounts are based on
management’s estimates of the funds needed to finance our operations until the
consummation of our initial business combination and to pay expenses in
identifying and consummating our initial business combination. Those estimates
may prove to be inaccurate, especially if a portion of the available proceeds
is
used to make a down payment in connection with our initial business combination
or pay exclusivity or similar fees or if we expend a significant portion in
pursuit of an initial business combination that is not consummated. Our officers
and directors may, as part of any business combination, negotiate the repayment
of some or all of any such expenses. If the target business’s owners do not
agree to such repayment, this could cause our management to view such potential
business combination unfavorably, thereby resulting in a conflict of interest.
The financial interest of our officers and directors and Steel Partners could
influence our officers’ and directors’ motivation in selecting a target business
and therefore there may be a conflict of interest when determining whether
a
particular business combination is in the stockholders’ best interest. In
addition, the proceeds we receive from the co-investment (as well as the
proceeds of our initial public offering not being placed in the trust account
or
the income interest earned on the trust account balance) may be used to repay
the expenses for which our directors may negotiate repayment as part of our
initial business combination.
We
will probably complete only one business combination with the proceeds of our
initial public offering and the sale of the additional founder’s warrants and
the co-investment units, meaning our operations will depend on a single
business.
The
net
proceeds from our initial public offering and the sale of the additional
founder’s warrants provided us with approximately $408,497,676 that we may use
to complete our initial business combination ($438,497,676 after the
consummation of the co-investment). Our initial business combination must be
with a target business or businesses with a fair market value of at least 80%
of
the sum of the balance in the trust account plus the proceeds of the
co-investment at the time of such business combination (excluding deferred
underwriting discounts and commissions of approximately $17.3 million). We
may
not be able to acquire more than one target business because of various factors,
including the existence of complex accounting issues and the requirement that
we
prepare and file pro forma financial statements with the SEC that present
operating results and the financial condition of several target businesses
as if
they had been operated on a combined basis. Additionally, we may encounter
numerous logistical issues if we pursue multiple target businesses, including
the difficulty of coordinating the timing of negotiations, proxy statement
disclosure and closings. We may also be exposed to the risk that our inability
to satisfy conditions to closing with one or more target businesses would reduce
the fair market value of the remaining target businesses in the combination
below the required threshold of 80% of the sum of the amount held in our trust
account plus the proceeds of the co-investment (excluding deferred underwriting
discounts and commissions of approximately $17.3 million). Due to these added
risks, we are more likely to choose a single target business with which to
pursue a business combination than multiple target businesses. Unless we combine
with a target business in a transaction in which the purchase price consists
substantially of common stock and/or preferred stock, it is likely we will
complete only our initial business combination with the proceeds of our initial
public offering and the sale of the additional founder’s warrants and the
co-investment units. Accordingly, the prospects for our success may depend
solely on the performance of a single business. If this occurs, our operations
will be highly concentrated and we will be exposed to higher risk than other
entities that have the resources to complete several business combinations,
or
that operate in diversified industries or industry segments.
If
we do not conduct an adequate due diligence investigation of a target business
with which we combine, we may be required subsequently to take write downs
or
write-offs, restructuring, and impairment or other charges that could have
a
significant negative effect on our financial condition, results of operations
and our stock price, which could cause you to lose some or all of your
investment.
In
order
to meet our disclosure and financial reporting obligations under the federal
securities laws, and in order to develop and seek to execute strategic plans
for
how we can increase the profitability of a target business, realize operating
synergies or capitalize on market opportunities, we must conduct a due diligence
investigation of one or more target businesses. Intensive due diligence is
time
consuming and expensive due to the operations, accounting, finance and legal
professionals who must be involved in the due diligence process. We may have
limited time to conduct such due diligence due to the requirement that we
complete our initial business combination by October 10, 2009. Even if we
conduct extensive due diligence on a target business with which we combine,
we
cannot assure you that this diligence will uncover all material issues relating
to a particular target business, or that factors outside of the target business
and outside of our control will not later arise. If our diligence fails to
identify issues specific to a target business or the environment in which the
target business operates, we may be forced to write-down or write-off assets,
restructure our operations, or incur impairment or other charges that could
result in our reporting losses. Even though these charges may be non-cash items
and not have an immediate impact on our liquidity, the fact that we report
charges of this nature could contribute to negative market perceptions about
us
or our common stock. In addition, charges of this nature may cause us to violate
net worth or other covenants to which we may be subject as a result of assuming
pre-existing debt held by a target business or by virtue of our obtaining
post-combination debt financing.
Our
outstanding warrants may adversely affect the market price of our common stock
and make it more difficult to effect our initial business
combination.
The
units
sold in our initial public offering included warrants to purchase 43,289,600
shares of common stock. SP Acq LLC, Steel Partners II, L.P. and Messrs. Bergamo,
LaBow, Lorber, Toboroff and Walker collectively hold warrants to purchase an
aggregate of 17,822,400 shares of our common stock (comprising the shares of
stock purchasable upon exercise of the 10,822,400 initial founder’s warrants and
the shares of common stock purchasable upon exercise of the 7,000,000 additional
founder’s warrants), and upon consummation of the co-investment Steel Partners
II, L.P. will hold an additional 3,000,000 co-investment warrants to purchase
shares of our common stock. If we issue common stock to complete our initial
business combination, the potential issuance of additional shares of common
stock on exercise of these warrants could make us a less attractive acquisition
vehicle to some target businesses. This is because exercise of any warrants
will
increase the number of issued and outstanding shares of our common stock and
reduce the value of the shares issued to complete our initial business
combination. Our warrants may make it more difficult to complete our initial
business combination or increase the purchase price sought by one or more target
businesses. Additionally, the sale or possibility of the sale of the shares
underlying the warrants could have an adverse effect on the market price for
our
common stock or our units, or on our ability to obtain other financing. If
and
to the extent these warrants are exercised, you may experience dilution to
your
holdings.
The
grant of registration rights to SP Acq LLC, Steel Partners II, L.P. and certain
of our directors may make it more difficult to complete our initial business
combination, and the future exercise of such rights may adversely affect the
market price of our common stock.
Pursuant
to an agreement we have entered into, (i) SP Acq LLC, Steel Partners II, L.P.
and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker can demand that we
register the resale of the founder’s units, the founder’s shares and the initial
founder’s warrants, and the shares of common stock issuable upon exercise of the
initial founder’s warrants, (ii) SP Acq LLC and Messrs. Bergamo, LaBow, Lorber,
Toboroff and Walker can demand that we register the additional founder’s
warrants and the shares of common stock issuable upon exercise of the additional
founder’s warrants and (iii) Steel Partners II, L.P. can demand that we register
the resale of the co-investment units, the co-investment shares and the
co-investment warrants and the shares of common stock issuable upon exercise
of
the co-investment warrants. The registration rights will be exercisable with
respect to the founder’s units, the founder’s shares, the initial founder’s
warrants and shares of common stock issuable upon exercise of such warrants,
the
co-investment units, the co-investment shares and co-investment warrants and
shares of common stock issuable upon exercise of such warrants at any time
commencing three months prior to the date on which the relevant securities
are
no longer subject to transfer restrictions, and with respect to the additional
founder’s warrants and the underlying shares of common stock at any time after
the execution of a definitive agreement for an initial business combination.
We
will bear the cost of registering these securities. If SP Acq LLC, Steel
Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker
exercise their registration rights in full, there will be an additional
13,822,400 shares of common stock (including 3,000,000 co-investment shares)
and
up to 20,822,400 shares (including 3,000,000 shares issuable upon the exercise
of co-investment warrants) of common stock issuable on exercise of the warrants
eligible for trading in the public market. The registration and availability
of
such a significant number of securities for trading in the public market may
have an adverse effect on the market price of our common stock. In addition,
the
existence of the registration rights may make our initial business combination
more costly or difficult to conclude. This is because the stockholders of the
target business may increase the equity stake they seek in the combined entity
or ask for more cash consideration to offset the negative impact on the market
price of our common stock that is expected when the securities owned by SP
Acq
LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and
Walker are registered.
If
adjustments are made to the warrants, you may be deemed to receive a taxable
distribution without the receipt of any cash.
U.S.
holders of units or warrants may, in certain circumstances, be deemed to have
received distributions includible in income if adjustments are made to the
warrants, even though holders would have not received any cash or property
as a
result of such adjustments. In certain circumstances, the failure to provide
for
such an adjustment may also result in a constructive distribution to you. In
addition, non-U.S. holders of units or warrants may, in certain circumstances,
be deemed to have received a distribution subject to U.S. federal withholding
tax requirements.
If
we are deemed to be an investment company, we must meet burdensome compliance
requirements and restrictions on our activities, which may increase the
difficulty of completing a business combination.
If
we are
deemed to be an investment company under the Investment Company Act of 1940
(the
“Investment Company Act”), the nature of our investments and the issuance of our
securities may be subject to various restrictions. These restrictions may make
it difficult for us to complete our initial business combination. In addition,
we may be subject to burdensome compliance requirements and may have
to:
|
·
|
register
as an investment company;
|
|
·
|
adopt
a specific form of corporate structure;
and
|
|
·
|
report,
maintain records and adhere to voting, proxy, disclosure and other
requirements.
|
We
do not
believe that our principal activities will subject us to the Investment Company
Act. In this regard, our agreement with the trustee states that proceeds in
the
trust account will be invested only in “government securities” and one or more
money market funds, selected by us, which invest principally in either
short-term securities issued or guaranteed by the United States having a rating
in the highest investment category granted thereby by a recognized credit rating
agency at the time of acquisition or tax exempt municipal bonds issued by
governmental entities located within the United States. This investment
restriction is intended to facilitate our not being considered an investment
company under the Investment Company Act. If we are deemed to be subject to
the
Investment Company Act, compliance with these additional regulatory burdens
would increase our operating expenses and could make our initial business
combination more difficult to complete.
The
loss of Mr. Lichtenstein could adversely affect our ability to complete our
initial business combination.
Our
ability to consummate a business combination is dependent to a large degree
upon
Mr. Lichtenstein. We believe that our success depends on his continued service
to us, at least until we have consummated a business combination. Due to his
ownership of SP Acq LLC and his relationship with Steel Partners II, L.P.,
Mr.
Lichtenstein has incentives to remain with us. Nevertheless, we do not have
an
employment agreement with him, or key-man insurance on his life. He may choose
to devote his time to other affairs, or may become unavailable to us for reasons
beyond his control, such as death or disability. The unexpected loss of his
services for any reason could have a detrimental effect on us.
The
American Stock Exchange may delist our securities, which could limit investors’
ability to transact in our securities and subject us to additional trading
restrictions.
While
our
securities are currently listed on the American Stock Exchange, we cannot assure
you that our securities will continue to be listed. Additionally, it is likely
that the American Stock Exchange would require us to file a new initial listing
application and meet its initial listing requirements, as opposed to its more
lenient continued listing requirements, at the time of our initial business
combination. We cannot assure you that we will be able to meet those initial
listing requirements at that time.
If
the
American Stock Exchange does not list our securities, or subsequently delists
our securities from trading, we could face significant consequences,
including:
|
·
|
a
limited availability for market quotations for our
securities;
|
|
·
|
reduced
liquidity with respect to our
securities;
|
|
·
|
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 common
stock;
|
|
·
|
limited
amount of news and analyst coverage for our company;
and
|
|
·
|
a
decreased ability to issue additional securities or obtain additional
financing in the future.
|
In
addition, we would no longer be subject to American Stock Exchange rules,
including rules requiring us to have a certain number of independent directors
and to meet other corporate governance standards.
If
we acquire a target business with operations located outside the United States,
we may encounter risks specific to other countries in which such target business
operates.
If
we
acquire a company that has operations outside the United States, we will be
exposed to risks that could negatively impact our future results of operations
following our initial business combination. The additional risks we may be
exposed to in these cases include, but are not limited to:
|
·
|
tariffs
and trade barriers;
|
|
·
|
regulations
related to customs and import/export
matters;
|
|
·
|
tax
issues, such as tax law changes and variations in tax laws as compared
to
the U.S.;
|
|
·
|
cultural
and language differences;
|
|
·
|
foreign
exchange controls;
|
|
·
|
crime,
strikes, riots, civil disturbances, terrorist attacks and
wars;
|
|
·
|
deterioration
of political relations with the United States;
and
|
|
·
|
new
or more extensive environmental
regulation.
|
Foreign
currency fluctuations could adversely affect our business and financial
results.
In
addition, a target business with which we combine may do business and generate
sales within other countries. Foreign currency fluctuations may affect the
costs
that we incur in such international operations. It is also possible that some
or
all of our operating expenses may be incurred in non-U.S. dollar currencies.
The
appreciation of non-U.S. dollar currencies in those countries where we have
operations against the U.S. dollar would increase our costs and could harm
our
results of operations and financial condition.
Because
we must furnish our stockholders with target business financial statements
prepared in accordance with and reconciled to U.S. generally accepted accounting
principles, we will not be able to complete an initial business combination
with
some prospective target businesses unless their financial statements are first
reconciled to U.S. generally accepted accounting
principles.
The
federal securities laws require that a business combination meeting certain
financial significance tests include historical and/or pro forma financial
statement disclosure in periodic reports and proxy materials submitted to
stockholders. Our initial business combination must be with a target business
that has a fair market value of at least 80% of the sum of the balance in the
trust account plus the proceeds of the co-investment (excluding deferred
underwriting discounts and commissions of approximately $17.3 million) at the
time of our initial business combination. We will be required to provide
historical and/or pro forma financial information to our stockholders when
seeking approval of a business combination with one or more target businesses.
These financial statements must be prepared in accordance with, or be reconciled
to, U.S. generally accepted accounting principles, or GAAP, and the historical
financial statements must be audited in accordance with the standards of the
Public Company Accounting Oversight Board (United States), or PCAOB. If a
proposed target business, including one located outside of the U.S., does not
have financial statements that have been prepared in accordance with, or that
can be reconciled to, U.S. GAAP and audited in accordance with the standards
of
the PCAOB, we will not be able to acquire that proposed target business. These
financial statement requirements may limit the pool of potential target
businesses with which we may combine.
ITEM
1B. Unresolved
Staff Comments
Not
applicable
ITEM
2. Properties
We
currently maintain our executive offices at 590 Madison Avenue, 32nd Floor,
New
York, New York 10022. The cost for this space is included in the $10,000
per-month fee described above that Steel Partners, Ltd. charge us for office
space, administrative services and secretarial support from the consummation
of
our initial public offering until the earlier offer consummation of a business
combination or our liquidation. Prior to the consummation of our initial public
offering, Steel Partners, Ltd. provided us with office space, administrative
services and secretarial support at no charge. We believe, based on rents and
fees for similar services in the New York City metropolitan area, that the
fee
that will be charged by Steel Partners, Ltd. is at least as favorable as we
could have obtained from an unaffiliated person. We consider our current office
space adequate for our current operations.
ITEM
3. Legal
Proceedings
None
ITEM
4. Submission
of Matters to a Vote of Security Holders
Not
applicable.
