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As filed with the United States Securities and Exchange Commission on November 12, 2021 under the Securities Act of 1933, as amended.
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PROOF Acquisition Corp I
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or
organization)
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6770
(Primary Standard
Industrial Classification
Code Number)
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86-2707040
(I.R.S. Employer
Identification No.)
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11911 Freedom Drive
Suite 1080
Reston, VA 20190
(703) 563-4100
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Michael W. Zarlenga
11911 Freedom Drive
Suite 1080
Reston, VA 20190
(703) 563-4100
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies:
Scott D. Fisher
Steptoe & Johnson LLP
1114 Avenue of the Americas
New York, New York 10036
(212) 506-3900
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Sarah K. Solum
Pamela L. Marcogliese
Freshfields Bruckhaus
Deringer US LLP
2710 Sand Hill Road
Menlo Park, CA 94025
(650) 618-9250
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b- 2 of the Exchange Act.
Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
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Smaller reporting company☒
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Emerging growth company ☒
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Units, each consisting of one share of Class A common stock, $0.0001 par value, and one-half of one redeemable warrant(2)
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23,000,000 units
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$10.00
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$230,000,000
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$21,321
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Shares of Class A common stock included as part of the units(3)
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23,000,000 shares
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—
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—
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—(4)
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Redeemable warrants included as part of the units(3)
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11,500,000 warrants
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—
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—
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—(4)
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Total
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$230,000,000
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$21,321
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(1)
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Estimated solely for the purpose of calculating the registration fee.
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(2)
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Includes 3,000,000 units, consisting of 3,000,000 shares of Class A common stock and 1,500,000 redeemable warrants underlying such units, which may be issued upon exercise of a 45-day option granted to the underwriter to cover over-allotments, if any.
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(3)
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Pursuant to Rule 416(a) under the Securities Act, there are also being registered an indeterminable number of additional securities as may be offered or issued to prevent dilution resulting from share sub-division, share dividends, or similar transactions.
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(4)
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No fee pursuant to Rule 457(g) under the Securities Act.
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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 12, 2021
PRELIMINARY PROSPECTUS
$200,000,000
PROOF Acquisition Corp I
20,000,000 Units
PROOF Acquisition Corp I is a newly-formed blank check company incorporated as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities, which we refer to as our initial business combination. We have not selected any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. We will not be limited to a particular industry or geographic region in our identification and acquisition of a target company.
This is an initial public offering of our securities. Each unit has an offering price of $10.00 and consists of one share of Class A common stock and one-half of one redeemable warrant. Each warrant entitles the holder thereof to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment, upon the terms and limitations as described herein. Each warrant will become exercisable on the later of 30 days after the completion of our initial business combination or 12 months from the closing of this offering, and will expire five years after the completion of our initial business combination, or earlier upon redemption or liquidation, as described in the prospectus. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. The underwriter has a 45-day option from the date of this prospectus to purchase up to 3,000,000 additional units to cover over-allotments, if any.
We will provide our public stockholders with the opportunity to redeem all or a portion of their Class A common stock upon the completion of our initial business combination, subject to the limitations as described herein. If we have not consummated an initial business combination within 18 months from the closing of this offering, we may, but are not obligated to, extend the period of time to consummate a business combination two times by an additional three months each time (for a total of up to 24 months to complete a business combination), and at the end of the applicable period we will redeem 100% of the public shares for cash, subject to applicable law and certain conditions as described herein.
Our sponsor, PROOF Acquisition Sponsor I, LLC, and BlackRock (as defined below) have agreed to purchase an aggregate of 11,500,000 warrants (or 13,225,000 warrants if the underwriter’s over-allotment option is exercised in full), each exercisable to purchase one share of Class A common stock at $11.50 per share, subject to adjustment as provided herein, at a price of $1.00 per warrant, in a private placement to occur concurrently with the closing of this offering. We refer to these warrants throughout this prospectus as the private placement warrants. Our sponsor has agreed to purchase an aggregate of 10,500,000 of the 11,500,000 private placement warrants (or 12,750,000 of the 13,225,000 private placement warrants if the underwriters’ over-allotment option is exercised in full). Our sponsor also owns 5,750,000 shares of Class B common stock, up to 750,000 of which are subject to forfeiture depending on the extent to which the underwriter’s over-allotment option is exercised. We refer to the shares of Class B common stock throughout this prospectus as the founder shares. The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of our initial business combination as described herein. Prior to our initial business combination, only holders of our shares of Class B common stock will be entitled to vote on the appointment of directors. On any other matter submitted to a vote of our stockholders, holders of our Class B common stock and holders of our Class A common stock will vote together as a single class, except as required by applicable law or stock exchange rule.
Certain funds and accounts managed by Magnetar Financial LLC (which we refer to collectively as “Magnetar” throughout this prospectus), have committed an aggregate of $575,000 (subject to reduction in proportion to any amount of the underwriter’s overallotment option that is not exercised) to our sponsor in exchange for membership interests of our sponsor.
Additionally, certain funds and accounts managed by subsidiaries of BlackRock, Inc. (which we refer to collectively as “BlackRock” throughout this prospectus) have agreed to purchase from us an aggregate of 1,000,000 of the 11,500,000 private placement warrants (or 1,150,000 of the 13,225,000 private placement warrants if the underwriter’s over-allotment option is exercised in full) and 400,000 shares of our Class B common stock (or 460,000 shares if the underwriter’s over-allotment option is exercised in full) in connection with the closing of this offering, which shares of Class B common stock will be redeemed from our sponsor at cost and reissued to BlackRock for the same per share consideration paid by our sponsor upon consummation of this offering.
Unless the context otherwise requires, we refer to Magnetar and BlackRock as the “anchor investors” throughout this prospectus. Magnetar has expressed to us an interest in purchasing up to 9.9% of the units in this offering. If Magnetar purchases the full amount of the units they have expressed an interest in purchasing, Magnetar would own approximately 7.92% of the outstanding shares of common stock following this offering (or approximately 6.89% of the outstanding shares if the over-allotment option is exercised in full) and our sponsor would own approximately 18.4% of the outstanding common stock following this offering (in either case). If we raise additional equity capital in a private placement offering in connection with the initial business combination, the anchor investors will be invited to participate on the same terms offered to other investors. For a discussion of our arrangements with the anchor investors, please see “Summary — The Offering — Expressions of Interest,” “Founder shares” and “Private placement purchases.”
We have applied to have our units listed on the New York Stock Exchange (“NYSE”), under the symbol “PACI.U” on or promptly after the date of this prospectus. We cannot guarantee that our securities will be approved for listing on the NYSE or any other exchange. We expect the shares of our Class A common stock and warrants comprising the units will begin separate trading on the NYSE under the symbols “PACI” and “PACI.WS,” respectively, on the 52nd day following the date of this prospectus (or, if that date is not a business day, the following business day) unless BofA Securities, Inc. permits earlier separate trading and we have satisfied certain conditions, as described herein.
We are an “emerging growth company” and a “smaller reporting company” under applicable federal securities laws and as a result will be subject to reduced public company reporting requirements.
Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page
43 for a discussion of information that should be considered in connection with an investment in our securities. Investors will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings.
Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Public offering price
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$10.00
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$200,000,000
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Underwriting discounts and commissions(1)
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$0.55
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$11,000,000
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Proceeds, before expenses, to us
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$9.45
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$189,000,000
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(1)
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Includes $0.35 per unit, or $7,000,000 (or $8,050,000 in the aggregate if the underwriter’s over- allotment option is exercised in full), payable to the underwriter for deferred underwriting commissions upon the consummation of an initial business combination. See also “Underwriting” for a description of underwriting compensation and other items of value payable to the underwriter.
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Of the proceeds we receive from this offering and the sale of the private placement warrants described in this prospectus, $204,000,000, or $234,600,000 if the underwriter’s over-allotment option is exercised in full ($10.20 per unit in either case), will be deposited into a U.S. based trust account at Bank of America, N.A. with Continental Stock Transfer & Trust Company acting as trustee, and such amount will be increased by $0.10 per public share for each three-month extension of our time to consummate our initial business combination, as described herein. Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our taxes, if any, the funds held in the trust account will not be released from the trust account until the earliest to occur of: (1) our completion of an initial business combination; (2) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; or (3) the redemption of our public shares if we have not completed an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders.
The underwriter is offering the units for sale on a firm commitment basis. The underwriter expects to deliver the units to the purchasers on or about , 2021.
BofA Securities
The date of this prospectus is , 2021
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We are responsible for the information contained in this prospectus. We have not, and the underwriter has not, authorized anyone to provide you with different information or to make any representations other than those contained in this prospectus. Neither we nor the underwriter take any responsibility for, and can provide no assurance as to the reliability of, any other information others may give to you. We are not, and the underwriter is not, making an offer to sell securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.
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Until , 2021 (the 25th day after the date of this prospectus) all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to unsold allotments or subscriptions.
Trademarks
This prospectus contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
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This summary only highlights the more detailed information appearing elsewhere in this prospectus. As this is a summary, it does not contain all of the information that you should consider in making an investment decision. You should read this entire prospectus carefully, including the information under “Risk Factors” and our financial statements and the related notes included elsewhere in this prospectus, before investing.