ITEM
5. Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Our
equity securities trade on the American Stock Exchange. Each of our units
consists of one share of common stock and one warrant and trades on the American
Stock Exchange under the symbol “DSP.U.” On November 2, 2007, the warrants and
common stock underlying our units began to trade separately on the American
Stock Exchange under the symbols “DSP.WS” and “DSP,” respectively. Each warrant
entitles the holder to purchase one share of our common stock at a price of
$7.50 commencing on the later of our consummation of a business combination
or
October 16, 2008, provided in each case that there is an effective registration
statement covering the shares of common stock underlying the warrants in effect.
The warrants expire on October 16, 2012, unless earlier redeemed.
The
following table sets forth, for the fourth quarter of the year ended December
31, 2007, the high and low sales price of our units, common stock and warrants
as reported on the American Stock Exchange. Prior to October 10, 2007, there
was
no established public trading market for our securities.
Quarter
Ended |
|
Units
|
|
Common
Stock
|
|
Warrants
|
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
Fourth
Quarter of year ended December 31, 2007 (from October 10,
2007)
|
|
$
|
10.11
|
|
$
|
9.76
|
|
$
|
9.25
|
|
$
|
9.00
|
|
$
|
1.00
|
|
$
|
0.87
|
|
Holders
of Common Equity
On
March
20, 2008, there were eight holders of record of our common stock, one holder
of
record of our units and eight holders of record of our warrants. Such numbers
do
not include beneficial owners holding shares, warrants or units through nominee
names.
Dividends
Except
for the unit dividend of 0.15 units for each unit outstanding that was effected
on August 8, 2007 and the unit dividend of one-third of a unit for each
unit that was outstanding that was effected on September 4, 2007, we have
not paid any dividends on our common stock to date and we do not intend to
pay
cash dividends prior to the consummation of a business combination. After we
complete our initial business combination, the payment of dividends will depend
on our revenues and earnings, if any, capital requirements and general financial
condition. The payment of dividends after our initial business combination
will
be within the discretion of our then-board of directors. Our board of directors
currently intends to retain any earnings for use in our business operations
and,
accordingly, we do not anticipate the board declaring any dividends in the
foreseeable future.
Recent
Sales of Unregistered Securities
On
March
22, 2007, SP Acq LLC, which is controlled by Mr. Lichtenstein, purchased
11,500,000 of our units.
On
June
25, 2007, a total of 500,000 founder’s units were sold by SP Acq LLC to Anthony
Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S. Nicholas
Walker, in private transactions and subject to the succeeding sentence, SP
Acq
LLC agreed to sell 662,791 founder’s units to Steel Partners II, L.P., an
affiliate of SP Acq LLC, pursuant to the purchase agreement dated March 30,
2007.
On
August
8, 2007, we declared a unit dividend of 0.15 units for each outstanding share
of
common stock. On September 4, 2007, we declared a unit dividend of one-third
of
a unit for each outstanding share of common stock. Pursuant to an adjustment
agreement we entered with SP Acq LLC, Steel Partners II, L.P. and Messrs.
Bergamo, LaBow, Lorber, Toboroff and Walker each of whom agreed to assign their
right to receive the additional founder’s units they received pursuant to the
dividend to SP Acq LLC.
On
March
22, 2007, SP Acq LLC entered into an agreement with us to purchase 5,250,000
warrants at a price of $1.00 per warrant, upon the consummation of the offering.
Subsequent to this agreement, Messrs. Bergamo, LaBow, Lorber, Toboroff and
Walker agreed that they would purchase a total of 500,000 of the additional
founder’s warrants from SP Acq LLC. These warrants were purchased on October 16,
2007, the date of the Company’s initial public offering.
On
October 4, 2007, SP Acq LLC agreed to purchase an additional 1,750,000
additional founder’s warrants at a price of $1.00 per warrant immediately prior
to the consummation of our initial public offering resulting in an aggregate
purchase of 7,000,000 additional founder’s warrants. The additional founder’s
warrants are non-redeemable so long as they are held by SP Acq LLC or its
permitted transferees. These warrants were purchased on October 16, 2007, the
date of the Company’s initial public offering.
On
October 31, 2007 SP Acq LLC transferred 6,197 units to Steel Partners II, L.P.
in connection with the partial exercise of the underwriters’ over-allotment
option pursuant to the purchase agreement dated March 30, 2007. In addition,
pursuant to an adjustment agreement, SP Acq LLC forfeited a total of 667,600
units.
Securities
Authorized for Issuance Under Equity Compensation Plans
We
have
no compensation plans under which equity securities are authorized for
issuance.
Use
of Proceeds from our Initial Public Offering
On
October 16, 2007, we closed our initial public offering of 40,000,000 units
with each unit consisting of one share of common stock and one warrant, each
to
purchase one share of our common stock at a price of $7.50 per share. On
October 31, 2007 the underwriters purchased an additional 3,289,600 units
pursuant to an over-allotment option. All of the units registered were sold
at
an offering price of $10.00 per unit and generated gross proceeds of
$432,896,000. The securities sold in our initial public offering were registered
under the Securities Act of 1933 on a registration statement on Form S-1 (No.
333-142696). The SEC declared the registration statement effective on
October 10, 2007. UBS Investment Bank acted as sole bookrunning manager and
representative of Ladenburg Thalmann & Co. Inc. and Jefferies &
Company.
We
received net proceeds of approximately $426,909,120 from our initial public
offering (including proceeds from the exercise by the underwriters of their
over-allotment option). Of those net proceeds, approximately $17,315,840 is
attributable to the deferred underwriters’ discount. We retained $1,000,000 of
the proceeds to pay offering expenses and for working capital purposes and
deposited $425,909,120 into a trust account. The funds in the trust account
will
be part of the funds distributed to our public stockholders in the event we
are
unable to complete a business combination. Unless and until a business
combination is consummated, and except for a portion of the interest earned
on
the funds in the trust account that is available to the company, the proceeds
held in the trust account will not be available to us. The net proceeds
deposited into the trust account remain on deposit in the trust account and
earned $2,944,393 in interest through December 31, 2007. Pursuant to the
terms of the investment management trust agreement, $1,485,505 of trust interest
income has been released to the Company through December 31, 2007. The balance
in the trust account at December 31, 2007 was $426,898,303.
ITEM
6. Selected
Financial Data
The
following table summarizes the relevant financial data for our business and
should be read with our financial statements, which are included in this
report.
Statement
of Income Data:
|
|
For
the period from
February
14, 2007
(date
of inception) to
December
31, 2007
|
|
Formation
and operating costs
|
|
$
|
264,373
|
|
Loss
from operations
|
|
|
(264,373
|
)
|
Interest
income
|
|
|
2,950,473
|
|
Interest
expense
|
|
|
9,435
|
|
Income
before tax
|
|
|
2,676,665
|
|
Provision
for taxes on income
|
|
|
(1,210,372
|
)
|
Net
income
|
|
$
|
1,466,293
|
|
Net
income per common share, basic and diluted
|
|
$
|
0.09
|
|
Shares
used in computing net income per share, basic and diluted
|
|
|
17,245,726
|
|
Balance
Sheet Data:
|
|
As
of
December
31, 2007
|
|
Working
capital
|
|
$
|
409,863,563
|
|
Total
assets
|
|
|
428,945,449
|
|
Total
liabilities
|
|
|
18,956,480
|
|
Value
of common stock which may be redeemed for cash at conversion
value
|
|
|
127,772,726
|
|
Stockholders’
equity
|
|
|
282,216,243
|
|
ITEM
7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
We
are a
blank check company organized under the laws of the State of Delaware on
February 14, 2007. We were formed for the purpose of acquiring, through a
merger, capital stock exchange, asset acquisition or other similar business
combination, one or more businesses or assets. We consummated our initial public
offering on October 16, 2007. We are currently in the process of evaluating
and
identifying targets for a business combination. We intend to utilize cash from
our initial public offering, our capital stock, debt or a combination of cash,
capital stock and debt, in effecting a business combination. The issuance of
additional shares of our capital stock:
|
·
|
may
significantly reduce the equity interest of our
stockholders;
|
|
·
|
will
likely cause a change in control if a substantial number of our shares
of
common stock are issued, which may affect, among other things, our
ability
to use our net operating loss carry forwards, if any, and may also
result
in the resignation or removal of one or more of our current officers
and
directors; and
|
|
·
|
may
adversely affect prevailing market prices for our common
stock.
|
Similarly,
if we issue debt securities, it could result in:
|
·
|
default
and foreclosure on our assets if our operating revenues after a business
combination were insufficient to pay 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 contained
covenants that require the maintenance of certain financial ratios
or
reserves and any such covenant were breached without a waiver or
renegotiation of that covenant;
|
|
·
|
our
immediate payment of all principal and accrued interest, if any,
if the
debt security were payable on demand;
and
|
|
·
|
our
inability to obtain additional financing, if necessary, if the debt
security contained covenants restricting our ability to do
so.
|
Results
of Operations and Known Trends Or Future Events
We
have
neither engaged in any operations nor generated any revenues to date. We will
not generate any operating revenues until after completion of our initial
business combination, at the earliest. We will continue to generate
non-operating income in the form of interest income on cash and cash
equivalents. Net income for the period from February 14, 2007 (inception)
through December 31, 2007 was $1,466,293, which consisted of $2,950,473 in
interest income partially offset by $264,373 in formation and operating
expenses, $9,435 in interest expense and $1,210,372 in taxes on income. The
trustee of the trust account will pay any taxes resulting from interest accrued
on the funds held in the trust account out of the funds held in the trust
account. In addition, we will incur expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance),
as
well as for due diligence expenses.
Off-Balance
Sheet Arrangements
We
have
never entered into any off-balance sheet financing arrangements and have never
established any special purpose entities. We have not guaranteed any debt or
commitments of other entities or entered into any options on non-financial
assets.
Contractual
Obligations
We
do not
have any long term debt, capital lease obligations, operating lease obligations,
purchase obligations or other long term liabilities.
Liquidity
and Capital Resources
The
net
proceeds from (i) the sale of the units in our initial public offering
(including the underwriters’ over-allotment option), after deducting offering
expenses of approximately $1,095,604 and underwriting discounts and commissions
of approximately $30,302,720, together (ii) with $7,000,000 from SP Acq LLC’s
investment in the additional founder’s warrants, were approximately
$408,497,676. We expect that most of the proceeds held in the trust account
will
be used as consideration to pay the sellers of a target business or businesses
with which we ultimately complete our initial business combination. We expect
to
use substantially all of the net proceeds of our initial public offering not
in
the trust account to pay expenses in locating and acquiring a target business,
including identifying and evaluating prospective acquisition candidates,
selecting the target business, and structuring, negotiating and consummating
our
initial business combination. To the extent that our capital stock or debt
financing is used in whole or in part as consideration to effect our initial
business combination, any proceeds held in the trust account as well as any
other net proceeds not expended will be used to finance the operations of the
target business.
We
do not
believe we will need additional financing in order to meet the expenditures
required for operating our business prior to our initial business combination.
However, we will rely on interest earned of up to $3.5 million on the trust
account to fund such expenditures and, to the extent that the interest earned
is
below our expectation, we may have insufficient funds available to operate
our
business prior to our initial business combination. Moreover, in addition to
the
co-investment we may need to obtain additional financing to consummate our
initial business combination. We may also need additional financing because
we
become obligated to convert into cash a significant number of shares of public
stockholders voting against our initial business combination, in which case
we
may issue additional securities or incur debt in connection with such business
combination. Following our initial business combination, if cash on hand is
insufficient, we may need to obtain additional financing in order to meet our
obligations.
ITEM
7A. Quantitative
and Qualitative Disclosures About Market Risk
The
net
proceeds of our initial public offering, including amounts in the trust account,
will be invested in U.S. government treasury bills with a maturity of 180 days
or less or in money market funds meeting certain conditions under Rule 2a-7
under the Investment Company Act. Due to the short-term nature of these
investments, we believe there will be no associated material exposure to
interest rate risk.
ITEM
8. Financial
Statements and Supplementary Data
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders of SP
Acquisition Holdings, Inc.
We
have
audited the accompanying balance sheet of SP Acquisition Holdings, Inc. (a
corporation in the development stage) (the “Company”) as of December 31, 2007
and the related statements of income, stockholders’ equity and cash flows for
the cumulative period from February 14, 2007 (date of 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 Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements, 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 SP Acquisition Holdings, Inc.
(a
corporation in the development stage) as of December 31, 2007, and the results
of its operations and its cash flows for the cumulative period from February
14,
2007 (date of inception) to December 31, 2007, in conformity with accounting
principles generally accepted in the United States of America.
/s/
GRANT
THORNTON LLP
New
York,
New York
March
25,
2008
SP
ACQUISITION HOLDINGS, INC.
(a
corporation in the development stage)
BALANCE
SHEET
|
|
December
31,
2007
|
|
Current
Assets:
|
|
|
|
Cash
|
|
$
|
1,317,688
|
|
Cash
and cash equivalents, held in Trust
|
|
|
426,898,303
|
|
Accrued
interest receivable on Trust assets
|
|
|
469,705
|
|
Other
receivable
|
|
|
26,323
|
|
Prepaid
expenses
|
|
|
108,024
|
|
Total
current assets
|
|
|
428,820,043
|
|
Deferred
tax assets - non current
|
|
|
125,406
|
|
|
|
$
|
428,945,449
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
449,194
|
|
Note
payable to affiliate
|
|
|
250,000
|
|
Advances
payable to affiliate
|
|
|
26,818
|
|
Interest
payable to affiliate
|
|
|
9,435
|
|
Accrued
expenses
|
|
|
96,915
|
|
Income
taxes payable
|
|
|
808,278
|
|
Other
payables- deferred underwriting fee
|
|
|
17,315,840
|
|
Total
current liabilities
|
|
|
18,956,480
|
|
|
|
|
|
|
Common
stock, subject to possible conversion, 12,986,879 shares at conversion
value
|
|
|
127,772,726
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
—
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
Preferred
stock, $.001 par value; 1,000,000 authorized, none issued
|
|
|
—
|
|
Common
stock, $.001 par value, 200,000,000 shares authorized; 41,125,121
shares
issued and outstanding (excluding 12,986,879 shares subject to possible
conversion) at December 31, 2007
|
|
|
41,125
|
|
Additional
paid-in capital
|
|
|
280,708,825
|
|
Retained
earnings accumulated during the development stage
|
|
|
1,466,293
|
|
Total
stockholders’ equity
|
|
|
282,216,243
|
|
|
|
$
|
428,945,449
|
|
The
accompanying notes are an integral part of these financial
statements.
SP
ACQUISITION HOLDINGS, INC.
(a
corporation in the development stage)
STATEMENT
OF INCOME
|
|
For
the period from
February
14, 2007
(date
of inception) to
December
31, 2007
|
|
|
|
|
|
|
|
|
|
Formation
and operating costs
|
|
$
|
264,373
|
|
Loss
from operations
|
|
|
(264,373
|
)
|
Interest
income - Trust
|
|
|
2,944,393
|
|
Interest
income - other
|
|
|
6,080
|
|
Interest
expense
|
|
|
(9,435
|
)
|
Income
before tax
|
|
|
2,676,665
|
|
Provision
for income taxes
|
|
|
(1,210,372
|
)
|
Net
income
|
|
$
|
1,466,293
|
|
|
|
|
|
|
Net
income per common share, basic and diluted
|
|
$
|
0.09
|
|
Weighted
average number of common shares outstanding, basic and
diluted
|
|
|
17,245,726
|
|
The
accompanying notes are an integral part of these financial
statements.