Unless otherwise stated in this prospectus or the context otherwise requires, references to:
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“advisors” are to those individuals who are not members of the PAC I management team but that serve as advisors to our management team either directly or as a member of the VC Advisory Board;
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“amended and restated certificate of incorporation” are to our certificate of incorporation to be in effect upon completion of this offering;
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“anchor investors” are to (i) Magnetar, which has committed an aggregate of $575,000 (subject to reduction in proportion to any amount of the underwriter’s overallotment option that is not exercised) in exchange for membership interests of our sponsor, and (ii) BlackRock, which has agreed to purchase an aggregate of 1,000,000 private placement warrants (or up to 1,150,000 private placement warrants if the underwriter’s over-allotment option is exercised in full) and to which we have agreed to issue an aggregate of 400,000 shares of our Class B common stock (or 460,000 shares if the underwriter’s over-allotment option is exercised in full) in connection with the closing of this offering, and as further described herein;
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“BlackRock” are to certain funds and accounts managed by subsidiaries of BlackRock, Inc., collectively;
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“common stock” are to our Class A common stock and our Class B common stock, collectively;
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“founder shares” are to our shares of Class B common stock issued to our sponsor and to BlackRock in private placements and the shares of Class A common stock that will be issued upon the automatic conversion of the shares of Class B common stock at the time of our initial business combination. The shares of Class A common stock issued upon the automatic conversion will not be “public shares”;
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“initial stockholders” are to our sponsor and other holders of our founder shares immediately prior to the closing of this offering (including BlackRock);
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“letter agreement” are to the letter agreement between us, the sponsor and each of our directors and officers, the form of which is filed as an exhibit to the registration statement of which this prospectus forms a part;
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“Magnetar” are to certain funds and accounts managed by Magnetar Financial LLC, collectively;
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“management” or our “management team” are to our executive officers and directors;
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“PAC I” are to PROOF Acquisition Corp I, a Delaware corporation;
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“private placement warrants” are to the warrants to be issued to our sponsor and to BlackRock in a private placement simultaneously with the closing of this offering and upon conversion of working capital loans or extension promissory notes, if any;
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“PROOF.VC” are to PROOF Fund, L.P. and PROOF Fund II, LP and their affiliates and parallel funds;
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“public shares” are to our shares of Class A common stock sold as part of the units in this offering (and includes those shares purchased in this offering or thereafter in the open market);
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“public stockholders” are to the holders of our public shares, including our initial stockholders, management team and anchor investors to the extent our initial stockholders, members of our management team or anchor investors purchase public shares, provided that our initial stockholders’, each member of our management team’s and anchor investors’ status as a “public stockholder” will only exist with respect to the public shares;
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“public warrants” are to the warrants sold as part of the units in this offering (and includes those warrants purchased in this offering as part of the units or thereafter in the open market);
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“sponsor” are to PROOF Acquisition Sponsor I, LLC, a Delaware limited liability company;
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“VC Advisory Board” are to our Venture Capital Advisory Board, which will assist us in sourcing and evaluating transaction opportunities; and
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“we,” “us,” “our,” “company,” or “our company” are to PAC I.
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Each unit consists of one share of Class A common stock and one-half of one warrant for each unit purchased. Each whole warrant entitles the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share, subject to adjustment as described in this prospectus, and only whole warrants are exercisable. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, unless you purchase at least two units, you will not be able to receive or trade a whole warrant.
Unless we tell you otherwise, the information in this prospectus assumes that the underwriter will not exercise its over-allotment option and the corresponding forfeiture by our sponsor of 750,000 founder shares.
General
We are a newly formed blank check company incorporated as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this prospectus as our initial business combination. To date, our efforts have been limited to organizational activities as well as activities related to this offering. We have not selected any business combination target and we have not, nor has anyone on our behalf initiated any substantive discussions, directly or indirectly, with any business combination target. We have generated no operating revenues to date and we do not expect that we will generate operating revenues until we consummate our initial business combination.
Our objective is to identify and merge with a business that has the potential to achieve sustainable growth and which addresses a large and growing market. We believe there are attractive trends in several industries in which we have expertise, including the enterprise software, health care, financial technology and consumer sectors, although we may pursue an acquisition in any business industry or sector.
PAC I intends to capitalize on the approximately 175 years of combined experience of our management team, our board of directors (the “Board”), the PROOF.VC team, our VC Advisory Board and our other advisers, in investing and managing capital across markets and industries, structuring transactions, giving sound guidance as members of boards of directors and building businesses. Our management team is led by John Backus, Michael Zarlenga, and Steve Mullins. Our strategic advisor is Brian D. Finn. Our Board includes Peter Harrison (Chairman), as well as members Lisa Suennen, Coleman Andrews and Mark Lerdal. Working with our experienced team, we will source and diligence transaction opportunities with the goal of adding post-transaction value using our complementary extensive network of relationships. Our management team, our strategic advisor, our VC Advisory Board and our Board (collectively the “PAC I Team”) have enjoyed longstanding professional and personal relationships, having both invested and worked together for many years across many public and private businesses. They share a common vision for investing in and building exceptional businesses.
Our PAC I Team brings highly complementary capabilities including investing across the various stages of venture capital, leading public and private companies, serving as effective board members, and negotiating large and complex mergers and acquisition transactions. Throughout their respective careers, they have worked with founders, boards and management teams of companies operating across a broad range of industries in various stages of their life cycles and with enterprise values ranging from those exhibited by smaller microcap companies to billion-dollar enterprise value companies, including a focus on consumer, enterprise software, healthcare and financial technology-focused companies.
While our PAC I team has expertise and experience investing across many industries and sectors and we may pursue an acquisition in any business industry or sector, we intend to target businesses where our management team’s insights, expertise and networks can provide advantaged solutions to create value, including through add-on acquisitions, governance enhancements, capital structure optimization, improvements to operations and risk management and attracting and expanding institutional following and ownership.
We believe our PAC I Team is well-positioned to identify attractive business combination opportunities that have the opportunity for significant growth. Our objectives are to generate attractive returns for our shareholders and to enhance value by bringing strategic, financial and operational improvements to the acquired company. We expect to focus on potential target companies with certain industry characteristics, including compelling long-term growth prospects, attractive competitive dynamics, consolidation opportunities and products or services
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with large total addressable markets. The key business characteristics that we will focus on include the potential for disruptive technology or business model; attractive returns on invested capital; significant streams of recurring revenue; operational improvement opportunities; attractive steady-state margins; incremental margins and attractive free cash flow characteristics.
Past experience or performance of our management team and its affiliates is not a guarantee of either (1) our ability to successfully identify and execute a transaction or (2) success with respect to any business combination that we may consummate. You should not rely on the historical record of our management team or its affiliates as indicative of future performance. Our management team and their respective affiliates have been involved with a large number of public and private companies in addition to those identified above, not all of which have achieved similar performance levels. In addition, information regarding the financial performance of funds managed by PROOF.VC, or of specific PROOF.VC portfolio company investments, is provided in this prospectus for informational purposes only. Past performance of PROOF.VC is not indicative of PROOF.VC’s future results, and you should not rely on the information relating to the performance of funds managed by PROOF.VC (which are investment funds that have invested in multiple portfolio companies), or of specific PROOF.VC portfolio company investments, as indicative of the future performance of PROOF Acquisition Corp I (which is a blank check company whose strategy is as described elsewhere in this prospectus), or of an investment in PROOF Acquisition Corp I. See “Risk Factors — Past performance by PROOF.VC, our management team, and members of our VC Advisory Board is not indicative of future performance of an investment in us.” For a complete list of our executive officers and entities for which a conflict of interest may or does exist between such officers and the company, please refer to “Management — Conflicts of Interest.”
Strategic Relationship with Our Sponsor
The initial members of PROOF Acquisition Sponsor I, LLC are managing members or executive officers of PROOF.VC, a growth-stage venture capital firm which pioneered an investing strategy in venture capital that has been written up as a case study by Harvard Business School Professor Josh Lerner. PROOF.VC leverages the pro rata (preemptive) investing rights of smaller early-stage venture capital funds to obtain access to many sought-after venture-backed companies. PROOF.VC shares its profits with the early-stage venture funds. As such, we believe these early-stage venture funds are incented to share their best companies with PROOF.VC. PROOF.VC works closely with smaller venture funds to source investment opportunities. These smaller venture funds bring companies to the attention of the PROOF.VC team for investment consideration. Based on the investment criteria of PROOF.VC and other factors, PROOF.VC aims to invest in approximately 15 of those companies annually. As the investment criteria of PROOF.VC and PAC I are different, we anticipate that some of the companies in which PROOF.VC does not invest may be good prospective companies for our initial business combination. In addition, it is possible that some of the companies that PROOF.VC invests in or considers investing in may be attractive business combination targets. Through its relationship with PROOF.VC, the PAC I Team may have an early look at companies that are brought to the attention of PROOF.VC. However, PROOF.VC does not have any obligation to present any potential business combination targets to us.
Some of PROOF.VC’s prior investments include Beyond Meat Inc. (Nasdaq: BYND), Skillz Inc. (NYSE: SKLZ), Desktop Metal, Inc. (NYSE: DM), Astra Space, Inc. (Nasdaq: ASTR), Roman Health Ventures, Inc., Carta, Inc., Zipline International, Inc., Epic Games, Inc., Yanka Industries, Inc. (dba Masterclass), Sweetgreen, Inc., Bird Rides, Inc. (NYSE: BRDS), EquipmentShare.com, Inc., Varo Money, Inc., and Overtime Sports, Inc. These companies operate in sectors in which we intend to focus our attention, including enterprise software, health care, financial technology and consumer, among others. Through September 30, 2021, PROOF.VC has invested in 61 companies. The median enterprise value of these 61 companies at the time of PROOF.VC’s first investment in such companies was $344 million. The majority of PROOF.VC’s first investments in a company are at valuations between $100 million and $800 million. PROOF.VC estimates that 24 of the 61 companies in which it has invested through September 30, 2021 have market values in excess of $1 billion, with 4 of those 24 companies having market values of $5 billion or more. Included in PROOF.VC’s 61 investments are two companies which went public through traditional IPOs (Beyond Meat Inc. and Casper Sleep, Inc.), four companies which went public via a SPAC merger (Skillz Inc., Desktop Metal, Inc., Astra Space, Inc., and Bird Rides, Inc.), one company which has publicly filed a preliminary prospectus with the SEC for an IPO (Sweetgreen, Inc.), and two companies that were sold to strategic buyers (Tubi, Inc. and Frontier Car Group). PROOF.VC calculates that the financial performance of its 2016 vintage year PROOF I fund as of September 30, 2021 includes a 3.23X multiple on invested capital (“MOIC”), a 36.5% internal rate of return, net
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of management fees and carried interest (“net IRR”), and a 0.88X distribution to paid-in ratio, representing aggregate cash distributions made to limited partners relative to aggregate capital called from limited partners (“DPI”). PROOF.VC calculates that the financial performance of its 2019 vintage year PROOF II fund as of September 30, 2021 includes a 1.46X MOIC and a 26.2% net IRR. PROOF.VC’s calculations of MOIC and net IRR described herein include a combination of realized and estimated unrealized value. PROOF.VC estimates of MOIC, net IRR and portfolio company valuations described herein are internal estimates as of September 30, 2021, which are calculated pursuant to PROOF.VC’s internal valuation policy and, in the absence of readily ascertainable market values, represent estimated fair value as determined by PROOF.VC’s general partner, after giving consideration to, among other things, recent or impending funding rounds, operating results, financial condition and other pertinent information.
Our PAC I Team intends to apply its decades of experience to filter through investment opportunities, identify companies with talented management teams and partner with them to help lead new industries.
John C. Backus is a founder and Managing Member of PROOF.VC, and serves on its investment committee, and each of our officers and directors presently has, and any of them in the future may have, additional fiduciary or contractual obligations which may conflict with or supersede duties owed to PAC I. Please refer to “─Other Considerations” below and “Management — Conflicts of Interest.”
Our Management Team
Our management team is led by Peter Harrison (Chair), John Backus (CEO, director and a managing member of our sponsor), Steve Mullins (Chief Financial Officer and a managing member of our sponsor) and Michael Zarlenga (General Counsel and a managing member of our sponsor). Through its exposure to the experience and expertise that members of our management team have gained at PROOF.VC, PAC I will leverage these sourcing and analytic capabilities to identify and diligence potential companies for the initial business combination. Our board members have a shared history of working collaboratively and successfully on a series of growth investments sourced by PROOF.VC, including private round investments in:
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Beyond Meat Inc. and DailyPay (3 Board members)
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Skillz Inc., Zipline International Inc., Sweetgreen, Inc., EquipmentShare.com, Inc., and Yanka Industries, Inc. (dba Masterclass) (2 Board members)
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Carta, Inc., Bird Rides, Inc., Desktop Metal, Inc., Astra Space, Inc., and Varo Money, Inc. (1 Board Member)
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John C. Backus, Jr. (CEO and Director). Mr. Backus brings more than 37 years of investment and executive experience spanning the private and public sectors. Mr. Backus is currently a founder and Managing Director of PROOF.VC, a venture capital firm at the forefront of monetizing expiring pro rata rights. Mr. Backus created the PROOF Fund in 2015, which he co-founded with his partners Thanasis Delistathis and John Burke. At PROOF.VC, Mr. Backus has been responsible for many high-profile investments, including Beyond Meat Inc. (IPO), Skillz Inc. (SPAC merger), Zipline International, Inc., DailyPay, Carta, Inc., and Yanka Industries, Inc. (dba Masterclass). He also is an advisor to the family office of Saudi Prince Khaled bin Alwaleed bin Talal Al Saud, as well as the venture growth firm Blue Heron Capital. Mr. Backus began his career in 1981 at Bain & Company’s small but rapidly growing Menlo Park office, with a focus on consumer product companies. He became the first Bain & Company consultant to transition to a full-time permanent role at a Bain Capital company in 1985. He became the chief financial officer of Key Airlines, Bain Capital’s first investment. At Key Airlines, Mr. Backus obtained a security clearance, and he later led the military business of the acquirer of Key Airlines, World Airways. That line of business was responsible for a majority of World Airways’ revenue at one point. In 1991, Mr. Backus was awarded the Desert Storm/Desert Shield Civilian Medal for his efforts at World Airways. Mr. Backus co-founded US Order, an early electronic banking company, in 1990. After selling part of the business to Visa in 1994, he and co-founder William F. Gorog took the company public in 1995. Mr. Backus served as CEO of US Order until 1998, when he stepped down to found Draper Atlantic, an early-stage venture capital firm. Notable exits that Mr. Backus was involved with at Draper Atlantic include DivX (IPO), Mobile365 (sold to Sybase) and GlobalLogic (sold to Apax). In 2006, Mr. Backus and his team merged with another group to form New Atlantic Ventures, where he was responsible for a number of large exits including Invincea (sold to Sophos) and TwoSix Labs (sold to Carlyle). Mr. Backus graduated from Stanford
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University with both a degree in Economics as well as an MBA. Active in his community, Mr. Backus has served on the Board of Directors of The Wolftrap Foundation for the Performing Arts (Chair); the Northern Virginia Technology Council (Chair); The Colorectal Cancer Alliance (Chair) and The National Venture Capital Association (Executive Committee).
Peter Harrison (Chairman of the Board) will lead our investment outreach and evaluation activities with Steve Mullins (CFO) and Michael Zarlenga (General Counsel). Mr. Harrison brings 35 years of executive and investment experience spanning the private and public technology sectors. Mr. Harrison is currently the Founder and General Partner of Sand Hill Capital, a fund focused on social and environmental impact investing, which he founded in July 2018. He also serves as a board trustee of George Washington University where he co-chairs the ESG taskforce. In 1990 he co-founded, Seer Technologies, an IBM backed spin-off from Credit Suisse First Boston where he was working at the time. He led the growth of Seer’s international business, culminating in an IPO in 1995. In 1996 Mr. Harrison joined Versata, an early stage technology start-up in the Bay Area where he led the growth of their revenues as Senior Vice President, culminating in an IPO in 2000. In 2001 Mr. Harrison joined GlobalLogic as CEO, a technology service firm, which over the next 10 years grew to over 6,000 employees attracting investments from NEA, Sequoia Capital and Goldman Sachs along the way. GlobalLogic was itself acquired by Apax Partners in 2013. In 2013 Mr. Harrison took over as CEO of Snagajob, a marketplace for hourly workers with over 60 million users in 2015. While there, he recapitalized the business and grew software revenues significantly. He presently sits on several boards of technology companies and collaborates with venture capital and private equity funds, advising them on new investments. Mr. Harrison is a limited partner in PROOF.VC, and has co-invested in 19 PROOF.VC companies. We believe Mr. Harrison is well-qualified to serve as a chairman of our board of directors due to his extensive experience, relationships and contacts.
Steven P. Mullins (CFO). Mr. Mullins brings over 20 years of experience as a chief financial officer, board member, partner in investment funds, and senior financial advisor. Mr. Mullins, through his consulting firm, SPM Consulting, is currently the chief financial officer of several early stage technology companies, including Rebellion Defense, Inc., Bloom Protocol, LLC, Endera Systems, LLC, Redjack, LLC, A2P, LLC, Percipient.ai, Inc., Qmulos, Inc., Earth Optics, Inc., and INADEV Corporation. He is the current Chairman of the Board of Advisors of INADEV Corporation, a government services and commercial product company. He also is an advisor to the family office of Saudi Prince Khaled bin Alwaleed bin Talal Al Saud. Mr. Mullins was the Chief Financial Officer and Treasurer of InteliData Technologies Corporation which was publicly traded on the NASDAQ from 1999-2002 after serving as its Director of Finance and Controller. Mr. Mullins has also served on the Board of Visitors at his alma mater, George Mason University, where he was Chairman of the Audit Committee for 2 years and Vice Chairman of the Finance and Land Use Committee for 2 years.
Michael W. Zarlenga (General Counsel and Corporate Secretary). Mr. Zarlenga has been practicing corporate and securities law for more than 25 years and currently serves as the General Counsel for PROOF.VC. Since joining PROOF.VC in 2019, Mr. Zarlenga has formed and overseen the funding of PROOF Fund II, a $120 million venture capital fund, overseen investments in more than 60 rounds of financing utilizing special purpose vehicles totaling in excess of $140 million, and overseen exits from Beyond Meat Inc. (IPO), Casper, Inc. (IPO), Frontier Car Group (tender offer), Tubi, Inc. (merger with Fox), Skillz Inc. (SPAC merger), Desktop Metal, Inc. (SPAC merger), and Astra Space, Inc. (SPAC merger). Over the course of his legal career, Mr. Zarlenga has advised clients including publicly traded and privately-held corporations, partnerships, financial institutions, underwriters, individuals, and investor groups in connection with formation and corporate governance, mergers and acquisitions, regulatory and enforcement proceedings, reorganizations, private and public debt and equity offerings, and reporting requirements under the Securities Exchange Act of 1934. Prior to joining PROOF.VC, Mr. Zarlenga served as General Counsel and Corporate Secretary to Carson America, Inc., Dr. Benjamin S. Carson’s Principal Campaign Committee for seeking the Republican National Committee's 2016 Presidential Nomination. Mr. Zarlenga is also an entrepreneur, owning and managing a successful small business.
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VC Advisory Board
The VC Advisory Board consists of individuals with significant experience growing, building, and operating and investing in technology businesses. In addition to origination activities, we expect the VC Advisory Board will be consulted on potential business combination opportunities and the sponsor and management may request the participation of VC Advisory Board members where their skills and experience are expected to enhance the investment process and the long-term value creation opportunity.
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Jennifer Schretter, Partner at PROOF.VC
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Amos Ben Meir, Investor and Board Director at Sand Hill Angels
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Jai Choi, Founder of Tekton Ventures
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Angela Dalton, Founder of Signum Growth Capital
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Paul Grossinger, Co-Founder of Gaingels (Gaingels.com)
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Alex Gurevich, Managing Partner at Javelin Capital Partners
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Kent Madsen, Managing Partner of EPIC Ventures
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Steve Marcus, Co-Founder and General Partner of Riot Ventures
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Jordan Nof, Co-Founder and Managing Partner of Tusk Venture Partners
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Paul Willard, Silicon Valley early-stage investor
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Our Board of Directors
We have assembled a Board which will evaluate investments and has the experience to consider business combination targets across industries. Additional information about the members of our Board can be found in the section entitled “Management — Officers and Directors.”
We believe our 5 board members have relevant and valuable experience identifying, evaluating and closing investments in high growth companies, as some or all have:
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been active investors in the technology sector;
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served on boards of directors;
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served on investment committees;
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served as CEOs (including 3 public company CEOs); and
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served on public company boards.
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Business Strategy
Our business strategy is to identify and complete our initial business combination with a company that complements the experience of our PAC I Team and can benefit from its sourcing, investing, governance and public market and value-enhancement expertise. Our selection process will capitalize on both our exposure to PROOF.VC’s proprietary deal flow from more than 100 venture capital funds together with our PAC I Team’s extensive networks of relationships to both source a transaction as well as implement an operational and growth strategy. These networks have been developed through our PAC I Team’s well-established experience across private and public market investing where they have demonstrated a distinct combination of capabilities including:
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Broad experience and a track record of identifying breakout companies in targeted industries;
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Extensive experience consummating transactions across market cycles and in partnering with operators to drive exceptional results;
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Execution ability in complex acquisitions, venture capital, private equity, business operations, IPOs and post-SPAC IPO combination transactions (“deSPAC transactions”);
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Deep investment experience in the consumer and enterprise sectors with a focus on leveraging technology to drive transformational change in legacy industries;
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Track record of co-investing and collaboration by Backus, Harrison, Andrews, Suennen and Lerdal;
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Targeted experience screening opportunities and identifying companies with excellent management teams and partnering with them at the forefront of new industries;
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Broad and diverse network of operational, investment and transactional relationships, including the PROOF.VC network, to provide access to deal flow as well as experienced operators and management teams;
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Extensive experience operating businesses, allocating capital and managing risk across a broad array of markets;
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Experience managing the complexities of global public companies with a deep understanding of the interplay between macroeconomic events, global capital flows and evolving regulatory landscapes;
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Wide-ranging and meaningful relationships with a range of sellers such as private equity firms, entrepreneurs and companies, active and retired executives and financing providers to help source ideas and targets;
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Deep experience as operators, prudent risk-takers, business builders and managers at complex institutions; and
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History of serving on public and private boards and working with public companies to effect change.