SP
ACQUISITION HOLDINGS, INC.
(a
corporation in the development stage)
STATEMENT
OF CASH FLOWS
|
|
February
14, 2007 (date of inception) to December 31, 2007
|
|
Cash
flows from operating activities:
|
|
|
|
Net
income
|
|
$
|
1,466,293
|
|
|
|
|
|
|
Changes
in asset and liability accounts:
|
|
|
|
|
Interest
receivable
|
|
|
(469,705
|
)
|
Other
receivable
|
|
|
(26,323
|
)
|
Prepaid
expenses
|
|
|
(108,024
|
)
|
Deferred
tax asset - non current
|
|
|
(125,406
|
)
|
Accounts
payable
|
|
|
65,203
|
|
Advances
payable to affiliate
|
|
|
26,818
|
|
Interest
payable to affiliate
|
|
|
9,435
|
|
Accrued
expenses
|
|
|
96,915
|
|
Income
taxes payable
|
|
|
808,278
|
|
Net
cash provided by operating activities
|
|
|
1,743,484
|
|
Cash
flows from investing activities:
|
|
|
|
|
Cash
and cash equivalents held in Trust
|
|
|
(426,898,303
|
)
|
Net
cash used in investing activities
|
|
|
(426,898,303
|
)
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
Proceeds
from issuance of founder’s units
|
|
|
25,000
|
|
Proceeds
from issuance of additional founder’s warrants
|
|
|
7,000,000
|
|
Proceeds
from note payable to affiliate
|
|
|
250,000
|
|
Proceeds
from initial public offering
|
|
|
432,896,000
|
|
Payment
of offering costs
|
|
|
(13,698,493
|
)
|
Net
cash provided by financing activities
|
|
|
426,472,507
|
|
Net
increase in cash
|
|
|
1,317,688
|
|
Cash
at the beginning of the period
|
|
|
—
|
|
Cash
at the end of the period
|
|
$
|
1,317,688
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash financing activities:
|
|
|
|
|
Unpaid
offering costs
|
|
$
|
383,991
|
|
Accrual
of deferred underwriters’ discount
|
|
$
|
17,315,840
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
Cash
payments for taxes on income
|
|
$
|
527,500
|
|
The
accompanying notes are an integral part of these financial
statements.
SP
ACQUISITION HOLDINGS, INC.
(a
corporation in the development stage)
STATEMENT
OF STOCKHOLDERS’ EQUITY
|
|
Common
Stock
Shares
|
|
Common
Stock
Amount
|
|
Additional
Paid-in Capital
|
|
Retained
Earnings Accumulated During the Development Stage
|
|
Total
Stockholders’ Equity
|
|
Proceeds
from founder’s units issued on March 22, 2007
|
|
|
11,500,000
|
|
$
|
11,500
|
|
$
|
13,500
|
|
$
|
—
|
|
$
|
25,000
|
|
Proceeds
from issuance of 40,000,000 units, net of underwriters’ commissions and
offering expenses of $29,030,049 on October 16, 2007
|
|
|
40,000,000
|
|
|
40,000
|
|
|
370,929,951
|
|
|
—
|
|
|
370,969,951
|
|
Net
proceeds subject to possible conversion of 11,999,999
shares
|
|
|
(11,999,999
|
)
|
|
(12,000
|
)
|
|
(118,187,990
|
)
|
|
|
|
|
(118,199,990
|
)
|
Proceeds
from issuance of 7,000,000 warrants on October 16, 2007
|
|
|
—
|
|
|
—
|
|
|
7,000,000
|
|
|
—
|
|
|
7,000,000
|
|
Proceeds
from issuance of 3,289,600 units, net of underwriters’ commissions and
offering expenses of $2,368,275 on October 31, 2007
|
|
|
3,289,600
|
|
|
3,290
|
|
|
30,524,435
|
|
|
|
|
|
30,527,725
|
|
Net
proceeds subject to possible conversion of 986,880 shares
|
|
|
(986,880
|
)
|
|
(987
|
)
|
|
(9,571,749
|
)
|
|
|
|
|
(9,572,736
|
)
|
Founder’s
Units forfeited on October 31, 2007
|
|
|
(677,600
|
)
|
|
(678
|
)
|
|
678
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
1,466,293
|
|
|
1,466,293
|
|
Balances
at December 31, 2007
|
|
|
41,125,121
|
|
$
|
41,125
|
|
$
|
280,708,825
|
|
$
|
1,466,293
|
|
$
|
282,216,243
|
|
The
accompanying notes are an integral part of these financial
statements.
SP
Acquisition Holdings, Inc.
(a
corporation in the development stage)
Notes
to Financial Statements
NOTE
A — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
SP
Acquisition Holdings, Inc. (a corporation in the development stage) (the
“Company”) was incorporated in Delaware on February 14, 2007. The Company was
formed to acquire one or more businesses or assets through a merger, capital
stock exchange, asset acquisition, stock purchase or other similar business
combination (“Business Combination”). The Company has neither engaged in any
operations nor generated revenue to date. All activity through December 31,
2007
relates to the formation of the Company and its initial public offering
described below and in Note C. The Company will not generate any operating
revenues until after the completion of its initial business combination. Since
the completion of its initial public offering, the Company generates
non-operating income in the form of interest income on cash and cash
equivalents.
The
Company is considered to be in the development stage as defined in Statement
of
Financial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting By
Development Stage Enterprises,” and is subject to the risks associated with
activities of development stage companies.
The
Company was initially formed and capitalized through the sale of founder’s units
to a related entity, SP Acq LLC (See Note D).
The
registration statement for the Company’s initial public offering (“Offering”)
was declared effective October 10, 2007. The Company consummated the Offering
on
October 16, 2007 and recorded proceeds of $370,969,951, net of the underwriters’
discount of $28,000,000 and offering costs of $1,030,049. Simultaneously with
the consummation of the Offering, the Company consummated the private sale
of
7,000,000 warrants to SP Acq LLC at a price of $1 per warrant (an aggregate
purchase price of $7,000,000) (see Note D).
On
October 31, 2007, the underwriters exercised a portion and terminated the
balance of their over allotment option granted in connection with the initial
public offering and consummated the purchase of an additional 3,289,600 units
at
a price of $10.00 per unit, for gross proceeds of $32,896,000 or net proceeds
of
$30,527,725, net of the underwriters’ fee of $2,302,720 and offering costs of
$65,555.
The
Company’s management has broad discretion with respect to the specific
application of the net proceeds of the Offering, although substantially all
of
the net proceeds of the Offering are intended to be generally applied toward
consummating a Business Combination. Furthermore, there is no assurance that
the
Company will be able to successfully effect a Business Combination.
A
total
of $425,909,120 (or approximately $9.84 per share), including $371,000,000
of
the net proceeds from the Offering, $7,000,000 from the sale of warrants to
the
founding shareholders (see Note D), $30,593,280 of net proceeds of the over
allotment issuance and $17,315,840 of deferred underwriting discounts and
commissions, has been placed in a trust account at JPMorgan Chase Bank, N.A.,
with the Continental Stock Transfer & Trust Company as trustee (the “Trust”)
which is to be 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. Except
for
up to $3,500,000 of Trust interest income to be released to the Company to
fund
expenses relating to investigating and selecting a target business and other
working capital requirements, and any additional amounts needed to pay income
taxes on the Trust earnings, the proceeds held in the Trust will not be released
from the Trust until the earlier of the completion of the Company’s Business
Combination or the liquidation of the Company. As of December 31, 2007, the
balance in the Trust account was $426,898,303, interest receivable on trust
assets was $469,705 and the Trust has released $1,485,505 of interest income
to
the Company.
The
placing of funds in the Trust may not protect those funds from third party
claims against the Company. Although the Company will seek to have all vendors
and service providers (which would include any third parties we engaged to
assist us in any way in connection with our search for a target business) and
prospective target businesses execute agreements with the Company waiving any
right, title, interest or claim of any kind in or to any monies held in the
Trust, there is no guarantee that they will execute such
agreements.
SP
Acq
LLC has agreed that it will be liable to the Company if and to the extent claims
by third parties reduce the amounts in the trust account available for payment
to our stockholders in the event of a liquidation and the claims are made by
a
vendor for services rendered, or products sold, to us, or by a prospective
target business. A “vendor” refers to a third party that enters into an
agreement with us to provide goods or services to us. However, the agreement
entered into by SP Acq LLC specifically provides for two exceptions to the
indemnity given: there will be no liability (1) as to any claimed amounts owed
to a third party who executed a legally enforceable waiver, or (2) as to any
claims under our indemnity of the underwriters of our initial public offering
against certain liabilities, including liabilities under the Securities Act.
Furthermore, there could be claims from parties other than vendors, third
parties with which we entered into a contractual relationship or target
businesses that would not be covered by the indemnity from SP Acq LLC, such
as
shareholders and other claimants who are not parties in contract with us who
file a claim for damages against us.
The
Company, after signing a definitive agreement for the acquisition of a target
business, will submit such transaction for stockholder approval. In the event
that 30% or more of the outstanding stock (excluding, for this purpose, those
shares of common stock issued prior to the Offering) vote against the Business
Combination and exercise their conversion rights described below, the Business
Combination will not be consummated. Public stockholders voting against a
Business Combination will be entitled to convert their common stock to cash
at a
per share conversion price equal to the aggregate amount then in the Trust
account (before payment of deferred underwriters fees and including interest,
net of any income taxes payable on such interest, which shall be paid from
the
Trust, and net of interest income of up to $3.5 million earned on the Trust
balance previously released to the Company to fund working capital
requirements), if the Business Combination is approved and consummated. However,
voting against the Business Combination alone will not result in election to
exercise a stockholder’s conversion rights. A stockholder must also
affirmatively exercise such conversion rights at or prior to the time the
Business Combination is voted upon by the stockholders. All of the Company’s
stockholders prior to the Offering, and all of the officers and directors of
the
Company have agreed to vote all of the shares of the Company stock held by
them
in accordance with the vote of the majority in interest of all other
stockholders of the Company.
In
the
event the Company does not consummate a Business Combination on or before
October 10, 2009, the proceeds held in the Trust, including the unpaid portion
of the underwriters’ commission (See Note D) will be distributed to the
Company’s public stockholders (excluding SP Acq LLC, Steel Partners II, L.P. and
Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S.
Nicholas Walker, each a director of the Company), to the extent of their
pre-Offering stock holdings.
NOTE
B — BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
1. Development
Stage Company:
The
Company complies with the reporting requirements of SFAS No. 7, “Accounting and
Reporting by Development Stage Enterprises.”
As
indicated in the accompanying financial statements, the Company has incurred
substantial organizational, legal, accounting and offering costs in the pursuit
of its financing plans and expects to incur additional costs in pursuit of
its
acquisition plans. As of December 31, 2007, the Company had cash on hand of
$1,317,688 as well as $426,898,303 of cash and cash equivalents in the Trust.
Under terms of the investment management trust agreement, up to $3,500,000
of
interest may be released to the Company in such amounts and such intervals
as we
request, subject to availability. At December 31, 2007 $1,485,505 of Trust
interest has been released to the Company. Management has reviewed its cash
requirements as of December 31, 2007 and believes that its cash on hand, along
with the funds available to it from the interest income from the Trust (See
Note
A) is sufficient to cover its expenses for the next twelve months.
As
discussed in Note D, the note with Steel Partners Ltd. has a due date of
December 31, 2007. Steel Partners Ltd. has confirmed that the promissory note
is
not in default at December 31, 2007 and that the payment may be made on or
before December 31, 2008.
There
is
no assurance that the Company’s plan to complete a Business Combination will be
successful.
2. Cash
and cash equivalents:
The
Company considers investments with a maturity of three months or less when
purchased to be cash equivalents.
3. Common
Stock and Unit Dividends:
Each
share of common stock has one vote. As discussed in Note F, on August 8, 2007,
the Company declared a unit dividend of 0.15 units for each unit outstanding
and
on September 4, 2007 declared a unit dividend of one third of a unit for each
unit outstanding. All of the unit holders agreed to transfer their units due
them with respect to these dividends to SP Acq LLC. Such stock dividends are
presented as if they were stock splits and presented retroactively each period
presented. All unit amounts outstanding reflect such dividends, except for
weighted average shares outstanding as discussed in Note B-4.
4. Net
Income Per Common Share:
The
Company follows the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 128, “Earnings Per Share”. In accordance with SFAS No. 128,
earnings per common share amounts (“Basic EPS”) is computed by dividing earnings
by the weighted average number of common shares outstanding for the period.
Common shares subject to possible conversion of 12,986,879 have been excluded
from the calculation of basic earnings per share since such shares, if redeemed,
only participate in their pro rata shares of the trust earnings. Earnings per
common share amounts, assuming dilution (“Diluted EPS”), gives effect to
dilutive warrants and other potential common stock outstanding during the
period. SFAS No. 128 requires the presentation of both Basic EPS and Diluted
EPS
on the face of the statements of operations. In accordance with SFAS No. 128,
the Company has not considered the effect of its outstanding Warrants in the
calculation of diluted earnings per share since the exercise of the Warrants
is
contingent upon the occurrence of future events.
5. Concentration
of Credit Risk:
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist of cash accounts in a financial institution, which at times,
exceeds the Federal depository insurance coverage of $100,000. As of December
31, 2007 the Company had $428,215,991 in cash and cash equivalents which
exceeded Federally insured limits.
6. Fair
Value of Financial Instruments:
The
fair
value of the Company’s assets and liabilities, which qualify as financial
instruments under SFAS No. 107, “Disclosure About Fair Value of Financial
Instruments,” approximate the carrying amounts represented in the balance sheet
because of their short term maturities.
7. 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 and disclosure of contingent assets and liabilities at the date
of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
8. Trust
Account:
The
Trust
(See Note A) is invested in T Bills with a 30 day maturity as of December 31,
2007.
9. Income
Taxes:
The
Company complies with SFAS 109, “Accounting for Income Taxes,” which requires an
asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities that
will result in future taxable or deductible amounts, based on enacted tax laws
and rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established, when necessary,
to
reduce deferred tax assets to the amount expected to be realized.
On
February 14, 2007, the Company adopted the provisions of Financial Accounting
Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48
prescribes a recognition threshold and measurement process for financial
statement recognition and measurement of a tax position taken or expected to
be
taken in a tax return and also provides guidance on derecognition,
classification, interest and penalties, accounting in interim period, disclosure
and transition.
10. Stock-based
compensation:
11. Recent Accounting
Pronouncements:
In
September 2006, the FASB issued FASB Statement No. 157, "Fair Value
Measurements," or ("SFAS 157"). The standard provides guidance for using fair
value to measure assets and liabilities. The standard also responds to
investors’ requests for expanded information about the extent to which companies
measure assets and liabilities at fair value, the information used to measure
fair value, and the effect of fair value measurements on earnings. The standard
applies whenever other standards require or permit assets or liabilities to
be
measured at fair value. The standard does not expand the use of fair value
in
any new circumstances. SFAS 157 must be adopted prospectively as of the
beginning of the year it is initially applied. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The Company is evaluating the
impact that this standard may have on its financial position and results of
operations.