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Acquisition Criteria
Consistent with our business strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We intend to use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines:
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Is a good business today, with, we believe, the potential to be a great, category-leading business in the future;
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Has the ability to make the transition to become a public company and can benefit from being a public company with access to broader capital markets to help achieve its business strategy and capital structure needs;
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Has a strong position within its industry with identified competitive advantages and defensible business strategies;
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Can benefit from our PAC I Team’s expertise and collective capabilities in transaction sourcing, deal execution, investing, and public company management;
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Has the potential to capitalize on disruptive technology or a business model with the potential for attractive prospective growth;
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Is focused on the enterprise software, health care, fintech or consumer end markets;
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Has products or services focused on a large total addressable market;
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Is capital efficient, with the potential for attractive returns on invested capital;
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Has sound business metrics and the potential to generate recurring revenue from customers;
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Has the potential to deploy capital for strategic growth initiatives or add-on acquisitions;
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Demonstrates growth potential and operates in an industry with positive end market trends, secular drivers and growth dynamics; and
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Has a strong and innovative management team aligned with shareholder interests.
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These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general criteria and guidelines as well as other considerations, factors and criteria that our management team may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria and guidelines in our shareholder communications related to our initial business combination, which, as discussed in this prospectus, would be in the form of proxy solicitation materials or tender offer documents that we would file with the SEC. In addition to any potential business candidates we may identify on our own, or through our relationship with PROOF.VC, we anticipate that other target business candidates will be brought to our attention from various unaffiliated sources, including investment market participants, private equity funds and large business enterprises seeking to divest non-core assets or divisions.
Our Acquisition Process
In evaluating a prospective target business, we expect to conduct an extensive due diligence review which may encompass, as applicable and among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities and a review of financial and other information about the target and its industry. We will also call upon our management team’s networks of relationships with CEOs, board members and members of executive management teams, to provide specialized insights into their areas of expertise, and utilize our operational and capital planning experience.
Each of our sponsor, directors, officers and advisors, together with the members of PROOF.VC, will, directly or indirectly, own founder shares, private placement warrants or both following this offering and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, these officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any of these officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination. See also “─ Other Considerations.”
Initial Business Combination
In accordance with the rules of the NYSE, our initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the trust account (excluding the amount of deferred underwriting discounts held in trust and taxes payable on the income earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. We refer to this as the “80% fair market value test.” If our board of directors is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions. Our stockholders may not be provided with a copy of such opinion nor will they be able to rely on such opinion. Subject to this requirement, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations.
We will have until 18 months from the closing of this offering to consummate an initial business combination. However, if we anticipate that we may not be able to consummate our initial business combination within 18 months, we may extend the period of time to consummate a business combination two times by an additional three months each time (for a total of up to 24 months to complete a business combination). Pursuant to the terms of our amended and restated certificate of incorporation and the trust agreement to be entered into between us and Continental Stock Transfer & Trust Company on the date of this prospectus, in order to extend the time available for us to consummate our initial business combination, our sponsor or its affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the trust account $2,000,000, or up to $2,300,000 if the underwriter’s over-allotment option is exercised in full ($0.10 per public share in either case) on or prior to the date of the applicable deadline for each of the available three month extensions, providing a total possible business combination period of 24 months at a total payment value of $4,000,000 (or $4,600,000 if the underwriters’ over-allotment option is exercised in full), in exchange for a non-interest bearing, unsecured promissory note (an “extension promissory note”). Such loans may be converted into warrants, at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. Any such loans that are not converted to warrants will be non-interest bearing and
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payable upon the consummation of our initial business combination. If we complete our initial business combination, we would repay such loaned amounts out of the proceeds of the trust account released to us. If we do not complete a business combination, we will not repay such loans. Furthermore, the letter agreements with our initial shareholders contain a provision pursuant to which our sponsor has agreed to waive its right to be repaid for such loans out of the funds held in the trust account in the event that we do not complete a business combination. Our sponsor and its affiliates or designees are not obligated to fund the trust account so that we may extend the time available for us to complete our initial business combination.
We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders will own shares will own or acquire 100% of the issued and outstanding equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the prior owners of the target business, the target management team or stockholders or for other reasons. We only intend to complete a business combination if the post-transaction company owns or acquires 50% or more of the issued and outstanding voting securities of the target business or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to our initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target business and us in the initial business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the issued and outstanding capital stock, shares or other equity interests of a target, or issue a substantial number of new shares to third parties in connection with financing our initial business combination. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our issued and outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% fair market value test. If the business combination involves more than one target business, the 80% fair market value test will be based on the aggregate value of all of the target businesses and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.
To the extent we effect our initial business combination with a company or business that may be in its early stages of development or growth, we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.
Other Considerations
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with our sponsor or any of our officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm that such initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
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We currently do not have any specific business combination under consideration. Our officers and directors have neither (nor has anyone on our behalf) individually selected nor considered a target business nor have they had any substantive discussions regarding possible target businesses among themselves or with our underwriter or other advisors. Our management team is regularly made aware of potential business opportunities, one or more of which we may desire to pursue for a business combination, but we have not (nor has anyone on our behalf) contacted any prospective target business or had any substantive discussions, formal or otherwise, with respect to a business combination transaction with our company. Additionally, we have not, nor has anyone on our behalf, taken any substantive measure, directly or indirectly, to identify or locate any suitable acquisition candidate for us, nor have we engaged or retained any agent or other representative to identify or locate any such acquisition candidate.
In addition, certain of our officers, advisors, VC Advisory Board members and directors presently have, and any of them in the future may have additional, fiduciary, or contractual obligations to other entities, including affiliates of PROOF.VC, pursuant to which such officers and directors are or will be required to present a business combination opportunity to such entities subject to his or her fiduciary duties. As a result, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, then, subject to the officer’s or director’s fiduciary duties under Delaware law, he or she will need to honor those fiduciary or contractual obligations to present the business combination opportunity to that entity, before we can pursue the opportunity. Our officers or directors also may choose to present such a business combination opportunity to another entity before presenting it to us. If these other entities decide to pursue the opportunity, we may be precluded from pursuing the same. Our amended and restated certificate of incorporation will provide that we renounce our interest in any business combination opportunity offered to any director or officer unless the opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the company and the opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
Our directors and officers are affiliates of and may sponsor, form or participate in additional blank check companies similar to ours during the period in which we are seeking an initial business combination. Any such companies may present additional conflicts of interest in pursuing an acquisition target, particularly in the event there is overlap among investment mandates. In addition, our officers and directors, are not required to commit any specified amount of time to our affairs, and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying potential business combinations and monitoring the related due diligence.
Corporate Information
Our executive offices are located at 11911 Freedom Drive, Suite 1080, Reston, VA 20190, and our telephone number is (703) 563-4100. We maintain a corporate website at . The information contained on or accessible through our corporate website or any other website that we may maintain is not part of this prospectus or the registration statement of which this prospectus is a part.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
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We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates equals or exceeds $700 million as of the prior September 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of any fiscal year for so long as either (1) the market value of our shares of Class A common stock held by non-affiliates did not equal or exceed $250 million as of the prior September 30, or (2) our annual revenues did not equal or exceed $100 million during such completed fiscal year and the market value of our shares of Class A common stock held by non-affiliates did not equal or exceed $700 million as of the prior September 30.
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The Offering
In deciding whether to invest in our securities, you should take into account not only the backgrounds of the members of our management team, but also the special risks we face as a blank check company and the fact that this offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. You will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. You should carefully consider these and the other risks set forth in the section below entitled “Risk Factors” of this prospectus.
Securities offered
20,000,000 units (or 23,000,000 units if the underwriter’s over-allotment option is exercised in full), at $10.00 per unit, each unit consisting of:
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one share of Class A common stock; and
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one-half of one redeemable warrant.
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Proposed NYSE symbols
Units: “PACI.U”
Class A common stock: “PACI”
Warrants: “PACI.WS”
Trading commencement and separation of shares of Class A common stock and warrants
The units are expected to begin trading on or promptly after the date of this prospectus. The shares of Class A common stock and warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus (or, if such date is not a business day, the following business day) unless BofA Securities, Inc. informs us of its decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. Once the shares of Class A common stock and warrants commence separate trading, holders will have the option to continue to hold units or separate their units into the component securities. Holders will need to have their brokers contact our transfer agent in order to separate the units into shares of Class A common stock and warrants. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, unless you purchase at least two units, you will not be able to receive or trade a whole warrant.
Additionally, the units will automatically separate into their component parts and will not be traded after completion of our initial business combination.
Separate trading of the shares of Class A common stock and warrants is prohibited until we have filed a Current Report on Form 8-K
In no event will the Class A common stock and warrants be traded separately until we have filed with the SEC a Current Report on Form 8-K which includes an audited balance sheet reflecting our receipt of the gross proceeds at the closing of this offering. We will file the Current Report on Form 8-K promptly after the closing of this offering. If the underwriter’s over-allotment option is exercised following the initial
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filing of such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the underwriter’s over-allotment option.
Units:
Number issued and outstanding before this offering
0
Number outstanding after this offering
20,000,000(1)
Common stock:
Number issued and outstanding before this offering
5,750,000 shares of Class B common stock(2)(3)
Number issued and outstanding after this offering
25,000,000 Class A and Class B common stock(1)(2)(4)
Warrants:
Number of private placement warrants to be
sold in a private placement simultaneously
with this offering
11,500,000(1)
Number of warrants to be outstanding after this
offering and the sale of private placement
warrants
21,500,000(1)
Exercisability
Each whole warrant is exercisable to purchase one share of Class A common stock, subject to adjustment as described herein. Only whole warrants are exercisable. No fractional warrants will be issued upon separation of the units and only whole warrants will trade.
We structured each unit to contain one-half of one redeemable warrant, with each whole warrant exercisable for one share of Class A common stock, as compared to units issued by some other similar blank check companies which contain whole warrants exercisable for one whole share, in order to reduce the dilutive effect of the warrants upon completion of our initial business combination as compared to units that each contain a whole warrant to purchase one whole share, thus making us, we believe, a more attractive business combination partner for target businesses.
Exercise price
$11.50 per whole share, subject to adjustments as described herein.
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The exercise price of the warrants will be adjusted if (x) we issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by our board of directors and, in the case of any such issuance to our sponsor or its affiliates, without taking into account any founder shares held by our sponsor or affiliates of the sponsor, as applicable, prior to the issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from the issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and (z) the volume weighted average trading price of our shares of Class A common stock during the 20 trading day period starting on the trading day prior to the day on which we consummate our initial business combination (such price, the “Market Value”) is below $9.20 per share. In that case, the exercise price of the warrants will be adjusted to equal 115% of the higher of the Market Value and the Newly Issued Price, rounded to the nearest cent. In addition, the $18.00 per share redemption trigger price described adjacent to “Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00” will be adjusted to equal 180% of the higher of the Market Value and the Newly Issued Price rounded to the nearest cent. Finally, the $10.00 per share redemption trigger price described adjacent to the caption “Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00” will be adjusted to equal the higher of the Market Value and the Newly Issued Price rounded to the nearest cent.