In
February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities—Including an amendment of FASB
Statement No. 115” (“SFAS 159”). SFAS 159 creates a “fair value option” under
which an entity may elect to record certain financial assets or liabilities
at
fair value upon their initial recognition. Subsequent changes in fair value
would be recognized in earnings as those changes occur. The election of the
fair
value option would be made on a contract-by contract basis and would need to
be
supported by concurrent documentation or a preexisting documented policy. SFAS
159 requires an entity to separately disclose the fair value of these items
on
the balance sheet or in the footnotes to the financial statements and to provide
information that would allow the financial statement user to understand the
impact on earnings from changes in the fair value. SFAS 159 is effective for
us
beginning with fiscal year 2008. The Company has evaluated SFAS 159 and expects
that adoption will have no significant impact on its financial statements or
results of operations.
In
December 2007, the FASB issued Statement No. 141 (revised 2007), “Business
Combinations,” (“SFAS 141(R)”). SFAS 141(R) retains the fundamental
requirements of SFAS 141 that the acquisition method of accounting (which SFAS
141 called the purchase method) be used for all business combinations and for
an
acquirer to be identified for each business combination. SFAS 141(R)
establishes principles and requirements for recognizing and measuring
identifiable assets and goodwill acquired, liabilities assumed, and any
noncontrolling interest in an acquisition, at their fair value as of the
acquisition date. SFAS 141(R) also requires an acquirer to recognize
assets acquired and liabilities assumed arising from contractual contingencies
as of the acquisition date, measured at their acquisition-date fair
values. Additionally, SFAS 141(R) will require that
acquisition-related costs in a business combination be expensed as incurred,
except for costs incurred to issue debt and equity securities. This statement
applies prospectively to business combinations effective with the Company’s
first fiscal quarter of 2009. Early adoption is not
permitted. The Company is evaluating the impact that this standard
may have on its financial position and results of operations.
In
December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in
Consolidated Financial Statements - an amendment of Accounting Research Bulletin
No. 51,” (“SFAS 160”). SFAS 160 amends Accounting Research Bulletin
No. 51 to establish accounting and reporting standards for the noncontrolling
interest, also referred to as minority interest, in a subsidiary and for the
deconsolidation of a subsidiary. SFAS 160 requires that the
noncontrolling interest in a subsidiary be clearly identified and presented
within the equity section of the consolidated statement of financial position
but separate from the company’s equity. Consolidated net income
attributable to the parent and to the noncontrolling interest must be clearly
identified and presented on the face of the consolidated statement of
income. SFAS 160 requires that any subsequent changes in a parent’s
ownership interest while still retaining its controlling financial interest
in
its subsidiary must be accounted for as equity transactions on a consistent
basis. In addition, SFAS 160 requires that upon the deconsolidation
of a subsidiary, both the gain or loss arising from the deconsolidation and
any
retained noncontrolling equity investment in the former subsidiary be measured
at fair value. SFAS 160 is effective commencing with the Company’s
first fiscal quarter of 2009. Early adoption is not
permitted. The Company is evaluating the impact that this standard
may have on its financial position and results of operations.
NOTE
C — INITIAL PUBLIC OFFERING
On
October 16, 2007 the Company sold to the public an aggregate of 40,000,000
units
at a price of $10.00. Each unit consists of one share of the Company’s common
stock, $0.001 par value, and one redeemable common stock purchase warrant.
On
October 31, 2007, the underwriters exercised a portion and cancelled the balance
of their over-allotment option granted in connection with the Offering and
consummated the sale of an additional 3,289,600 units at a price of
$10.00.
The
Company has incurred an underwriters’ fee of 7% of the gross offering proceeds
in connection with the completion of the Offering and the over-allotment. Of
this fee, $12,000,000 and $986,880 were paid at the closing of the Offering
and
over-allotment on October 16, 2007 and October 31, 2007, respectively, and
$17,315,840 is held in the Trust and will be paid to the underwriters in
connection with the consummation of a Business Combination. As of December
31,
2007, the remaining underwriting commitment of $17,315,840 is included as Other
Payables - deferred underwriters’ fee.
NOTE
D — RELATED PARTY TRANSACTIONS
SP
Acq
LLC purchased 11,500,000 of the Company’s founder’s units, each consisting of
one common share and one warrant to purchase a common share, for a price of
$25,000 in a private placement. The units are identical to those sold in the
Offering, except that SP Acq LLC, Steel Partners II, L.P., and Messrs.
Bergamo, LaBow, Lorber, Toboroff and Walker agreed to vote their founder’s
shares in the same manner as a majority of the public stockholders who vote
at
the special or annual meeting called for the purpose of approving the Company’s
Business Combination. As a result, they will not be able to exercise conversion
rights with respect to the founder’s shares if the Company’s Business
Combination is approved by a majority of its public stockholders. The founder’s
shares included therein will not participate with the common stock included
in
the units sold in the Offering in any liquidating distribution. The founder’s
units, including the founder’s shares and initial founder’s warrants may not be
sold or transferred until at least one year after the completion of a Business
Combination.
The
founder’s units included up to 1,500,000 units that were subject to forfeiture
by SP Acq LLC to the extent that the underwriters’ over-allotment option was not
exercised or was exercised in part such that the holders of the Company’s
founder’s units would collectively own 20% of the Company’s units after
consummation of the Offering and exercise or expiration of the over-allotment
option (assuming none of the holders of our founder’s units purchase units in
the Offering). On October 31, 2007, in connection with the partial exercise
of
the over-allotment option, 677,600 founder’s units were forfeited to the Company
and cancelled.
The
Company has issued warrants to purchase 11,500,000 common shares at $7.50 per
share as part of the founder’s units in connection with its initial
capitalization on March 22, 2007 (“initial founder’s warrants”). On October 31,
2007, in connection with the partial exercise of the underwriters’
over-allotment option, 677,600 initial founder’s warrants were forfeited to the
Company and cancelled.
Additionally,
pursuant to the Director’s Purchase Agreement dated as of June 25, 2007, SP Acq
LLC has sold a total of 500,000 founder’s units to certain directors of the
Company.
SP
Acq
LLC, pursuant to an agreement dated March 22, 2007, also sold to its affiliate
Steel Partners II, L.P. a portion of its founder’s units, with the final number
of units to be determined based on the number of units sold in the Offering
once
the underwriters’ over-allotment option was exercised or expired. As of October
16, 2007 upon the closing of the Offering, Steel Partners II, L.P. owned 662,791
founder’s units. On October 31, 2007, the underwriters exercised a portion of
their over-allotment option and SP Acq LLC sold an additional 6,197 of its
founders units to Steel Partners II, L.P., bringing Steel Partners II, L.P.
ownership to 668,988 units.
On
March
28, 2007 the Company issued a $250,000 unsecured promissory note to Steel
Partners, Ltd., an affiliate of SP Acq LLC and the Company. This note bears
interest at a rate of 5% per annum, is unsecured and principal and interest
payments were due on December 31, 2007. Interest payable of $9,435 has been
accrued on this note through December 31, 2007. Steel Partners, Ltd. has
confirmed that the promissory note is not in default at December 31, 2007 and
that payment may be made on or before December 31, 2008.
Advances
payable of $26,818 at December 31, 2007 relate to certain costs paid by Steel
Partners, Ltd. on behalf of the Company. The Company intends to repay such
advances and thus such amounts are reflected as a liability to affiliate. None
of the officers and directors of the Company received compensation for their
services to the Company.
The
Company presently occupies office space provided by Steel Partners, Ltd. Steel
Partners, Ltd. has agreed that, until the acquisition of a target business
by
the Company, it will make such office space, as well as certain office,
administrative and secretarial services, available to the Company, as may be
required by the Company from time to time. The Company has agreed to pay Steel
Partners, Ltd. $10,000 per month for such services. Services commenced on
October 16, 2007. The Company has accrued $25,000 for such services through
December 31, 2007.
SP
Acq
LLC purchased, in a private placement on October 16, 2007, 7,000,000 additional
founder’s warrants at a price of $1 per warrant (an aggregate purchase price of
$7,000,000) directly from the Company and not as part of the Offering. The
purchase price of these additional founder’s warrants has been determined by the
Company to be the fair value of such warrants as of the October 16, 2007
purchase date.
In
addition, Steel Partners II, L.P., has entered into an agreement with the
Company requiring it to purchase 3,000,000 units (“co-investment units”) at a
price of $10 per unit (an aggregate price of $30,000,000) from the Company
in a
private placement that will occur immediately prior to the Company’s
consummation of a Business Combination. These private placement units will
be
identical to the units sold in the Offering. It has also agreed that these
units
will not be sold, transferred, or assigned until at least one year after the
completion of the Business Combination. In the event that Steel Partners II,
L.P. does not purchase the co-investment units, SP Acq LLC, Steel Partners
II,
L.P. and the directors who purchased founder’s units have agreed to surrender
and forfeit its founder’s units and additional founder’s warrants to the
Company, provided however that such surrender and forfeiture will not be
required if SP Acq LLC purchases the co-investment units. In such event, Steel
Partners II, L.P. has agreed to transfer its founder’s units to SP Acq LLC. None
of the co-investment units have been issued by the Company as of December 31,
2007.
NOTE
E — PREFERRED STOCK
The
Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined
from
time to time by the Board of Directors. No shares have been issued as of
December 31, 2007.
NOTE
F — UNIT DIVIDENDS
Effective
August 8, 2007, the Board of Directors of the Company declared a unit dividend
to the holders of record. The dividend consisted of 0.15 units for each
outstanding share of common stock and totaled 1,125,000 units. Effective
September 4, 2007, the Board of Directors of the Company declared a unit
dividend to the holders of record. The dividend consisted of one third of a
unit
for each outstanding share of common stock and totaled 2,875,000 units. All
of
the unit holders agreed to transfer their units due them with respect to these
dividends to SP Acq LLC.
NOTE
G — WARRANTS
The
following table presents warrants outstanding:
|
|
December
31, 2007
|
|
|
|
Initial
Founder’s Warrants
|
|
|
10,822,400
|
|
Additional
Founder’s Warrants
|
|
|
7,000,000
|
|
Public
Warrants
|
|
|
43,289,600
|
|
Total
|
|
|
61,112,000
|
|
Initial
founder’s warrants are not redeemable while held by SP Acq LLC or its permitted
transferees and the exercisability of initial founder’s warrants are subject to
certain additional restrictions. Each initial founder’s warrant entitles the
holder to purchase from the Company one share of common stock at an exercise
price of $7.50 only in the event that the last sale price of the common stock
is
at least $14.25 per share for any 20 trading days within a 30 trading day period
beginning 90 days after a Business Combination. If the Company is unable to
deliver registered shares of common stock to the holder upon exercise of the
warrants during the exercise period, there will be no cash settlement of the
warrants and the warrants will expire worthless.
Additional
founder’s warrants entitle the holder to purchase from the Company one share of
common stock at an exercise price of $7.50 for each warrant commencing on the
completion of a Business Combination with a target business, and expire five
years from the date of the prospectus. SP Acq LLC has also agreed that the
warrants purchased by it will not be sold or transferred until after the
completion of a Business Combination, and will be non-redeemable so long as
they
are held by the Company’s founders or their permitted transferees. Additionally,
pursuant to the Director’s Purchase Agreement dated as of June 25, 2007, SP Acq
LLC sold 500,000 of such initial founder’s warrants to certain directors on
October 16, 2007.
Public
warrants entitle the holder to purchase from the Company one share of common
stock for each warrant at an exercise price of $7.50 commencing on the later
of
(a) one year from the date of the final prospectus for the Offering or (b)
the
completion of a Business Combination with a target business, and will expire
five years from the date of the prospectus. The warrants are redeemable at
the
option of the Company at a price of $0.01 per warrant upon 30 days prior notice
after the warrants become exercisable, only in the event that the last sale
price of the common stock is at least $14.25 per share for any 20 trading days
within a 30 trading day period ending on the third business day prior to the
date on which notice of redemption is given. If the Company is unable to deliver
registered shares of common stock to the holder upon exercise of the warrants
during the exercise period, there will be no cash settlement of the warrants
and
the warrants will expire worthless.
As
disclosed in Note D, the initial founder’s warrants and additional founder’s
warrants have certain restrictions and may be surrendered or forfeited under
certain circumstances.
Pursuant
to a registration rights agreement between the Company and SP Acq LLC, Steel
Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker,
the
holders of our founder’s units, founder’s shares and initial founder’s warrants
and shares issuable upon exercise thereof will be entitled to certain
registration rights at any time commencing three months prior to the date that
they are no longer subject to transfer restrictions.
NOTE
H — TAXES ON INCOME
Deferred
tax assets reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial statement purposes
and
the amounts used for income tax purposes and consist of the
following:
|
|
12/31/2007
|
|
Deferred
Tax Assets
|
|
|
|
Start
up and organization costs
|
|
$
|
125,406
|
|
Net
Deferred Taxes
|
|
$
|
125,406
|
|
The
difference between the provision for income taxes and the amounts computed
by
applying the federal statutory income taxes to the income before tax are
explained below:
|
|
12/31/2007
|
|
|
|
|
|
Tax
at Federal Statutory Rate
|
|
|
34.0
|
%
|
State
and Local Taxes, net of federal benefit
|
|
|
11.2
|
%
|
Provision
for Taxes
|
|
|
45.2
|
%
|
The
provision for income taxes consists of the following:
|
|
12/31/2007
|
|
Current
|
|
|
|
Federal
|
|
$
|
831,812
|
|
State
and Local
|
|
|
503,966
|
|
Total
Current Tax Expense
|
|
|
1,335,778
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
Federal
|
|
|
(93,094
|
)
|
State
and Local
|
|
|
(32,312
|
)
|
Total
Deferred Tax Expense (Benefit)
|
|
|
(125,406
|
)
|
|
|
|
|
|
Total
Tax Expense
|
|
$
|
1,210,372
|
|
Deferred
income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities based on enacted
tax
laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be
realized.
On
February 14, 2007, the Company adopted the provisions of Financial Accounting
Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). The
Company has identified its federal tax return and its state and city tax returns
in New York as “major” tax jurisdictions, as defined. As per FIN 48, the Company
has evaluated its tax positions and has determined that there are no uncertain
tax positions requiring recognition in the Company’s financial statements. Since
the Company was incorporated on February 14, 2007 the evaluation was performed
for the period from inception through December 31, 2007. The Company believes
that its income tax positions and deductions would be sustained on audit and
does not anticipate any adjustments that would result in a material change
to
its financial position. There were no unrecognized tax benefits as of December
31, 2007. The Company has not yet filed its initial tax returns and has had
no
tax examinations since its inception, February 14, 2007.
The
Company’s policy for recording interest and penalties associated with audits is
to record such items as a component of income tax expense. There were no amounts
accrued for penalties or interest as of or during the period from February
14,
2007 (inception) through December 31, 2007. The Company does not expect its
unrecognized tax benefit position to change during the next twelve months and
is
currently unaware of any issues that could result in significant payments,
accruals or material deviations from its position. The adoption of the
provisions of FIN 48 did not have a material impact on the Company’s financial
position, results of operations and cash flows.