Exercise period
The warrants will become exercisable on the later of:
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30 days after the completion of our initial business combination; and
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twelve months from the closing of this offering;
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provided, in each case, there must be an effective registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating to them and the shares are registered, qualified, or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or we permit holders to exercise their warrants on a cashless basis under the
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circumstances specified in the warrant agreement, including as a result of a notice of redemption described below under “Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00”). If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
We are not registering the shares of Class A common stock issuable upon exercise of the warrants at this time. However, we have agreed that as soon as practicable, but in no event later than fifteen business days after the closing of our initial business combination, we will use our commercially reasonable efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, and we will use our commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of our initial business combination, and to maintain the effectiveness of such registration statement and a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement; provided that if our shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th day after the closing of the initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption, but we will use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The warrants will expire at 5:00 p.m., Washington, D.C. time, five years after the completion of our initial business combination or earlier upon redemption or liquidation. On the exercise of any warrant, the warrant exercise price will be paid directly to us and not placed in the trust account.
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Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00
Once the warrants become exercisable, we may redeem the outstanding warrants (except as described herein with respect to the private placement warrants):
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in whole and not in part;
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at a price of $0.01 per warrant;
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upon a minimum of 30 days’ prior written notice of redemption to each warrant holder, which we refer to as the “30-day redemption notice”; and
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if, and only if, the last reported sale price (the “closing price”) of our shares of Class A common stock equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-Dilution Adjustments”) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders.
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We will not redeem the warrants as described above unless an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption notice. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Except as set forth below, none of the private placement warrants will be redeemable by us so long as they are held by the initial purchasers of the private placement warrants or their permitted transferees.
Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00
Once the warrants become exercisable, we may redeem the outstanding warrants (except as described herein with respect to the private placement warrants):
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in whole and not in part;
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at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table set forth under “Description of Securities — Warrants
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— Public Stockholders’ Warrants” based on the redemption date and the “fair market value” of our shares of Class A common stock (as defined below) except as otherwise described in “Description of Securities — Warrants — Public Stockholders’ Warrants”;
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if, and only if, the closing price of our shares of Class A common stock equals or exceeds $10.00 per public share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Antidilution Adjustments”) for any 20 trading days within the 30-trading day period ending three trading days before we send the notice of redemption to the warrant holders; and
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if the closing price of the shares of Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “Description of Securities — Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments”), the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.
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The “fair market value” of our shares of Class A common stock for the above purpose shall mean the volume weighted average price of our shares of Class A common stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants. This redemption feature differs from the typical warrant redemption features used in other blank check offerings. We will provide our warrant holders with the final fair market value no later than one business day after the 10-trading day period described above ends. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 shares of Class A common stock per warrant (subject to adjustment).
No fractional shares of Class A common stock will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a share, we will round down to the nearest whole
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number of the number of shares of Class A common stock to be issued to the holder. Please see the section entitled “Description of Securities—Warrants — Public Stockholders’ Warrants” for additional information.
Founder shares
On March 31, 2021, the sponsor subscribed for an aggregate of 5,750,000 shares of Class B common stock, par value $0.0001, for $25,000, or approximately $0.004 per share, to cover certain of our offering costs. As described below, we have agreed to issue to BlackRock an aggregate of 400,000 shares of our Class B common stock (or 460,000 shares if the underwriter’s over-allotment option is exercised in full) in connection with the closing of this offering. These shares will be repurchased from the sponsor at the same price the sponsor paid for the shares, classified as treasury shares, and reissued to BlackRock for the same per share consideration.
Prior to the initial investment in the company of $25,000 by the sponsor, the company had no assets, tangible or intangible. The per share purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the number of founder shares issued. The number of founder shares issued was determined based on the expectation that the founder shares would represent 20% of the aggregate amount of common stock outstanding upon completion of this offering. As such and except for shares repurchased and reissued as described above, our sponsor will own 20% of our issued and outstanding common stock upon completion of this offering, assuming they do not purchase any units in this offering. If we increase or decrease the size of the offering, we will affect a stock split or stock dividend or share contribution back to capital, as applicable, with respect to our Class B common stock immediately prior to the consummation of this offering in an amount so as to maintain the number of founder shares at 20% of the outstanding shares of our common stock upon the consummation of this offering. Up to 750,000 founder shares are subject to forfeiture by our sponsor (or its permitted transferees) depending on the extent to which the underwriter’s over-allotment option is not exercised so that our initial stockholders will maintain ownership of 20% of our common stock upon completion of this offering.
The founder shares are identical to the shares of Class A common stock included in the units being sold in this offering, except that:
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prior to our initial business combination, only holders of the founder shares have the right to vote on the appointment of directors
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and holders of a majority of our founder shares may remove a member of the board of directors for any reason;
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the founder shares are shares of Class B common stock that automatically convert into shares of our Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment pursuant to anti-dilution rights, as described herein;
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the founder shares are subject to transfer restrictions, as described in more detail below;
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our sponsor, officers, and directors have entered into a letter agreement with us, pursuant to which they have agreed (i) to waive their redemption rights with respect to any founder shares and public shares held by them in connection with the completion of our initial business combination and a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) that would modify the substance or timing of our obligation to provide holders of shares of Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (B) with respect to any other provision relating stockholders’ rights or pre-initial business combination activity and (ii) to waive their rights to liquidating distributions from the trust account with respect to any founder shares they hold if we fail to consummate an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame). If we submit our initial business combination to our public stockholders for a vote, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. Our sponsor, directors and officers and their respective affiliates have
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agreed to vote any founder shares held by them and have agreed to vote any public shares purchased during or after this offering in favor of our initial business combination. As a result, in addition to the shares held by our sponsor, we would need 7,900,001, or 38.7% of the remaining 20,400,000 outstanding shares of common stock of the Company owned by public stockholders and BlackRock immediately following this offering to be voted in favor of a transaction in order to have our initial business combination approved. This number and percentage would go down if Magnetar and other anchor investors purchase units in this offering and vote the shares underlying such units in favor of our initial business combination; and
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the founder shares are entitled to registration rights.
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See “Description of Securities ─ Founder Shares.”
Transfer restrictions on founder shares
Except as described herein (see “Principal Stockholders — Transfers of Founder Shares and Private Placement Warrants”), our initial stockholders and our directors and executive officers have agreed not to transfer, assign, or sell any of their founder shares until the earliest of (A) one year after the completion of our initial business combination and (B) subsequent to our initial business combination, (x) if the closing price of our shares of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, share exchange, or other similar transaction that results in all of our public stockholders having the right to exchange their common stock for cash, securities, or other property. Any permitted transferees would be subject to the same restrictions and other agreements of our initial stockholders and our directors and executive officers with respect to any founder shares. We refer to such transfer restrictions throughout this prospectus as the lock-up.
Founder shares conversion and anti-dilution rights
The shares of Class B common stock will automatically convert into shares of our Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock,
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or equity-linked securities, are issued or deemed issued in excess of the amounts sold in this offering and related to the closing of the initial business combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of this offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued (after giving effect to any redemptions of Class A common stock) in connection with the business combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the business combination and any private placement warrants issued to our sponsor, officers or directors upon conversion of working capital loans or extension promissory notes). The holders of a majority of the outstanding shares of Class B common stock may agree to waive any anti-dilution adjustment with respect to any issuance or deemed issuance of additional Class A common stock. Holders of founder shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
The term “equity-linked securities” refers to any debt or equity securities that are convertible, exercisable, or exchangeable for our shares of Class A common stock issued in a financing transaction in connection with our initial business combination, including but not limited to a private placement of equity or debt.
Expressions of Interest
Magnetar has expressed to us an interest in purchasing up to 9.9% of the units in this offering. If Magnetar purchases the full amount of the units it has expressed an interest in purchasing, Magnetar would own approximately 7.92% of the outstanding shares of common stock following this offering (or approximately 6.89% of the outstanding common stock if the underwriter’s over-allotment option is exercised in full). Accordingly, the purchases by Magnetar of units in this offering or of our securities in the open market (or both) could potentially allow it to assert significant influence over our company, including with respect to our initial business combination.
There can be no assurance that Magnetar will acquire any units in this offering, or as to the amount of equity it will retain, if any, upon the consummation of our initial business combination. In the event Magnetar purchases such units (either in this offering or after) and votes them in favor of our initial business combination, it is possible that no votes from other
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public stockholders would be required to approve our initial business combination, depending on the number of shares that are present at the meeting to approve such transaction. As a result of the shares of common stock that Magnetar may hold (directly or indirectly) and Magnetar’s membership interests in our sponsor, Magnetar may have different interests with respect to a vote on an initial business combination than other public stockholders. In addition, any purchases of units in this offering or in the open market by our other anchor investors could have the effect of increasing the effects described above.
Appointment and Removal of Directors; Voting Rights
Prior to the consummation of our initial business combination, only holders of our founder shares will have the right to vote on the appointment of directors. Holders of our public shares will not be entitled to vote on the appointment of directors during such time. In addition, prior to the completion of an initial business combination, holders of a majority of our founder shares may remove a member of the board of directors for any reason. These provisions of our amended and restated certificate of incorporation may only be amended by approval of a majority of at least 90% of the shares of all then outstanding common stock voting at a stockholder meeting. With respect to any other matter submitted to a vote of our stockholders, including any vote in connection with our initial business combination, except as required by applicable law or stock exchange rule, holders of our founder shares and holders of our public shares will vote together as a single class, with each share entitling the holder to one vote.
Private placement purchases
Our sponsor and BlackRock have committed, severally and not jointly, pursuant to written agreements, to purchase an aggregate of 11,500,000 private placement warrants (or 13,225,000 private placement warrants if the underwriter’s over-allotment option is exercised in full), at a price of $1.00 per warrant, each exercisable to purchase one share of our Class A common stock at $11.50 per share, in a private placement that will close simultaneously with the closing of this offering. We will receive an aggregate of $11,500,000 (or $13,225,000 if the underwriter’s over-allotment option is exercised in full) from these sales of private placement warrants.
A portion of the purchase price of the private placement warrants to be sold to our sponsor and BlackRock will be added to the proceeds from this offering to be held in the trust account such that at the time of closing $204,000,000 (or $234,600,000 if the underwriter exercises its over-allotment option in full) will be held in the trust account.