NOTE
I — UNAUDITED QUARTERLY FINANCIAL RESULTS
Quarterly
Financial Information:
|
|
For
the Period from February 14, 2007 (date of inception)
to
March
31, 2007
|
|
For
the Quarter ended June 30, 2007
|
|
For
the Quarter ended September 30, 2007
|
|
For
the Quarter ended December 31, 2007
|
|
Formation
and operating costs
|
|
$
|
25,436
|
|
$
|
132
|
|
$
|
11,250
|
|
$
|
227,555
|
|
Loss
from operations
|
|
|
(
25,436
|
)
|
|
(132
|
)
|
|
(11,250
|
)
|
|
(227,555
|
)
|
Interest
income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,950,473
|
|
Interest
expense
|
|
|
—
|
|
|
(3,185
|
)
|
|
(
3,125
|
)
|
|
(
3,125
|
)
|
Income
(loss) before tax
|
|
|
(25,436
|
)
|
|
(3,317
|
)
|
|
(14,375
|
)
|
|
2,719,793
|
|
Provision
for taxes on income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,210,372
|
)
|
Net
income (loss)
|
|
$
|
(25,436
|
)
|
$
|
(
3,317
|
)
|
$
|
(14,375
|
)
|
$
|
1,509,421
|
|
Net
income (loss) per common share, basic and diluted
|
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
0.04
|
|
Shares
used in computing net income (loss) per share, basic and
diluted
|
|
|
10,000,000
|
|
|
10,000,000
|
|
|
10,000,000
|
|
|
35,202,526
|
|
ITEM
9. Changes
and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
ITEM
9A. Controls
and Procedures
We
maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in our periodic filings with the SEC under the Exchange
Act, including this report, is recorded, processed, summarized and reported
on a
timely basis. These disclosure controls and procedures include controls and
procedures designed to ensure that information required to be disclosed under
the Exchange Act is accumulated and communicated to our management on a timely
basis to allow decisions regarding required disclosure. Management, including
our chief executive officer and chief operating officer, has evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined under Rules 13a-15(e) and 15(d)-15(e) of the Exchange
Act) as of December 31, 2007. Based upon that evaluation, management has
concluded that our disclosure controls and procedures were effective as of
the
end of the period covered by this report.
This
annual report does not include a report of management's assessment regarding
internal control over financial reporting or an attestation report of the
company's registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.
With
respect to the most recently completed fiscal quarter, other than certain
augmentation of the company's internal controls over financial reporting in
connection with the company becoming a public company, including supplementing
the reporting and review processes with respect to applicable United States
generally accepted accounting principles and SEC rules, there has been no
changes to the company's internal controls which has materially affected, or
is
reasonably likely to materially affect, the company's internal control over
financial reporting.
ITEM
9B. Other
Information
Not
applicable.
PART
III
ITEM
10. Directors,
Executive Officers and Corporate Governance
Directors
and Executive Officers
Our
directors and executive officers as of the date of this report are as
follows:
Name
|
|
Age
|
|
Position(s)
|
Warren
G. Lichtenstein
|
|
42
|
|
Chairman
of the Board of Directors, President and Chief Executive
Officer
|
Jack
L. Howard
|
|
45
|
|
Chief
Operating Officer and Secretary
|
James
R. Henderson
|
|
50
|
|
Executive
Vice President
|
Anthony
Bergamo
|
|
61
|
|
Director
|
Ronald
LaBow
|
|
73
|
|
Director
|
Howard
M. Lorber
|
|
59
|
|
Director
|
Leonard
Toboroff
|
|
75
|
|
Director
|
S.
Nicholas Walker
|
|
53
|
|
Director
|
Warren
G. Lichtenstein,
Chairman
of the Board of Directors, President and Chief Executive
Officer—
Mr.
Lichtenstein has been our Chairman of the Board, President and Chief Executive
Officer since February 2007. Mr. Lichtenstein co-founded Steel Partners II,
L.P.
in 1993. He has been Managing Member since 1996 of Steel Partners II GP LLC,
which is the General Partner of Steel Partners II, L.P. and Steel Partners
II
Master Fund L.P. He is Chief Executive Officer of Steel Partners LLC, a global
investment management firm, which is the Investment Manager to Steel Partners
II, L.P. and Steel Partners II Master Fund L.P. He is also a Co-Founder of
Steel
Partners Japan Strategic Fund (Offshore), L.P., a private investment partnership
investing in Japan, and Steel Partners China Access I LP, a private equity
partnership investing in China. Mr. Lichtenstein has served as a director of
GenCorp Inc., a technology-based manufacturer of aerospace and defense products
and systems with a real estate business segment, since March 5, 2008. He has
been a director (currently Chairman of the Board) of SL Industries, Inc., a
designer and manufacturer of power electronics, power motion equipment, power
protection equipment, and teleprotection and specialized communication
equipment, since January 2002 and served as Chief Executive Officer from
February 2002 to August 2005. He has served as Chairman of the Board of WHX
Corporation, a holding company, since July 2005. He served as a director of
WebFinancial Corporation, which through its operating subsidiaries, operates
niche banking markets, from 1996 to June 2005, as Chairman and Chief Executive
Officer from December 1997 to June 2005 and as President from December 1997
to
December 2003. Prior to the formation of Steel Partners II, L.P. in 1993, Mr.
Lichtenstein co-founded Steel Partners, L.P., an investment partnership, in
1990
and co-managed its business and operations. From 1988 to 1990, Mr. Lichtenstein
was an acquisition/arbitrage analyst with Ballantrae Partners, L.P., which
invested in risk arbitrage, special situations, and undervalued companies.
From
1987 to 1988, he was an analyst at Para Partners, L.P., a partnership that
invested in arbitrage and related situations. Mr. Lichtenstein has previously
served as a director of the following companies: Alpha Technologies Group,
Inc.
(Synercom Technology), Aydin Corporation (Chairman), BKF Capital Group
Inc., CPX Corp. (f/k/a CellPro, Incorporated), ECC International Corporation,
Gateway Industries, Inc., KT&G Corporation, Layne Christensen Company, PLM
International, Inc. Puroflow Incorporated, Saratoga Beverage Group, Inc.,
Synercom Technology, Inc., TAB Products Co., Tandycrafts Inc., Tech-Sym
Corporation, United Industrial Corporation (Chairman) and U.S. Diagnostic Labs,
Inc. Mr. Lichtenstein graduated from the University of Pennsylvania with a
B.A.
in Economics.
Jack
L. Howard,
Chief
Operating Officer and Secretary—
Mr.
Howard was a Director from February 2007 until June 2007, was Vice-Chairman
from
February 2007 until August 2007 and has been our Secretary since February 2007.
Since June 2007, he has been our Chief Operating Officer. Mr. Howard co-founded
Steel Partners II, L.P. in 1993. He has been a registered principal of Mutual
Securities, Inc., a NASD registered broker-dealer since 1989. He is the
President of Steel Partners LLC, a global investment management firm. He has
been associated with Steel Partners LLC and its affiliates since December 2003.
He served as Chairman of the Board and Chief Executive Officer of Gateway
Industries, Inc., a provider of database development and web site design and
development services, from February 2004 to April 2007 and as Vice President
from December 2001 to April 2007. He has been a director of Adaptec, Inc.,
a
storage solutions provider, since December 2007. Mr. Howard has served as
Chairman of the Board of WebFinancial Corporation, which through its operating
subsidiaries, operates niche banking markets, since June 2005, as a director
of
WebFinancial since 1996 and its Vice President since 1997. From 1997 to May
2000, he also served as Secretary, Treasurer and Chief Financial Officer of
WebFinancial. He has been a director of WHX Corporation, a holding company,
since July 2005. He has served as a director of NOVT Corporation, a former
developer of advanced medical treatments for coronary and vascular disease,
since April 2006. He has been a director of CoSine Communications, Inc., a
holding company, since July 2005. He has been a director of BNS Holding, Inc.,
a
holding company that owns the majority of Collins Industries, Inc., a
manufacturer of school buses, ambulances and terminal trucks, since June 2004.
From 1984 to 1989, Mr. Howard was with First Affiliated Securities, a NASD
broker dealer. Mr. Howard has previously served as a director of Scientific
Software-Intercomp, Inc., Pubco Corporation and Investors Insurance Group,
Inc.
Mr. Howard graduated from the University of Oregon with a B.A. in Finance.
He
currently holds the securities licenses of Series 7, Series 24, Series 55 and
Series 63.
James
R. Henderson,
Executive
Vice President —
Mr.
Henderson has been our Executive Vice President since February 2007. Mr.
Henderson is a Managing Director and operating partner of Steel Partners LLC,
a
global investment management firm. He has been associated with Steel Partners
LLC and its affiliates since August 1999. He has served as a director of GenCorp
Inc., a technology-based manufacturer of aerospace and defense products and
systems with a real estate business segment, since March 5, 2008. Mr. Henderson
has served as Chief Executive Officer of WebFinancial Corporation, which through
its operating subsidiaries, operates niche banking markets, since June 2005,
as
President and Chief Operating Officer of WebFinancial since November 2003,
and
was the Vice President of Operations from September 2000 through December 2003.
He has served as Chief Executive Officer of WebBank, a wholly-owned subsidiary
of WebFinancial, from November 2004 to May 2005. Mr. Henderson has served as
a
director of Angelica Corporation, a provider of healthcare linen management
services, since August 2006. He has served as a director of BNS Holding, Inc.,
a
holding company that owns the majority of Collins Industries, Inc., a
manufacturer of school buses, ambulances and terminal trucks, since June 2004.
He has served as a director (currently Chairman of the Board) of Del Global
Technologies Corp., a designer and manufacturer of medical imaging and
diagnostic systems, since November 2003. He has served as a director of SL
Industries, Inc., a designer and producer of proprietary advanced systems and
equipment for the power and data quality industry, since January 2002. Mr.
Henderson has served as President of Gateway Industries, Inc., a provider of
database development and web site design and development services, since
December 2001. He served as a director of ECC International Corp., a
manufacturer and marketer of computer-controlled simulators for training
personnel to perform maintenance and operator procedures on military weapons,
from December 1999 to September 2003 and as acting Chief Executive Officer
from
July 2002 to March 2003. From January 2001 to August 2001, he served as
President of MDM Technologies, Inc., a direct mail and marketing company. From
1996 to 1999, Mr. Henderson was employed in various positions with Aydin
Corporation, a defense electronics manufacturer, which included a tenure as
President and Chief Operating Officer. From 1980 to 1996, Mr. Henderson was
employed with UNISYS Corporation, an e-business solutions provider. Mr.
Henderson has previously served as a director of Tech-Sym Corporation. Mr.
Henderson graduated from the University of Scranton with a B.S. in
Accounting.
Anthony
Bergamo,
Director
—
Mr.
Bergamo has been a Director since July 2007. He has held various positions
with
MB Real Estate, a property management company based in New York City and
Chicago, since April 1996, including the position of Vice Chairman since May
2003. Mr. Bergamo served as managing director with Milstein Hotel Group, a
hotel
operator, from April 1996 until July 2007. He has also served as the Chief
Executive Officer of Niagara Falls Redevelopment, LLC, a real estate development
company, since August 1998. Mr. Bergamo was a director of Lone Star Steakhouse
& Saloon, Inc., an owner and operator of restaurants, from May 2002 until
December 2006, at which time such company was sold to a private equity fund.
At
the time of such sale, Mr. Bergamo was the Chairman of the Audit Committee
of
Lone Star Steakhouse & Saloon, Inc. He has also been a director since 1995,
a Trustee since 1986 and currently is Chairman of the Audit Committee of Dime
Community Bancorp. Mr. Bergamo is also the Founder of the Federal Law
Enforcement Foundation, a foundation that provides economic assistance to both
federal and local law enforcement officers suffering from serious illness and
to
communities recovering from natural disasters, and has served as its Chairman
since 1988. Mr. Bergamo serves on the New York State Commission for Sentencing
Reform and the New York State Judicial Screening Committee. He earned a BS
in
history from Temple University, and a JD from New York Law School. He is
admitted to the New York, New Jersey, Federal Bars, US Court of Appeals and
the
US Supreme Court.
Ronald
LaBow,
Director
—
Mr.
LaBow has been a Director since June 2007. He has served as President of
Stonehill Investment Corp., an investment fund, since February 1990. From
January 1991 to February 2004, Mr. LaBow served as Chairman of the Board of
WHX
Corporation, a holding company. Mr. LaBow currently is the President of WPN
Corp., a financial consulting company, and is a director of BKF Capital Group,
Inc. He earned a BS from University of Illinois, an MS from Columbia University
School of Business, an LLB from New York Law School and a Master of Law from
New
York University Law School. He is admitted to the bar of the state of New
York.
Howard
M. Lorber,
Director
—
Mr.
Lorber has been a Director since June 2007. Mr. Lorber has served as Chairman
of
the Board of Open Acquisition Corp. since January 2008, a blank check company
that has filed its initial registration statement with the SEC. Mr. Lorber
has
served as the Executive Chairman of Nathan’s Famous Inc. since January 2007 and
prior to that served as its Chairman from 1987 until December 2006 and as its
Chief Executive Officer from November 1993 until December 2006. Also, Mr. Lorber
has been the President and Chief Executive Officer of Vector Group Ltd. since
January 2006 and has served as a director since January 2001. Mr. Lorber served
as the President and Chief Operating Officer of Vector Group Ltd. from January
2001 until January 2006. Mr. Lorber was President, Chief Operating Officer
and a
Director of New Valley Corporation from November 1994 until its merger with
Vector Group in December 2005. For more than the past five years, Mr. Lorber
has
been a stockholder and a registered representative of Aegis Capital Corp. Mr.
Lorber served as Chairman of the Board of Ladenburg Thalmann Financial Services,
the parent of Ladenburg Thalmann & Co. Inc., one of the underwriters of our
initial public offering, from May 2001 until July 2006 when he became
Vice-Chairman in which capacity he currently serves. Mr. Lorber currently serves
as a director of United Capital Corp., a real estate investment and diversified
manufacturing company.
Leonard
Toboroff,
Director
—
Mr.
Toboroff has been a Director since June 2007. Mr. Toboroff has served as a
Vice
Chairman of the Board of Allis-Chalmers Energy Inc., a provider of products
and
services to the oil and gas industry, since May 1988 and served as Executive
Vice President from May 1989 until February 2002. He served as a director and
Vice President of Varsity Brands, Inc. (formerly Riddell Sports Inc.), a
provider of goods and services to the school spirit industry, from April 1998
until it was sold in September 2003. Mr. Toboroff has been an Executive Director
of Corinthian Capital Group, LLC, a private equity fund, since October 2005.
He
is also a director of Engex Corp., a closed-end mutual fund. He has been a
director of NOVT Corporation, a former developer of advanced medical treatments
for coronary and vascular disease, since April 2006. Mr. Toboroff has previously
served as a director of American Bakeries Co., Ameriscribe Corporation and
Saratoga Spring Water Co. Mr. Toboroff is a graduate of Syracuse University
and
The University of Michigan Law School.
S.
Nicholas Walker,
Director
—
Mr.
Walker has been a director since June 2007. Mr. Walker is the Chief Executive
Officer of the York Group Limited (“York”) a financial services company. York
provides investment management services and securities brokerage services to
institutional and high net worth individual clients. Mr. Walker has served
as
CEO of York since 2000. From 1995 until 2000 Mr. Walker served as Senior Vice
President of Investments of PaineWebber Inc. in New York. From 1982 until 1995,
he served as Senior Vice President of Investments of Prudential Securities
Inc.
in New York. From 1977 to 1981 he served as an assistant manager at Citibank
NA,
merchant banking group, in New York and from 1976 to 1977 as a syndication
manager with Sumitomo Finance International Limited in London. Mr. Walker served
as a director of the Cronos Group, a leading lessor of intermodal marine
containers, from 1999 until it was sold in July 2007 (Nasdaq symbol “CRNS”). Mr.
Walker holds an M.A. degree in Jurisprudence from Oxford University,
England.
Number
and Terms of Office of Directors
Our
board
of directors consists of six directors. These individuals will play a key role
in identifying and evaluating prospective acquisition candidates, selecting
the
target business, and structuring, negotiating and consummating our initial
business combination. However, none of these individuals has been a principal
of
or affiliated with a blank check company that executed a business plan similar
to our business plan and other than Mr. Lorber, none of these individuals is
currently affiliated with any such entity. Nevertheless, we believe that the
skills and expertise of these individuals, their collective access to potential
target businesses, and their ideas, contacts, and acquisition expertise should
enable them to successfully identify and assist us in completing our initial
business combination. However, there is no assurance such individuals will,
in
fact, be successful in doing so.
Executive
Officer Compensation
None
of
our executive officers or directors has received any compensation for service
rendered. After our initial business combination, our executive officers and
directors who remain with us may be paid consulting, management or other fees
from the combined company with any and all amounts being fully disclosed to
stockholders, to the extent then known, in the proxy solicitation materials
furnished to our stockholders. It is unlikely, however, that the amount of
such
compensation will be known at the time of a stockholder meeting held to consider
an initial business combination, as it will be up to the directors of the
post-combination business to determine executive and director
compensation.
Director
Independence
Our
board
of directors has determined that Messrs. Bergamo, LaBow, Toboroff and Walker
are
“independent directors” as such term is defined in the rules of the American
Stock Exchange and Rule 10A-3 of the Exchange Act.
Board
Committees
Our
board
of directors has formed an audit committee and a governance and nominating
committee. Each committee is composed of four directors.
Audit
Committee
Our
audit
committee consists of Messrs. Bergamo, Toboroff , Walker and LaBow with Mr.
Bergamo serving as chair. As required by the rules of the American Stock
Exchange, each of the members of our audit committee is able to read and
understand fundamental financial statements, and we consider Mr. Bergamo to
qualify as an “audit committee financial expert” and as “financially
sophisticated” as defined under SEC and American Stock Exchange rules,
respectively. The responsibilities of our audit committee include:
|
·
|
meeting
with our management periodically to consider the adequacy of our
internal
control over financial reporting and the objectivity of our financial
reporting;
|
|
·
|
appointing
the independent registered public accounting firm, determining the
compensation of the independent registered public accounting firm
and
pre-approving the engagement of the independent registered public
accounting firm for audit and non-audit
services;
|
|
·
|
overseeing
the independent registered public accounting firm, including reviewing
independence and quality control procedures and experience and
qualifications of audit personnel that are providing us audit
services;
|
|
·
|
meeting
with the independent registered public accounting firm and reviewing
the
scope and significant findings of the audits performed by them, and
meeting with management and internal financial personnel regarding
these
matters;
|
|
·
|
reviewing
our financing plans, the adequacy and sufficiency of our financial
and
accounting controls, practices and procedures, the activities and
recommendations of the auditors and our reporting policies and practices,
and reporting recommendations to our full board of directors for
approval;
|
|
·
|
establishing
procedures for the receipt, retention and treatment of complaints
regarding internal accounting controls or auditing matters and the
confidential, anonymous submissions by employees of concerns regarding
questionable accounting or auditing
matters;
|
|
·
|
following
the completion of our initial public offering, preparing the report
required by the rules of the SEC to be included in our annual proxy
statement;
|
|
·
|
monitoring
compliance on a quarterly basis with the terms of our initial public
offering and, if any noncompliance is identified, immediately taking
all
action necessary to rectify such noncompliance or otherwise causing
compliance with the terms of our initial public offering;
and
|
|
·
|
reviewing
and approving all payments made to our officers, directors and affiliates,
including Steel Partners, Ltd., other than the payment of an aggregate
of
$10,000 per month to Steel Partners, Ltd. for office space, secretarial
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.
|
Governance
and Nominating Committee
Our
governance and nominating committee consists of Messrs. Bergamo, LaBow, Toboroff
and Walker with Mr. LaBow serving as chair. The functions of our governance
and
nominating committee include:
|
·
|
recommending
qualified candidates for election to our board of
directors;
|
|
·
|
evaluating
and reviewing the performance of existing
directors;
|
|
·
|
making
recommendations to our board of directors regarding governance matters,
including our certificate of incorporation, bylaws and charters of
our
committees; and
|
|
·
|
developing
and recommending to our board of directors governance and nominating
guidelines and principles applicable to
us.
|
Code
of Ethics and Committee Charters
We
have
adopted a code of ethics that applies to our officers, directors and employees.
We have filed copies of our code of ethics and our board committee charters
as
an exhibit to the registration statement in connection with our initial public
offering. You will be able to review these documents 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 to us. We intend to disclose
any amendments to or waivers of certain provisions of our code of ethics in
a
current report on Form 8-K.
Conflicts
of Interest
Investors
should be aware of the following potential conflicts of interest:
|
·
|
Members
of our management team are not required to commit their full time
to our
affairs and, accordingly, they will have conflicts of interest in
allocating management time among various business
activities.
|
|
·
|
The
members of our management team as well as the entities in the Steel
Partners may in the future become affiliated with entities, including
other blank check companies, engaged in business activities similar
to
those we intend to conduct.
|
|
·
|
Our
business opportunity right of first review agreement does not apply
to
companies targeted for acquisition by any business in which Steel
Partners
II, L.P. directly or indirectly has an investment (including Steel
Partners Japan Strategic Fund (Offshore), L.P. or businesses headquartered
in or organized under the laws of China. and accordingly, members
of our
management team may become aware of business opportunities that are
not
subject to this agreement. Currently, members of our management team
are
officers or directors of the following entities in which Steel Partners
II, L.P., directly or indirectly, has an investment: Adaptec, Inc.,
Angelica Corporation, BNS Holding, Inc., Collins Industries, Inc.,
CoSine
Communications, Inc., Del Global Technologies Corp., Gateway Industries,
Inc., GenCorp Inc., Nathan’s Famous Inc., NOVT Corporation, SL Industries,
Inc., Vector Group Ltd., WebBank, WebFinancial Corporation and WHX
Corporation. In addition, such members of our management team could
in the
future become officers or directors of other entities in which Steel
Partners II, L.P., directly or indirectly, has an investment. Due
to those
existing and future affiliations, members of our management team
may have
fiduciary obligations to present potential business opportunities
to those
entities prior to presenting them to us which could cause conflicts
of
interest. Accordingly, members of our management team and our directors
may have conflicts of interest in determining to which entity a particular
business opportunity should be
presented.
|
|
·
|
Since
Mr. Lichtenstein may be deemed the beneficial owner of shares held
by SP
Acq LLC and Steel Partners II, L.P., he may have a conflict of interest
in
determining whether a particular target business is appropriate for
us and
our stockholders. This ownership interest may influence his motivation
in
identifying and selecting a target business and timely completing
an
initial business combination. The exercise of discretion by our officers
and directors in identifying and selecting one or more suitable target
businesses may 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.
|
|
·
|
Unless
we consummate our initial business combination, our officers and
directors
and Steel Partners and its employees 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 and the amount of interest income from the trust account
that may be released to us as working capital. These amounts were
calculated based on management’s estimates of the funds needed to finance
our operations for 24 months and to pay expenses in identifying and
consummating our initial business combination. Those estimates may
prove
to be inaccurate, especially if a portion of the available proceeds
is
used to make a down payment in connection with our initial business
combination or pay exclusivity or similar fees or if we expend a
significant portion in pursuit of an initial business combination
that is
not consummated. Our officers and directors may, as part of any business
combination, negotiate the repayment of some or all of any such expenses.
The financial interest of our officers and directors and Steel Partners
could influence our officers’ and directors’ motivation in selecting a
target business, and therefore they may have a conflict of interest
when
determining whether a particular business combination is in the
stockholders’ best interest. Specifically, our officers and directors may
tend to favor potential initial business combinations with target
businesses that offer to reimburse any expenses that we did not have
the
funds to reimburse ourselves.
|
|
·
|
Our
officers and directors may have a conflict of interest with respect
to
evaluating a particular initial business combination if the retention
or
resignation of any such officers and directors were included by a
target
business as a condition to any agreement with respect to an initial
business combination.
|
|
·
|
Howard
M. Lorber, a director of our company, is also the Chairman of the
Board of
Open Acquisition Corp., which is a blank check company that intends
to
engage in activities similar to those conducted by us. While the
registration statement filed by Open Acquisition has not been declared
effective by the SEC and Open Acquisition’s registration statement states
that it intends to have approximately $118.75 million in its trust
account
to fund acquisitions (as opposed to over $400 million in our trust
account), if and when the registration statement of Open Acquisition
is
declared effective by the SEC Mr. Lorber may owe fiduciary duties
to
present Open Acquisition with business opportunities before presenting
such opportunities to us.
|
In
general, officers and directors of a corporation incorporated under the laws
of
the State of Delaware are required to present business opportunities to a
corporation if:
|
·
|
the
corporation could financially undertake the
opportunity;
|
|
·
|
the
opportunity is within the corporation’s line of business;
and
|
|
·
|
it
would not be fair to the corporation and its stockholders for the
opportunity not to be brought to the attention of the
corporation.
|
Accordingly,
as a result of multiple business affiliations, our officers and directors may
have similar legal obligations relating to presenting business opportunities
meeting the above-listed criteria to multiple entities. In addition, conflicts
of interest may arise when our board of directors evaluates a particular
business opportunity with respect to the above-listed criteria. We cannot assure
you that any of the above mentioned conflicts will be resolved in our
favor.
Each
of
our officers and directors has, or may come to have, to a certain degree, other
fiduciary obligations. Members of our management team have fiduciary obligations
to other companies on whose board of directors they presently sit, or may have
obligations to companies whose board of directors they may join in the future.
To the extent that they identify business opportunities that may be suitable
for
us or other companies on whose board of directors they may sit, our directors
will honor those fiduciary obligations. Accordingly, they may not present
opportunities to us that come to their attention in the performance of their
duties as directors of such other entities unless the other companies have
declined to accept such opportunities or clearly lack the resources to take
advantage of such opportunities.
We
will
not enter into our initial business combination with any entity in which any
of
our officers, directors or Steel Partners or its affiliates has a financial
interest.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our officers, directors
and persons who own more than ten percent of a registered class of our equity
securities to file reports of ownership and changes in ownership with the SEC.
Officers, directors and ten percent stockholders are required by regulation
to
furnish us with copies of all Section 16(a) forms they file. Based solely on
copies of such forms received, we believe that, during the year ended December
31, 2007, all filing requirements applicable to our officers, directors and
greater than ten percent beneficial owners were complied with.
ITEM
11. Executive
Compensation
Compensation
Discussion and Analysis
None
of
our officers or directors has received any cash compensation for services
rendered. In June 2007, each of our independent directors purchased 100,000
founder’s units for a purchase price of $330, and purchased 100,000 additional
founder’s warrants for an aggregate purchase price of $100,000 upon the
consummation of our initial public offering. However, none of them serve as
officers of ours nor receive any compensation for serving in such role, other
than reimbursement of actual out-of-pocket expenses. As the price paid for
the
founder’s units and additional founder’s warrants was fair market value at the
time, we do not consider the value of the units at the offering price to be
compensation. Rather, we believe that because they own such shares, no
compensation (other than reimbursement of out of pocket expenses) is necessary
and such persons agreed to serve in such role without compensation.
We
have
agreed to pay Steel Partners, Ltd., an affiliate of Mr. Lichtenstein, a total
of
$10,000 per month for office space, administrative services and secretarial
support until the earlier of our consummation of a business combination or
our
liquidation. This arrangement is being agreed to by Steel Partners, Ltd. for
our
benefit and is not intended to provide Steel Partners, Ltd. compensation in
lieu
of a management fee. We believe that such fees are at least as favorable as
we
could have obtained from an unaffiliated third party.
Other
than this $10,000 per-month fee, no compensation of any kind, including finder’s
and consulting fees, will be paid to any of our officers or directors, or any
of
their respective affiliates, for services rendered prior to or in connection
with a business combination. However, these individuals and SP Acq LLC will
be
reimbursed for any out-of-pocket expenses incurred in connection with activities
on our behalf such as identifying potential target businesses and performing
due
diligence on suitable business combinations. After a business combination,
any
of our officers or directors who remain with us may be paid consulting,
management or other fees from the combined company with any and all amounts
being fully disclosed to stockholders, to the extent then known, in the proxy
solicitation materials furnished to our stockholders. It is unlikely the amount
of such compensation will be known at the time of a stockholder meeting held
to
consider a business combination, as it will be up to the directors of the
post-combination business to determine executive and director
compensation.
Other
than the securities described above and in the section appearing elsewhere
in
this Annual Report on Form 10-K entitled “Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters”, neither our
officers nor our directors has received any of our equity
securities.
Compensation
Committee Interlocks and Insider Participation
None.
ITEM
12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Principal
stockholders
The
following table sets forth information regarding the direct and indirect
beneficial ownership of our common stock as of March 20, 2008 by:
|
·
|
each
beneficial owner of more than 5% of our outstanding shares of common
stock;
|
|
·
|
each
of our officers and directors; and
|
|
·
|
all
our officers and directors as a
group.
|
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. The following table does not reflect record or
beneficial ownership of the co-investment shares or the initial founder’s
warrants, the additional founder’s warrants, or the co-investment warrants, as
these warrants are not exercisable within 60 days of the date of this
report.
Name
and Address of Beneficial Owner(1)
|
|
Number
of Shares of Common Stock Beneficially Owned
|
|
Approximate
Percentage of Outstanding Common Stock Beneficially
Owned
|
Warren
G. Lichtenstein(2)(3)
|
|
10,322,400
|
|
19.0%
|
SP
Acq LLC
|
|
9,653,412
|
|
17.8%
|
Steel
Partners II LP.
|
|
668,988
|
|
1.2%
|
Steel
Partners II GP LLC(3)
|
|
668,988
|
|
1.2%
|
Steel
Partners II Master Fund L.P.(3)
|
|
668,988
|
|
1.2%
|
Steel
Partners LLC(3)
|
|
668,988
|
|
1.2%
|
Anthony
Bergamo(4)
|
|
109,653
|
|
*
|
Ronald
LaBow(4)
|
|
109,653
|
|
*
|
Howard
M. Lorber(4)
|
|
109,653
|
|
*
|
Leonard
Toboroff(4)
|
|
109,653
|
|
*
|
S.