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The private placement warrants will be non-redeemable (except as set forth under “Description of Securities — Warrants — Redemption of Warrants When the Price per Share of Our Class A Common Stock Equals or Exceeds $10.00”) and exercisable on a cashless basis so long as they are held by the initial purchasers of the private placement warrants or their permitted transferees (see “Description of Securities — Warrants — Private Placement Warrants”). If the private placement warrants are held by holders other than the initial purchasers of the private placement warrants or their permitted transferees, the private placement warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the units being sold in this offering. The holders of the private placement warrants, as well as its permitted transferees, have the option to exercise the private placement warrants on a cashless basis.
Transfer restrictions on private placement warrants
The private placement warrants (including the shares of Class A common stock issuable upon exercise of the private placement warrants) will not be transferable, assignable or salable until 30 days after the completion of our initial business combination, except as described herein under “Principal Stockholders — Transfers of Founder Shares and Private Placement Warrants.”
Cashless exercise of private placement warrants
If holders of private placement warrants elect to exercise them on a cashless basis, except as described under “Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00,” they would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the excess of the “Sponsor fair market value” (defined below) over the exercise price of the warrants by (y) the Sponsor fair market value. The “Sponsor fair market value” shall mean the average reported closing price of the shares of Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent. The reason that we have agreed that these warrants will be exercisable on a cashless basis so long as they are held by the initial purchasers of the private placement warrants or their permitted transferees is because it is not known at this time whether they will be affiliated with us following a business combination. If they remain affiliated with us, their ability to sell our securities in the open market will be significantly limited. We expect to have policies in place that restrict insiders from selling our securities except during specific periods.
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Proceeds to be held in trust account
The NYSE listing rules provide that at least 90% of the gross proceeds from this offering be deposited in a trust account. Of the proceeds we will receive from this offering and the sale of the private placement warrants described in this prospectus, $204,000,000, or $234,600,000 if the underwriter’s over-allotment option is exercised in full ($10.20 per unit in either case), will be deposited into a segregated trust account at Bank of America, N.A. located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and such amount will be increased by $0.10 per public share for each three-month extension of our time to consummate our initial business combination, as described herein. Of the proceeds we will receive from this offering and the sale of the private placement warrants described in this prospectus, approximately $550,000 will be used to pay expenses in connection with the closing of this offering and approximately $2,950,000 will be available for working capital following this offering. The proceeds to be placed in the trust account include $7,000,000 (or $8,050,000 if the underwriter’s over-allotment option is exercised in full) in deferred underwriting commissions. The funds placed in the trust account will be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries.
Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our taxes, including franchise and income tax obligations, the funds held in the trust account will not be released from the trust account until the earliest of: (a) the completion of our initial business combination, (b) the redemption of any public shares properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to provide holders of our Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (ii) with respect to any other provisions relating to stockholders’ rights or pre-initial combination activity, and (c) the redemption of our public shares if we have not consummated our business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, subject to applicable law. Public stockholders who redeem their shares of Class A common stock in connection with a stockholder vote described in clause (b) in the preceding sentence shall not be entitled to funds from the trust account upon the subsequent
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completion of an initial business combination or liquidation if we have not consummated an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, with respect to such shares of Class A common stock so redeemed. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders.
Ability to extend time to complete business combination
We will have until 18 months from the closing of this offering to consummate an initial business combination. However, if we anticipate that we may not be able to consummate our initial business combination within 18 months, we may extend the period of time to consummate a business combination two times by an additional three months each time (for a total of up to 24 months to complete a business combination). Pursuant to the terms of our amended and restated certificate of incorporation and the trust agreement to be entered into between us and Continental Stock Transfer & Trust Company on the date of this prospectus, in order to extend the time available for us to consummate our initial business combination, our sponsor or its affiliates or designees, upon five days advance notice to us prior to the applicable deadline, must deposit into the trust account $2,000,000, or up to $2,300,000 if the underwriter’s over-allotment option is exercised in full ($0.10 per public share in either case) on or prior to the date of the applicable deadline for each of the available three month extensions, providing a total possible business combination period of 24 months at a total payment value of $4,000,000 (or $4,600,000 if the underwriters’ over-allotment option is exercised in full), in exchange for a non-interest bearing, unsecured promissory note. Such loans may be converted into warrants, at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. Any such loans that are not converted to warrants will be non-interest bearing and payable upon the consummation of our initial business combination. If we complete our initial business combination, we would repay such loaned amounts out of the proceeds of the trust account released to us. If we do not complete a business combination, we will not repay such loans. Furthermore, the letter agreements with our initial shareholders contain a provision pursuant to which our sponsor has agreed to waive its right to be repaid for such loans out of the funds held in the trust account in the event that we do not complete a business combination. We will issue a press release announcing each extension, at least three business days prior to the deadline for each extension and we will issue a press release the business day after the deadline
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announcing whether the funds have been timely deposited. Our sponsor and its affiliates or designees are not obligated to fund the trust account so that we may extend the time available for us to complete our initial business combination.
Our public stockholders will not be afforded an opportunity to vote on our extension of time to consummate an initial business combination from 18 months to up to 24 months described above or redeem their shares in connection with such extension. However, our public stockholders will be entitled to vote and redeem their shares in connection with a stockholder meeting held to approve an initial business combination or in a tender offer undertaken in connection with such an initial business combination if we propose such during any three-month extension period.
If we are unable to consummate an initial business combination within the applicable time period, we will redeem 100% of the outstanding public shares for a pro rata portion of the funds held in the trust account, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us, divided by the number of then outstanding public shares, subject to applicable law and as further described herein, and then seek to dissolve and liquidate. We expect that the pro rata redemption price to be approximately $10.20 per share initially, and such amount will be increased by $0.10 per public share for each three-month extension of our time to consummate our initial business combination, as described herein (regardless of whether or not the underwriter exercise its over-allotment option), without taking into account any interest earned on such funds. However, we cannot assure you that we will in fact be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public stockholders.
Anticipated expenses and funding sources
Except as described above with respect to the payment of taxes, unless and until we complete our initial business combination, no proceeds held in the trust account will be available for our use. The proceeds held in the trust account will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Assuming an interest rate of 0.1% per year, we estimate the interest earned on the trust account will be approximately
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$200,000 per year; however, we can provide no assurances regarding this amount. Unless and until we complete our initial business combination, we may pay our expenses only from:
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the net proceeds from the sale of the private placement warrants, which will be approximately $2,950,000 in working capital after the payment of approximately $550,000 in expenses relating to this offering; and
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any loans or additional investments from our sponsor or an affiliate of our sponsor or certain of our officers and directors, although they are under no obligation to advance funds to us in such circumstances, and provided that any such loans will not have any claim on the proceeds held in the trust account unless such proceeds are released to us upon completion of our initial business combination.
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Conditions to completing our initial business combination
There is no limitation on our ability to raise funds privately or through loans in connection with our initial business combination. NYSE rules require that our initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of our assets held in the trust account (excluding the amount of deferred underwriting discount held in trust and taxes payable on the income earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Notwithstanding the foregoing, if we are not then listed on the NYSE for whatever reason, we would no longer be required to meet the foregoing 80% fair market value test.
If our board of directors is not able to independently determine the fair market value of the target business or businesses or we are considering an initial business combination with an affiliated entity, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions. We intend to complete our initial business combination only if the post-transaction company in which our public stockholders own shares will own or acquire 50% or more of the issued and outstanding voting securities of the target or is otherwise not required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to our initial business combination may collectively own a minority interest in the
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post-business combination company, depending on valuations ascribed to the target and us in the business combination transaction. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% fair market value test, provided that in the event that the business combination involves more than one target business, the 80% fair market value test will be based on the aggregate value of all of the target businesses and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.
Permitted purchases and other transactions with respect to our securities
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our initial stockholders, directors, executive officers, and advisors or their respective affiliates may purchase public shares or warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. Any such price per share may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with our initial business combination. Additionally, at any time at or prior to our initial business combination, subject to applicable securities laws (including with respect to material nonpublic information), our sponsor, directors, executive officers, and advisors or their respective affiliates may enter into transactions with investors and others to provide them with incentives to acquire public shares, vote their public shares in favor of our initial business combination or not redeem their public shares. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds held in the trust account will be used to purchase public shares or warrants in such transactions. If they engage in such transactions, they will be restricted from making any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with
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such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. Our sponsor, directors, executive officers, and advisors or their respective affiliates will be restricted from making any purchases if such purchasers would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. See “Proposed Business — Permitted Purchases and Other Transactions with Respect to Our Securities” for a description of how our sponsor, directors, executive officers, and advisors or their respective affiliates will select which stockholders to purchase securities from in any private transaction.
The purpose of any such purchase of shares could be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of the business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchase of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of shares of our Class A common stock or our public warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
There is no limit on the number of public shares and public warrants that our initial stockholders, officers, directors or their respective affiliates may purchase pursuant to the transactions described above.
Redemption rights for public stockholders upon completion of our initial business combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account calculated as of two business days prior to the consummation of our initial business combination, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes, divided by the number of then issued and
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outstanding public shares, subject to the limitations described herein. The amount in the trust account is initially anticipated to be $10.20 per public share, and such amount will be increased by $0.10 per public share for any three-month extension of our time to consummate our initial business combination, as described herein.
The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting discounts and commissions we will pay to the underwriter. The redemption rights will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. There will be no redemption rights upon the completion of our initial business combination with respect to our warrants. Our sponsor, directors and officers have entered into a letter agreement with us pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and public shares held by them in connection with the completion of our initial business combination.
Limitations on redemptions
Our amended and restated certificate of incorporation will provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination (so that we are not subject to the SEC’s “penny stock” rules). However, a greater net tangible asset or cash requirement may be contained in the agreement relating to our initial business combination. For example, the proposed business combination may require (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of our Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of our Class A common stock submitted for redemption will be returned to the holders thereof.
Manner of conducting redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the business combination or (ii) by means of a tender offer. In the case of a stockholder meeting, the election must be made (unless
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extended by us in our sole discretion) no later than two business days prior to the initially scheduled vote on the proposal to approve the initial business combination. The decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under applicable law or stock exchange listing requirements. Asset acquisitions and stock purchases would not typically require stockholder approval, while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our issued and outstanding common stock or seek to amend our amended and restated certificate of incorporation would require stockholder approval. We currently intend to conduct redemptions in connection with a stockholder vote unless stockholder approval is not required by applicable law or stock exchange listing requirements and we choose to conduct redemptions pursuant to the tender offer rules of the SEC for business or other legal reasons. If we hold a stockholder vote to approve our initial business combination, we will:
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conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules; and
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file proxy materials with the SEC.