Nicholas Walker(4)
|
|
109,653
|
|
*
|
Jack
L. Howard(5)
|
|
—
|
|
—
|
James
R. Henderson(5)
|
|
—
|
|
—
|
QVT
Financial LP(6)
1177
Avenue of the Americas, 9th Floor
New
York, New York 10036
|
|
3,733,800
|
|
6.9%
|
HBK
Investments L.P.(7)
300
Crescent Court, Suite 700
Dallas,
Texas, 75201
|
|
5,383,000
|
|
9.9%
|
The
Baupost Group, L.L.C.(8)
10
St. James Avenue, Suite 1700
Boston,
Massachusetts 02116
|
|
4,000,000
|
|
7.4%
|
Fir
Tree, Inc.(9)
505
Fifth Avenue, 23rd Floor
New
York, New York 10017
|
|
4,001,000
|
|
7.4%
|
Millenco
LLC(10)
666
Fifth Avenue
New
York, New York 10103
|
|
3,731,050
|
|
6.9%
|
All
executive officers and directors as a group
(8
individuals)(2)(3)
|
|
10,822,400
|
|
20.0%
|
(1)
|
Unless
otherwise indicated, the business address of each of the individuals
or
entities is 590 Madison Avenue, 32nd Floor, New York, New York
10022.
|
(2)
|
Mr.
Lichtenstein is the managing member of SP Acq LLC and may be considered
to
have beneficial ownership of SP Acq LLC’s interest in us. Mr. Lichtenstein
disclaims beneficial ownership of any shares in which he does not
have a
pecuniary interest.
|
(3)
|
Steel
Partners II Master Fund L.P. is the sole limited partner of Steel
Partners
II, L.P. Steel Partners II GP LLC is the general partner of Steel
Partners
II, L.P. and Steel Partners II Master Fund L.P. Steel Partners LLC
is the
investment manager of Steel Partners II and Steel Partners II Master
Fund
L.P. Warren G. Lichtenstein is the manager of Steel Partners LLC
and the
managing member of Steel Partners II GP LLC. By virtue of these
relationships, each of Steel Partners II GP LLC, Steel Partners II
Master
Fund L.P., Steel Partners LLC and Mr. Lichtenstein may be deemed
to
beneficially own the Shares owned by Steel Partners II, L.P. Mr.
Lichtenstein also has sole voting and dispositive power over the
reported
shares. Mr. Lichtenstein disclaims beneficial ownership of any shares
in
which he does not have a pecuniary
interest.
|
(4)
|
Each
of the following persons is a member of SP Acq LLC: Anthony Bergamo,
Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S. Nicholas
Walker.
Such persons have each been granted voting power over the number
of shares
equal to each of his respective percentage ownership in SP Acq LLC
multiplied by the number of shares owned by SP Acq LLC. Accordingly,
each
of such persons has been attributed 9,653 shares and such shares
are also
included in the shares held by SP Acq
LLC.
|
(5)
|
Each
of Jack L. Howard and James R. Henderson is a member of SP Acq LLC,
however, neither of such persons has voting or dispositive power
over the
shares of common stock owned by SP Acq LLC. Accordingly, the shares
held
by SP Acq LLC are not deemed to be beneficially owned by either of
such
persons.
|
(6)
|
As
reported in Amendment No. 1 to Schedule 13G filed with the SEC on
February
8, 2008, QVT Financial LP is the investment manager for QVT Fund
LP, which
beneficially owns 3,075,843 shares of Common Stock, and for Quintessence
Fund L.P., which beneficially owns 330,410 shares of Common Stock.
QVT
Financial LP is also the investment manager for a separate discretionary
account managed for Deutsche Bank AG, which holds 327,547 shares
of Common
Stock. QVT Financial LP has the power to direct the vote and disposition
of the Common Stock held by QVT Fund LP, Quintessence Fund L.P. and
Deutsche Bank AG. Accordingly, QVT Financial LP may be deemed to
be the
beneficial owner of an aggregate amount of 3,733,800 shares of Common
Stock, consisting of the shares owned by the Fund and Quintessence
and the
shares held in the Deutsche Bank AG. QVT Financial GP LLC, as General
Partner of QVT Financial LP, may be deemed to beneficially own the
same
number of shares of Common Stock reported by QVT Financial LP. QVT
Associates GP LLC, as General Partner of QVT Fund LP and Quintessence
Fund
L.P., may be deemed to beneficially own the aggregate number of shares
of
Common Stock owned by QVT Fund LP and Quintessence Fund L.P., and
accordingly, QVT Associates GP LLC may be deemed to be the beneficial
owner of an aggregate amount of 3,406,253
shares.
|
(7)
|
As
reported in Amendment No. 1 to Schedule 13G filed with the SEC on
February
11, 2008, HBK Investments L.P. has delegated discretion to vote and
dispose of the Securities to HBK Services LLC. HBK Services LLC may,
from
time to time, delegate discretion to vote and dispose of certain
of the
Securities to HBK New York LLC, a Delaware limited liability company,
HBK
Virginia LLC, a Delaware limited liability company, HBK Europe Management
LLP, a limited liability partnership organized under the laws of
the
United Kingdom, and/or HBK Hong Kong Ltd., a corporation organized
under
the laws of Hong Kong (collectively, the "Subadvisors"). Each of
HBK
Services LLC and the Subadvisors is under common control with HBK
Investments L.P.
|
(8)
|
As
reported in Schedule 13G filed with the SEC on February 13, 2008,
SAK
Corporation is the Manager of Baupost Group, L.L.C. Seth A. Klarman,
as
the sole Director of SAK Corporation and a controlling person of
Baupost
Group, L.L.C., may be deemed to have beneficial ownership under Section
13(d) of the securities beneficially owned by Baupost Group,
L.L.C.
|
(9)
|
As
reported in Amendment No. 1 to Schedule 13G filed with the SEC on
February
14, 2008, Fir Tree Capital Opportunity Master Fund, L.P. and Sapling
LLC
are the beneficial owners of 3,455,400 shares of Common Stock and
545,600
shares of Common Stock, respectively. Fir Tree, Inc. may be deemed
to
beneficially own the shares of Common Stock held by Sapling LLC and
Fir
Tree Capital Opportunity Master Fund, L.P. as a result of being the
investment manager of Sapling LLC and Fir Tree Capital Opportunity
Master
Fund, L.P.
|
(10)
|
As
reported in Schedule 13G filed with the SEC on March 20, 2008, Millennium
Management LLC, a Delaware limited liability company, is the manager
of
Millenco LLC, and consequently may be deemed to have shared voting
control
and investment discretion over securities owned by Millenco LLC.
Israel A.
Englander is the managing member of Millennium Management LLC. As
a
result, Mr. Englander may be deemed to have shared voting control
and
investment discretion over securities deemed to be beneficially owned
by
Millennium Management.
|
Upon
the
sale of the co-investment units, SP Acq LLC, Steel Partners II, L.P. and Messrs.
Bergamo, LaBow, Lorber, Toboroff and Walker will collectively own approximately
24.2% of our issued and outstanding shares of common stock, which could permit
them to effectively influence the outcome of all matters requiring approval
by
our stockholders at such time, including the election of directors and approval
of significant corporate transactions, following the consummation of our initial
business combination.
In
the
event that Steel Partners II, L.P. does not purchase the co-investment units,
SP
Acq LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff
and Walker have agreed to surrender and forfeit their founder’s units to us;
provided that such surrender and forfeiture will not be required if SP Acq
LLC
purchases such co-investment units. In such event, Steel Partners II, L.P.
has
agreed to transfer its founder’s units to SP Acq LLC.
SP
Acq
LLC is a holding company founded to form our company and hold an investment
in
the founder’s securities. Subject to the terms of its operating agreement, SP
Acq LLC may distribute the initial founder’s securities to its members at any
time, subject further to the transfer and other restrictions applicable to
permitted transferees described below and to applicable federal and state
securities laws.
Transfer
Restrictions
SP
Acq
LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and
Walker have agreed not to sell or transfer the founder’s units and the founder’s
shares and initial founder’s warrants (including the common stock to be issued
upon the exercise of the initial founder’s warrants) for a period of one year
from the date we consummate our initial business combination and SP Acq LLC
and
Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed not to sell
or
transfer the additional founder’s warrants (including the common stock to be
issued upon the exercise of the additional founder’s warrants) until after we
complete our initial business combination, except in each case to permitted
transferees who agree to be subject to the same transfer restrictions and in
the
case of the founder’s shares, waive their right to participate in any
liquidation distribution if we fail to consummate an initial business
combination and agree to vote in accordance with the majority of shares of
common stock voted by the public stockholders in connection with our initial
business combination and in the case of the founder’s units (including the
founder’s shares and initial founder’s warrants) agree to surrender and forfeit
such securities in the event that Steel Partners II, L.P. or SP Acq LLC fails
to
purchase the co-investment units; provided that such surrender and forfeiture
will not be required if SP Acq LLC purchases such co-investment units. Steel
Partners II, L.P. has agreed not to sell or transfer the co-investment units
and
the co-investment warrants or the co-investment shares until one year after
we
complete our initial business combination except to permitted transferees who
agree to be bound by such transfer restrictions. We refer to these agreements
with SP Acq LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber,
Toboroff and Walker and their permitted transferees as a “lock-up
agreement.”
The
permitted transferees under the lock-up agreements are our officers, directors
and employees and other persons or entities associated or affiliated with Steel
Partners II, L.P. or Steel Partners, Ltd. (other than, in the case of Steel
Partners II, L.P. and SP Acq LLC, their respective limited partners or members
in their capacity as limited partners or members). Any transfer to a permitted
transferee will be in a private transaction exempt from registration under
the
Securities Act, pursuant to Section 4(i) thereof.
During
the lock-up period, SP Acq LLC, Steel Partners II, L.P. and Messrs. Bergamo,
LaBow, Lorber, Toboroff and Walker and any permitted transferees to whom they
transfer shares of common stock will retain all other rights of holders of
our
common stock, including, without limitation, the right to vote their shares
of
common stock (except for the voting agreement described above with respect
to
the initial business combination) and the right to receive cash dividends,
if
declared. If dividends are declared and payable in shares of common stock,
such
dividends will also be subject to the lock-up agreement. If we are unable to
effect our initial business combination and liquidate, SP Acq LLC, Steel
Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have
waived the right to receive any portion of the liquidation proceeds with respect
to the founder’s shares. Any permitted transferees to whom the founder’s shares
are transferred will also agree to waive that right.
ITEM
13. Certain
Relationships, Related Transactions and Director
Independence
On
March
22, 2007, SP Acq LLC, which is controlled by Mr. Lichtenstein, purchased
11,500,000 of our units. On June 25, 2007, a total of 500,000 founder’s units
were sold by SP Acq LLC to Anthony Bergamo, Ronald LaBow, Howard M. Lorber,
Leonard Toboroff and S. Nicholas Walker, each a director of the company, in
private transactions subject to the succeeding sentence. Pursuant to the
purchase agreement dated March 30, 2007, SP Acq LLC has agreed to sell 662,791
founder’s units to Steel Partners II, L.P., an affiliate of SP Acq
LLC.
On
August
8, 2007, we declared a unit dividend of 0.15 units for each outstanding share
of
common stock. On September 4, 2007, we declared a unit dividend of one-third
of
a unit for each outstanding share of common stock. Pursuant to an adjustment
agreement we entered with SP Acq LLC, Steel Partners II, L.P. and Messrs.
Bergamo, LaBow, Lorber, Toboroff and Walker each of whom agreed to assign their
right to receive the additional founder’s units they received pursuant to the
dividend to SP Acq LLC. 667,600 of these additional founder’s units were
subsequently forfeited by SP Acq LLC in connection with the exercise of the
underwriters’ over-allotment option so that the holders of our founder’s units
maintained collective ownership of 20% of our units.
Pursuant
to the terms of the agreement with Steel Partners II, L.P., in the event that
Steel Partners II, L.P. does not purchase the co-investment units SP Acq LLC
has
entered into an agreement with us requiring it to purchase the co-investment
units. In such event, Steel Partners II, L.P. will transfer its founder’s units
to SP Acq LLC. Pursuant to the terms of the purchase agreements with Messrs.
Bergamo, LaBow, Lorber, Toboroff and Walker, SP Acq LLC may repurchase the
founder’s units owned by Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker in
the event of their resignation or removal for cause from our Board of
Directors.
The
founder’s units are identical to those sold in our initial public offering,
except that:
|
·
|
SP
Acq LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber,
Toboroff and Walker have agreed to vote all of their founder’s shares
either for or against a business combination as determined by the
public
stockholders who vote at the special or annual meeting called for
the
purpose of approving our initial business
combination;
|
|
·
|
SP
Acq LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber,
Toboroff and Walker have agreed that the founder’s shares included therein
will not participate with the common stock included in the units
sold in
our initial public offering in any liquidating
distribution;
|
|
·
|
the
initial founder’s warrants included therein
will:
|
|
·
|
only
become exercisable after our consummation of our initial business
combination if and when the last sales price of our common stock
exceeds
$14.25 per share for any 20 trading days within a 30 trading day
period
beginning 90 days after such business combination;
and
|
|
·
|
be
non-redeemable so long as they are held by SP Acq LLC or its permitted
transferees, including Steel Partners II, L.P. and Messrs. Bergamo,
LaBow,
Lorber, Toboroff and Walker; and
|
|
·
|
the
founder’s units (including the founder’s shares and initial founder’s
warrants) will be forfeited in the event that Steel Partners II,
L.P. or
SP Acq LLC fails to purchase the co-investment
units.
|
On
March
22, 2007, SP Acq LLC entered into an agreement with us to purchase 5,250,000
warrants at a price of $1.00 per warrant, upon the consummation of the offering.
Subsequent to this agreement, Messrs. Bergamo, LaBow, Lorber, Toboroff and
Walker agreed that they would purchase a total of 500,000 of the additional
founder’s warrants from SP Acq LLC. On October 4, 2007, SP Acq LLC agreed to
purchase an additional 1,750,000 additional founder’s warrants at a price of
$1.00 per warrant immediately prior to our initial public offering resulting
in
an aggregate purchase of 7,000,000 additional founder’s warrants. We believe the
purchase price of $1.00 per warrant for the additional founder’s warrants
represented the fair value of such warrants on the date of purchase and
accordingly no compensation expense has been recognized with respect to the
issuance of the additional founder’s warrants. The $7.0 million of proceeds from
the investment in the 7,000,000 additional founder’s warrants has been placed in
the trust account pending our completion of an initial business combination.
If
we do not complete such an initial business combination, then the $7.0 million
will be part of the liquidation distribution to our public stockholders, and
the
additional founder’s warrants will expire worthless. The additional founder’s
warrants are non-redeemable so long as they are held by SP Acq LLC or its
permitted transferees.
On
March
22, 2007, Steel Partners II, L.P. agreed to invest $30.0 million in us in the
form of co-investment units at a price of $10.00 per unit. Steel Partners II,
L.P. is obligated to purchase such co-investment units from us immediately
prior
to the consummation of our initial business combination. The co-investment
units
are identical to those sold in the offering except that the co-investment
warrants included therein will be non-redeemable so long as they are held Steel
Partners II, L.P. or its permitted transferees.
In
the
event that Steel Partners II, L.P. is unable to consummate the co-investment
when required to do so, SP Acq LLC, Steel Partners II, L.P., Anthony Bergamo,
Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S. Nicholas Walker have
agreed to surrender and forfeit their founder’s units to us; provided that such
surrender and forfeiture will not be required if SP Acq LLC purchases such
co-investment units.