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We expect that a final proxy statement would be mailed to public stockholders at least ten days prior to the stockholder vote. However, we expect that a draft proxy statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. Although we are not required to do so, we currently intend to comply with the substantive and procedural requirements of Regulation 14A in connection with any stockholder vote even if we are not able to maintain our NYSE listing or Exchange Act registration.
If we seek stockholder approval, we will complete our initial business combination only if a majority of the shares of our common stock voted are voted in favor of the business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the
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company entitled to vote at such meeting. Shares held by our sponsor, officers and directors will count towards establishing this quorum and our sponsor, directors, officers and their respective affiliates have agreed to vote any founders shares held by them, and have agreed (and their permitted transferees will agree) to vote any public shares purchased during or after this offering in favor of our initial business combination. We expect that at the time of any stockholder vote relating to our initial business combination, our sponsor will own at least 18.4% of our outstanding shares of common stock entitled to vote thereon. As a result, in addition to the shares held by our sponsor, we would need 7,900,001, or 38.7% of the remaining 20,400,000 outstanding shares of common stock of the Company owned by public stockholders and BlackRock immediately following this offering to be voted in favor of a transaction in order to have our initial business combination approved. If Magnetar purchases the full amount of units it has expressed an interest in purchasing in this offering and votes the public shares underlying such units in favor of our initial business combination, we would need only 5,920,001 or approximately 32.1%, of the remaining outstanding shares of common stock of the Company owned by public stockholders and BlackRock immediately following this offering to be voted in favor of an initial business combination. If BlackRock purchases units in this offering or in the open market following the offering and votes the public shares underlying the units and its founder shares in favor of our initial business combination, this number would decrease further. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained.
These quorum and voting thresholds, and the voting agreements with our sponsor, directors, executive officers, and their affiliates, may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction or vote at all.
We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the proxy solicitation or tender offer materials mailed to the holders, or up to two business days prior to the initially scheduled vote on the proposal to approve the business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically using
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The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option, rather than simply voting against the initial business combination. The tender offer or proxy materials, as applicable, that we will furnish to holders in connection with our initial business combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements, which will include the requirement that a beneficial owner must identify itself in order to redeem its common stock. We believe that this will allow our transfer agent time to efficiently process any redemptions without the need for further communication or action from the redeeming public stockholders, which could delay redemptions and result in additional administrative cost. If the proposed business combination is not approved and we continue to search for a target business, we will promptly return any certificates delivered, or shares tendered electronically, by public stockholders who elected to redeem their shares.
If we conduct redemptions pursuant to the tender offer rules of the SEC, we will, pursuant to our amended and restated certificate of incorporation:
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conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers; and
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file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about our initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.
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Upon the public announcement of our initial business combination, if we elect to conduct redemptions pursuant to the tender offer rules, we and our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase our shares of Class A common stock in the open market, in order to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares, which number will be based on the requirement that we may not redeem
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public shares in an amount that would cause our net tangible assets to be less than $5,000,001 following such redemptions, or any greater net tangible asset or cash requirement that may be contained in the agreement relating to our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete such initial business combination, and we instead may search for an alternative business combination (including, potentially, with the same target).
Limitation on redemption rights of stockholders holding more than 15% of the shares sold in this offering if we hold stockholder vote
Notwithstanding the foregoing redemption rights, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Exchange Act), will be restricted from redeeming its shares (purchased in connection with the IPO or in the secondary market following the IPO) with respect to more than an aggregate of 15% of the shares sold in this offering, without our prior consent. We believe the restriction described above will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to redeem their shares as a means to force us, our sponsor or its affiliates or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in this offering could threaten to exercise its redemption rights against a business combination if such holder’s shares are not purchased by us, our sponsor or its affiliates or our management at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem to no more than 15% of the shares sold in this offering, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with a business combination with a target business that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including all shares held by those stockholders that hold more than 15% of the shares sold in this offering) for or against our initial business combination.
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Redemption rights in connection with proposed amendments to our certificate of incorporation
Our amended and restated certificate of incorporation will provide that any of its provisions (other than amendments relating to provisions governing the election or removal of directors prior to our initial business combination, which require the approval of a majority of at least 90% of all then outstanding shares of common stock voting at a stockholder meeting), related to pre-business combination activity (including the requirement to fund the trust account and not release such amounts except in specified circumstances, and to provide redemption rights to public stockholders as described herein) may be amended if approved by holders of at least 65% of our issued and outstanding common stock entitled to vote thereon, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of at least 65% of our issued and outstanding common stock entitled to vote thereon. In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of our issued and outstanding common stock entitled to vote thereon (except that, prior to our initial business combination, the affirmative vote of holders of a majority of the issued and outstanding shares of our Class B common stock is required to approve the election or removal of directors), subject to applicable provisions of the Delaware General Corporation Law, or DGCL, or applicable stock exchange rules. Prior to our initial business combination, we may not issue additional shares of capital stock that can vote on amendments to our amended and restated certificate of incorporation or on our initial business combination or that would entitle holders thereof to receive funds from the trust account. Our initial stockholders, who will beneficially own 20% of our common stock upon the closing of this offering (assuming they do not purchase any units in this offering), will participate in any vote to amend our amended and restated certificate of incorporation or trust agreement and will have the discretion to vote in any manner they shall choose. Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation that would modify the substance or timing of our obligation to provide holders of our Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, or with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity
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unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes, divided by the number of then outstanding public shares. Our sponsor, officers and directors have entered into a letter agreement with us pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination, and BlackRock has agreed to waive its redemption rights with respect to any founder shares held by it. Any permitted transferees would be subject to the same restrictions and other agreements of our initial stockholders, officers and directors with respect to any founder shares.
Release of funds in trust account on closing of our initial business combination
On the completion of our initial business combination, the funds held in the trust account will be used to pay amounts due to any public stockholders who properly exercise their redemption rights as described above under “Redemption rights for public stockholders upon completion of our initial business combination,” to pay the underwriter its deferred underwriting discounts and commissions, to pay all or a portion of the consideration payable to the target or owners of the target of our initial business combination, to repay our sponsor pursuant to the promissory note for the advancement of expenses, and to pay other expenses associated with our initial business combination. If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or the redemption of our public shares, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of post-transaction businesses, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
Redemption of public shares and distribution and liquidation if no initial business combination
Our amended and restated certificate of incorporation will provide that we will have only 18 months from the closing of this offering to complete our initial business combination. If we have not completed our initial business combination within the 18-month period (or up to 24-month period, if applicable), we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten
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business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), divided by the number of then issued and outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 18-month time period (or up to 24-month time period, if applicable).
Our sponsor, officers, and directors have entered into a letter agreement with us, and BlackRock has entered into agreements with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering. However, if our initial stockholders or management team acquire public shares, whether in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted 18-month time period (or up to 24-month time period, if applicable).
The underwriter has agreed to waive its rights to its deferred underwriting discounts and commissions held in the trust account in the event we do not complete our initial business combination within the allotted timeframe and subsequently liquidate and, in such event, those amounts will be included with the funds held in the trust account that will be available to fund the redemption of our public shares.
If we have not completed an initial business combination within the 18-month period (or up to 24-month period, if applicable), we may seek an amendment to our amended and restated certificate of incorporation to extend the period of time we have to complete an initial business combination beyond 18 months (or up to 24 months, if applicable). Our
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amended and restated certificate of incorporation will require that this amendment be approved by holders of 65% of our outstanding common stock.
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable), divided by the number of then issued and outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 following such redemptions.
Limited payments to insiders
There will be no finder’s fees, reimbursements or cash payments made by the company to our sponsor, officers or directors, or our or their respective affiliates, for services rendered to us prior to or in connection with the completion of our initial business combination, other than the following payments, none of which will be made from the proceeds of this offering and the sale of the private placement warrants held in the trust account prior to the completion of our initial business combination:
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Repayment of up to an aggregate of $300,000 in loans made to us by our sponsor to cover offering-related and organizational expenses;
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Reimbursement for any out-of-pocket expenses related to identifying, investigating, negotiating and completing an initial business combination;
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Reimbursement of an affiliate of our sponsor for office space, secretarial and administrative services provided to members of our management team, in the amount of $10,000 per month pursuant to an administrative services agreement among us, our sponsor, and an affiliate of our sponsor; and
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Repayment of loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to fund working capital deficiencies or finance
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transaction costs in connection with an intended initial business combination. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. Except for the foregoing, the terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans.
Any such payments will be made either (i) prior to our initial business combination using the net proceeds of this offering and the sale of the private placement warrants held outside the trust account or from loans made to us by our sponsor or an affiliate of our sponsor or certain of our officers and directors or (ii) in connection with or after the consummation of our initial business combination, from any amounts remaining from the proceeds of the trust account released to us in connection therewith. In connection with their services to PAC I, our officers, directors and advisors will receive membership interests in the sponsor.
Audit Committee
We will establish and maintain an audit committee, which will be composed entirely of independent directors. Among its responsibilities, the audit committee will review on a quarterly basis all payments that were made by us to our sponsor, officers, or directors, or their affiliates and monitor compliance with the terms described above and other terms relating to this offering. If any noncompliance is identified, then the audit committee will be charged with the responsibility to promptly take all action necessary to rectify such noncompliance or otherwise to cause compliance with the terms of this offering. For more information, see the section entitled “Management —Committees of the Board of Directors — Audit Committee.”
Conflicts of Interest
Certain of our officers, advisors, and directors presently have, and any of them in the future may have additional, fiduciary, or contractual obligations to other entities pursuant to which the officer or director is or will be required to present a business combination opportunity to the entity subject to his or her fiduciary duties. As a result, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, then, subject to the officer’s or director’s fiduciary duties under Delaware law, he or she will need to honor those fiduciary or contractual obligations to present the business combination opportunity to that entity, before we can pursue the opportunity. Our officers or directors also may choose to present such a business combination opportunity to another entity before presenting it to us. If these other entities decide to pursue the opportunity, we may be precluded from pursuing the same. Our amended and
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restated certificate of incorporation will provide that we renounce our interest in any business combination opportunity offered to any director or officer unless the opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the company and the opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. See “Risk Factors ─ Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular business opportunity should be presented.”
Indemnity
Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third-party (other than our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (1)(x) $10.20 per public share following the closing of this offering, (y) $10.30 per public share after 18 months from the closing of this offering, or (z) $10.40 per public share after 21 months from the closing of this offering, as applicable; or (2) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of interest which may be withdrawn to pay taxes except as to any claims by a third-party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriter of this offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third-party, our sponsor will not be responsible to the extent of any liability for such third-party claims. We have not independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company and, therefore, our sponsor may not be able to satisfy those obligations. We have not asked our sponsor to reserve for such obligations.