We
will
also enter into an agreement with each of SP Acq LLC, Steel Partners II, L.P.,
and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker granting them the right
to demand that we register the resale, (i) in the case of SP Acq LLC, Steel
Partners II, L.P., and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker,
of
the founder’s units, the founder’s shares, the initial founder’s warrants and
the shares of common stock underlying the initial founder’s warrants,
(ii) in the case of SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff
and Walker, the additional founder’s warrants and the shares of common stock
underlying the additional founder’s warrants, and (iii) in the case of
Steel Partners II, L.P., the co-investment units, co-investment shares and
co-investment warrants and the shares of common stock underlying the
co-investment warrants, with respect to the founder’s units, the founder’s
shares, the initial founder’s warrants and shares of common stock issuable upon
exercise of such warrants, the co-investment units, the co-investment shares
and
the co-investment warrants and shares issuable upon exercise of such warrants
at
any time commencing three months prior to the date on which they are no longer
subject to transfer restrictions, and with respect to all of the additional
founder’s warrants and the underlying shares of common stock, at any time after
the execution of a definitive agreement for an initial business combination.
We
will bear the expenses incurred in connection with the filing of any such
registration statements.
As
of
December 31, 2007, Steel Partners, Ltd., had loaned us a total of $250,000
evidenced by a promissory note, which was used to pay a portion of the expenses
of our initial public offering and our organization. This note bears interest
at
5%, compounded semi-annually and will be paid in full by December 31, 2008.
This
loan was made to us by Steel Partners, Ltd. because SP Acq LLC was recently
formed and has limited capital. We had accrued interest of $9,435 as of December
31, 2007. In addition, as of December 31, 2007, Steel Partners, Ltd. advanced
$26,818 to pay expenses that were due before our initial funding. Such amounts
remained outstanding as of December 31, 2007. Steel Partners, Ltd. regularly
advances capital on behalf of various affiliated entities.
We
have
agreed to pay Steel Partners, Ltd. a monthly fee of $10,000 for office space
and
administrative services, including secretarial support. This fee commenced
upon
the completion of our initial public offering. We believe that such fees are
at
least as favorable as we could have obtained from an unaffiliated third
party.
We
will
reimburse our officers, directors and affiliates, including Steel Partners
and
its employees, for any reasonable out-of-pocket business expenses incurred
by
them in connection with certain activities on our behalf such as identifying
and
investigating possible target businesses and business combinations. Subject
to
availability of proceeds not placed in the trust account and interest income
of
up to $3.5 million on the balance in the trust account, there is no limit on
the
amount of out-of-pocket expenses that could be incurred. Our audit committee
will review and approve all payments made to our officers, directors and
affiliates, including Steel Partners, other than the payment of an aggregate
of
$10,000 per month to Steel Partners, Ltd. for office space, secretarial and
administrative services, and 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. To the extent
such out-of-pocket expenses exceed the available proceeds not deposited in
the
trust account and interest income of up to $3.5 million on the balance in the
trust account, such out-of-pocket expenses would not be reimbursed by us unless
we consummate an initial business combination.
Members
of our management team may become aware of business opportunities that may
be
appropriate for presentation to us as well as the other entities with which
they
are or may be affiliated. We have entered into a business opportunity right
of
first review agreement with Mr. Lichtenstein and Steel Partners II GP LLC
(formerly Steel Partners, L.L.C.), which provides that from the date of our
initial public offering until the earlier of the consummation of our initial
business combination or our liquidation in the event we do not consummate an
initial business combination, we will have a right of first review with respect
to business combination opportunities of Steel Partners relating to companies
that are not publicly traded on a stock exchange or over-the-counter market
with
an enterprise value of between $300 million to $1.5 billion, excluding companies
targeted for acquisition by any business in which Steel Partners II, L.P.
directly or indirectly has an investment (including Steel Partners Japan
Strategic Fund (Offshore), L.P.) or businesses headquartered in or organized
under the laws of China. Currently, members of our management team are officers
or directors of the following entities in which Steel Partners II, L.P.,
directly or indirectly, has an investment: Adaptec, Inc., Angelica Corporation,
BNS Holding, Inc., Collins Industries, Inc., CoSine Communications, Inc., Del
Global Technologies Corp., Gateway Industries, Inc., GenCorp Inc., Nathan’s
Famous Inc., NOVT Corporation, SL Industries, Inc., Vector Group Ltd., WebBank,
WebFinancial Corporation and WHX Corporation. In addition, such members of
our
management team could in the future become officers or directors of other
entities in which Steel Partners II, L.P., directly or indirectly, has an
investment. Due to those existing and future affiliations, members of our
management team may have fiduciary obligations to present potential business
opportunities to those entities prior to presenting them to us which could
cause
conflicts of interest. In addition, our directors and officers may in the future
become affiliated with entities, including other blank check companies, engaged
in activities similar to those intended to be conducted by us. Accordingly,
members of our management team and our directors may have conflicts of interest
in determining to which entity a particular business opportunity should be
presented.
Howard
M.
Lorber, a director of our company, is also the Chairman of the Board of Open
Acquisition Corp., which is a blank check company that intends to engage in
activities similar to those conducted by us. While the registration statement
filed by Open Acquisition has not been declared effective by the SEC and Open
Acquisition’s registration statement states that it intends to have
approximately $118.75 million in its trust account to fund acquisitions (as
opposed to over $400 million in our trust account), if and when the registration
statement of Open Acquisition is declared effective by the SEC Mr. Lorber may
owe fiduciary duties to present Open Acquisition with business opportunities
before presenting such opportunities to us.
Other
than reimbursable out-of-pocket expenses payable to our officers and directors
and Steel Partners II, L.P. and an aggregate of $10,000 per month paid to Steel
Partners, Ltd. for office space, secretarial and administrative services, no
compensation or fees of any kind, including finder’s and consulting fees or any
other forms of compensation, including but not limited to stock options, will
be
paid to any of our officers or directors or their affiliates.
ITEM
14. Principal
Accounting Fees and Services
The
firm
of Grant Thornton LLP (“Grant Thornton”) acts as our principal accountant. Grant
Thornton manages and supervises the audit, and is exclusively responsible for
the opinion rendered in connection with its examination. The following is a
summary of fees paid to Grant Thornton for services rendered:
Audit
Fees
The
aggregate fees billed or expected to be billed for professional services
rendered by Grant Thornton for the year ended December 31, 2007
were:
Audit
fees
|
|
$
|
135,000
|
|
Reviews
of Form S-1 and related filings
|
|
|
155,000
|
|
Total
|
|
$
|
290,000
|
|
Audit-Related
Fees
We
did
not receive audit-related services that are not reported as Audit Fees for
the
year ended December 31, 2007.
Tax
Fees
There
were $25,000 fees billed or expected to be billed for professional services
for tax compliance, tax advice and tax planning by Grant Thornton for the year
ended December 31, 2007.
All
Other Fees
We
did
not receive products and services provided by Grant Thornton, other than those
discussed above, for the year ended December 31, 2007.
Pre-Approval
Policy
Since
our
audit committee was not formed until October 2007, the audit committee did
not
pre-approve all of the foregoing services, although any services rendered prior
to the formation of our audit committee were approved by our board of directors.
Since the formation of our audit committee, and on a going-forward basis, the
audit committee has and will pre-approve all auditing services and permitted
non-audit services to be performed for us by Grant Thornton, including the
fees
and terms thereof (subject to the de
minimus
exceptions for non-audit services described in the Exchange Act which are
approved by the audit committee prior to the completion of the audit). The
audit
committee may form and delegate authority to subcommittees of the audit
committee consisting of one or more members when appropriate, including the
authority to grant pre-approvals of audit and permitted non-audit services,
provided that decisions of such subcommittee to grant pre-approvals shall be
presented to the full audit committee at its next scheduled meeting. Anthony
Bergamo, the Chairman of our Audit Committee, approved certain tax services
to
be performed by Grant Thornton.
PART
IV
ITEM
15. Exhibits
and Financial Statement Schedules
|
(a)
|
The
following documents are filed as a part of this
Report:
|
Report
of
Independent Registered Public Accounting Firm
Balance
Sheet
Statement
of Operations
Statement
of Stockholders’ Equity
Statement
of Cash Flows
Notes
to
Financial Statements
|
2.
|
Financial
Statement Schedule(s)
|
All
schedules are omitted for the reason that the information is included in the
financial statements or the notes thereto or that they are not required or
are
not applicable.
We
hereby
file as part of this Annual Report on Form 10-K the Exhibits listed in the
attached Exhibit Index. Exhibits which are incorporated herein by reference
can
be inspected and copied at the public reference facilities maintained by the
SEC, 100 F Street, N.E., Room 1580, Washington D.C. 20549. Copies of such
material can also be obtained from the Public Reference Section of the SEC,
100
F Street, N.E., Washington, D.C. 20549, at prescribed rates.
|
(c)
|
Financial
Statement Schedules
|
All
schedules are omitted for the reason that the information is included in the
financial statements or the notes thereto or that they are not required or
are
not applicable.
Exhibit
No.
|
|
Description
|
|
|
|
3.1
|
|
Amended
and Restated Certificate of Incorporation (7)
|
3.2
|
|
Form
of Bylaws (1)
|
4.1
|
|
Specimen
Unit Certificate (3)
|
4.2
|
|
Specimen
Common Stock Certificate (3)
|
4.3
|
|
Amended
and Restated Warrant Agreement by and between the Registrant and
Continental Stock Transfer & Trust Company (6)
|
4.4
|
|
Form
of Warrant Certificate (1)
|
10.1
|
|
Form
of Letter Agreement by and among the Registrant, SP Acq LLC and Steel
Partners II, L.P. (5)
|
10.2
|
|
Form
of Letter Agreement by and among the Registrant and each of the directors
and executive officers of the Registrant (6)
|
10.3
|
|
Initial
Founder’s Securities Purchase Agreement, dated as of March 22, 2007, by
and between the Registrant and SP Acq LLC (1)
|
10.4
|
|
Founder’s
Units Purchase Agreement, dated as of March 30, 2007, by and among
the
Registrant, SP Acq LLC and Steel Partners II, L.P. (4)
|
10.5
|
|
Form
of Co-Investment Unit Purchase Agreement between the Registrant and
Steel
Partners II, L.P. (1)
|
10.6
|
|
Form
of Registration Rights Agreement by and between the Registrant and
the
founder (4)
|
10.7
|
|
Form
of Indemnity Agreement by and between the Registrant and each of
its
directors and executive officers (4)
|
10.8
|
|
Form
of Investment Management Trust Agreement by and between the Registrant
and
Continental Stock Transfer & Trust Company (7)
|
10.9
|
|
Form
of Right of First Review Agreement by and among the Registrant and
Warren
Lichtenstein and Steel Partners, L.L.C. (4)
|
10.10
|
|
Form
of Letter Agreement between SP Acq LLCs, the Registrant and each
of
Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff
and S.
Nicholas Walker (2)
|
10.11
|
|
Escrow
Agreement by and between the Registrant and SP Acq LLC
(4)
|
10.12
|
|
Adjustment
Agreement by and among the Registrant, SP Acq LLC, Steel Partners
II, L.P.
and each of Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard
Toboroff and S. Nicholas Walker (5)
|
14
|
|
Form
of Code of Conduct and Ethics (1)
|
24.1
|
|
Powers
of Attorney
|
31.1
|
|
Principal
Executive Officer Certification Pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
31.2
|
|
Principal
Financial Officer Certification Pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
32.1
|
|
Principal
Executive Officer Certification Pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2
|
|
Principal Financial
Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
99.1
|
|
Form
of Charter of Audit Committee (1)
|
99.2
|
|
Form
of Charter of Governance and Nominating Committee
(1)
|
|
(1)
|
Incorporated
by reference to the corresponding exhibit filed with the Registration
Statement on Form S-1 (File No. 333-142696) with the SEC on May 8,
2007.
|
|
(2)
|
Incorporated
by reference to the corresponding exhibit filed with Amendment No.
1 to
the Registration Statement on Form S-1 (File No. 333-142696) filed
with
the SEC on June 28, 2007.
|
|
(3)
|
Incorporated
by reference to the corresponding exhibit filed with Amendment No.
2 to
the Registration Statement on Form S-1 (File No. 333-142696) filed
with
the SEC on August 10, 2007.
|
|
(4)
|
Incorporated
by reference to the corresponding exhibit filed with Amendment No.
3 to
the Registration Statement on Form S-1 (File No. 333-142696) filed
with
the SEC on September 14, 2007.
|
|
(5)
|
Incorporated
by reference to the corresponding exhibit filed with Amendment No.
4 to
the Registration Statement on Form S-1 (File No. 333-142696) filed
with
the SEC on September 28, 2007.
|
|
(6)
|
Incorporated
by reference to the corresponding exhibit filed with Amendment No.
5 to
the Registration Statement on Form S-1 (File No. 333-142696) filed
with
the SEC on October 5, 2007.
|
|
(7)
|
Incorporated
by reference to the corresponding exhibit (with respect to Exhibit
3.1)
and 10.1 (with respect to Exhibit 10.8) filed with the Current Report
on
Form 8-K filed with the SEC on October 23,
2007.
|
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.
|
SP
Acquisition Holdings, Inc.
|
|
|
|
By:
|
/s/
Warren G. Lichtenstein |
|
|
Name:
|
Warren
G. Lichtenstein
|
|
|
Title:
|
Chairman,
President and Chief Executive
Officer
|
POWER
OF ATTORNEY
KNOW
ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Warren G. Lichtenstein and Jack L. Howard as true
and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any and all amendments to this Annual Report on Form 10-K,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the SEC granting unto said attorney-in-fact and
agent
the full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as to all intents
and purposes as either of them might or could do in person, hereby ratifying
and
confirming all that said attorney-in-fact and agent, or their substitute, may
lawfully do or cause to be done by virtue hereof.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Warren G. Lichtenstein
|
|
|
|
March
26, 2008
|
Warren
G. Lichtenstein
|
|
Chairman,
President and Chief Executive Officer (Principal Executive
Officer)
|
|
|
|
|
|
|
|
/s/
Jack
L. Howard |
|
|
|
March
26, 2008
|
Jack
L. Howard
|
|
Chief
Operating Officer and Secretary (Principal
Financial Officer and Principal Accounting Officer)
|
|
|
|
|
|
|
|
/s/
Anthony
Bergamo |
|
|
|
|
Anthony
Bergamo
|
|
Director
|
|
March
26, 2008
|
|
|
|
|
|
/s/
Howard
M. Lorber |
|
|
|
|
Howard
M. Lorber
|
|
Director
|
|
March
26, 2008
|
|
|
|
|
|
/s/
Leonard
Toboroff |
|
|
|
|
Leonard
Toboroff
|
|
Director
|
|
March
26, 2008
|
|
|
|
|
|
/s/
S.
Nicholas Walker |
|
|
|
|
S.
Nicholas Walker
|
|
Director
|
|
March
26, 2008
|
|
|
|
|
|
/s/
Ronald
LaBow |
|
|
|
|
Ronald
LaBow
|
|
Director
|
|
March
26, 2008
|