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Summary of Risk Factors
An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with section entitled “Risk Factors” and the other information contained in this prospectus, before making a decision to invest in our units. 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. The risks include, but are not limited to:
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We are a newly formed company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
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Past performance by PROOF.VC, our management team, and members of our VC Advisory Board is not indicative of future performance of an investment in us. In addition, our management team and their respective affiliates have been involved with a large number of public and private companies in addition to those identified above, not all of which have achieved similar performance levels.
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Our public stockholders may not be afforded an opportunity to vote on our proposed business combination, which means we may complete our initial business combination even though a majority of our public stockholders do not support our initial business combination.
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Your only opportunity to affect the investment decision regarding a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash.
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If we seek stockholder approval of our initial business combination, our sponsor, officers and directors have agreed to vote any founder shares held by them and their respective affiliates, and have agreed to vote any public shares held by them in favor of the initial business combination, regardless of how our public stockholders may vote.
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The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target.
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The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.
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The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
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The requirement that we complete our initial business combination within 18 months (or up to 24 months, if applicable) after the closing of this offering may give potential target businesses leverage over us in negotiating a business combination and may limit the time we have to conduct due diligence on potential business combination targets as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would produce value for our stockholders.
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Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the recent Coronavirus disease 2019 (COVID-19) outbreak and the status of debt and equity markets.
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We may not be able to complete our initial business combination within the 18 months (or up to 24 months, if applicable) after the closing of this offering, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may receive only their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless.
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If we seek stockholder approval of our initial business combination, our initial stockholders, directors, officers, advisors, and their affiliates may elect to purchase shares from public stockholders, which may influence a vote on a proposed business combination and reduce the public “float” of our Class A common stock or public warrants.
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If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our business combination, or fails to comply with the procedures for tendering its shares, the stockholder’s shares may not be redeemed.
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You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. Therefore, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss.
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If our securities are approved for listing, NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
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You will not be entitled to protections normally afforded to investors of many other blank check companies.
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If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our Class A common stock.
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Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we have not completed our initial business combination, our public stockholders may receive only their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless.
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We may be unable to complete our initial business combination, in which case our public stockholders may only receive $10.20 per share (or $10.30 or $10.40 per public share in case we extend the period of time available for us to complete a business combination to 21 months or 24 months, respectively), or less than such amount in certain circumstances, and our warrants will expire worthless.
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We are not required to obtain an opinion from an independent investment banking firm or from a valuation or appraisal firm regarding fairness. Consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.
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Subject to his or her fiduciary duties under applicable law, none of the members of our management team who are also employed by our sponsor or its affiliates have any obligation to present us with any opportunity for a potential business combination of which they become aware. Our sponsor and directors and officers are also not prohibited from sponsoring, investing or otherwise becoming involved with, any other blank check companies, including in connection with their initial business combinations, prior to us completing our initial business combination.
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Our management team will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination.
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We may have limited ability to assess the management of a prospective target business and, as a result, may affect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company.
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The holders of our founder shares will control the election of our board of directors until consummation of our initial business combination and will hold a substantial interest in us. As a result, they will appoint all of our directors prior to our initial business combination and may exert a substantial influence on actions requiring stockholder vote, potentially in a manner that you do not support.
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Certain key agreements related to this offering may be amended without your consent.
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The other risks and uncertainties discussed in “Risk Factors” and elsewhere in this prospectus.
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An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this prospectus, before making a decision to invest in our units. 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.
Risks Relating to our Search for, Consummation of, or Inability to Consummate, a Business Combination and Post-Business Combination Risks
Our sponsor has the right to extend the time period we have to consummate our initial business combination up to two times for an additional three months each time, without providing our public stockholders the opportunity to vote on such extension or to redeem their public shares in connection therewith.
If we anticipate that we may not be able to consummate our initial business combination within 18 months, and subject to our sponsor depositing additional funds into the trust account as set out below, our time to consummate a business combination may be extended up to two times for an additional three months each time, for a total of up to 24 months to complete a business combination. This will occur as long as our sponsor or its affiliates or designees, upon five days advance notice prior to the applicable deadline, deposits into the trust account $2,000,000 (or $2,300,000 if the underwriter’s over-allotment option is exercised in full), or $0.10 per unit, on or prior to the date of the applicable deadline for each of the available three month extensions, providing a total possible period in which to complete our initial business combination of 24 months at a total payment value of $4,000,000 (or $4,600,000 if the underwriters’ over-allotment option is exercised in full), in exchange for a non-interest bearing, unsecured promissory note. Such loans may be converted into warrants, at a price of $1.00 per warrant, at the option of the lender. Our public stockholders will not be entitled to vote or redeem their shares in connection with any such extension. As a result, we may conduct such an extension even though a majority of our public stockholders do not support such an extension and will not be able to redeem their shares in connection therewith. This feature is different than the traditional special purpose acquisition company structure, in which any extension of the company’s period to complete a business combination requires a vote of the company’s shareholders and shareholders have the right to redeem their public shares in connection with such vote.
Our sponsor may decide not to extend the term we have to consummate our initial business combination, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, and the warrants would expire worthless.
We will have 18 months from the closing of this offering to consummate our initial business combination. However, if we anticipate that we may not be able to consummate our initial business combination within 18 months, we may extend the period of time to consummate a business combination up to two times by an additional three months each time (for a total of up to 24 months). In order for the time available for us to consummate our initial business combination to be extended, our sponsor or its affiliates or designees must deposit into the trust account $2,000,000 (or $2,300,000 if the underwriter’s over-allotment option is exercised in full), or $0.10 per public share, on or prior to the date of the applicable deadline for each of the available three month extensions in exchange for a non-interest bearing, unsecured promissory note as described elsewhere herein. Our sponsor and its affiliates or designees are obligated to deposit additional funds into the trust account in order to effectuate the aforementioned extensions, however our sponsor and its affiliates or designees have no obligation to ensure we are able to extend the time available to us to complete our initial business combination by making any additional deposit into the trust account. If we are unable to consummate our initial business combination within the applicable time period, we will, as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares for a pro rata portion of the funds then held in the trust account and as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations to provide for claims of creditors and the requirements of other applicable law. In such event, the warrants will be worthless.
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Our public stockholders may not be afforded an opportunity to vote on our proposed business combination, which means we may complete our initial business combination even though a majority of our public stockholders do not support the combination.
We may choose not to hold a stockholder vote to approve our initial business combination if the business combination would not require stockholder approval under applicable law or stock exchange listing requirements. Except as required by applicable law or stock exchange requirement, the decision as to whether we will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Accordingly, we may complete our initial business combination even if holders of a majority of our issued and outstanding public shares do not approve of the business combination we complete. Please see the section entitled “Proposed Business — Stockholders May Not Have the Ability to Approve Our Initial Business Combination” for additional information.
Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”
As of September 30, 2021, we had cash of $24,070 and a working capital deficiency of $316,766. Further, we expect to incur significant costs in pursuit of our acquisition plans. Management’s plans to address this need for capital through this offering are discussed in the section of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our plans to raise capital and to consummate our initial business combination may not be successful. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements contained elsewhere in this prospectus do not include any adjustments that might result from our inability to consummate this offering or our inability to continue as a going concern.
Your only opportunity to affect the investment decision regarding a potential business combination may be limited to the exercise of your right to redeem your shares from us for cash.
At the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of our initial business combination. Because our board of directors may complete a business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the business combination, unless we seek a stockholder vote. Accordingly, if we do not seek stockholder approval, your only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our public stockholders in which we describe our initial business combination.
If we seek stockholder approval of our initial business combination, our sponsor, directors and officers have agreed to vote any founder shares held by them and their respective affiliates, and have agreed to vote any public shares held by them in favor of such initial business combination, regardless of how our public stockholders vote.
Our initial stockholders will own 20% of our outstanding shares of common stock immediately following the completion of this offering. Our initial stockholders, directors and management team also may from time to time purchase shares of Class A common stock prior to our initial business combination. Our amended and restated certificate of incorporation will provide that, if we seek stockholder approval of an initial business combination, such initial business combination will be approved if we receive the affirmative vote of a majority of the then outstanding shares of common stock voted at such meeting, including the founder shares. Pursuant to the terms of a letter agreement entered into with us, our sponsor, officers and directors and their respective affiliates have agreed (and their permitted transferees will agree) to vote any founder shares held by them and any public shares held by them, in favor of our initial business combination. As a result, in addition to the shares held by our sponsor, we would need 7,900,001, or 38.7% of the remaining 20,400,000 outstanding shares of common stock of the Company owned by public stockholders and BlackRock immediately following this offering to be voted in favor of a transaction in order to have our initial business combination approved. If Magnetar purchases the full amount of units it has expressed an interest in purchasing in this offering and votes the public shares underlying such units in favor of our initial business combination, we would need only
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5,920,001 or approximately 32.1%, of the remaining outstanding shares of common stock of the Company owned by public stockholders and BlackRock immediately following this offering to be voted in favor of an initial business combination. If BlackRock purchases units in this offering or in the open market following the offering and votes the public shares underlying the units and its founder shares in favor of our initial business combination, this number would decrease further. Accordingly, if we seek stockholder approval of our initial business combination, the agreement by our sponsor and management team to vote in favor of our initial business combination will increase the likelihood that we will receive the requisite stockholder approval for such initial business combination.
The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target.
We may seek to enter into a business combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with the business combination. Furthermore, in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 following such redemptions, or any greater net tangible asset or cash requirement that may be contained in the agreement relating to our initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemption and the related business combination and may instead search for an alternate business combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into a business combination transaction with us.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.
At the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements, or arrange for third-party financing. In addition, if a larger number of shares are submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for third-party financing. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. The above considerations may limit our ability to complete the most desirable business combination available to us or optimize our capital structure. The amount of the deferred underwriting discounts and commissions payable to the underwriter will not be adjusted for any shares that are redeemed in connection with a business combination. The per-share amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting discounts and commissions and after such redemptions, the amount held in trust will continue to reflect our obligation to pay the entire deferred underwriting discounts and commissions.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that our initial business combination would be unsuccessful is increased. If our initial business combination is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate the trust account. If you need immediate liquidity, you could attempt to sell your stock in the open market. However, at that time, our stock may be trading at a discount to the pro rata amount per share in the trust account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.
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The requirement that we complete our initial business combination within 18 months (or up to 24 months, if applicable) after the closing of this offering may give potential target businesses leverage over us in negotiating a business combination and may limit the time we have to conduct due diligence on potential business combination targets as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would produce value for our stockholders.
Any potential target business with which we enter into negotiations concerning a business combination will be aware that we must complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering. Consequently, a target business may obtain leverage over us in negotiating a business combination, knowing that if we do not complete our initial business combination with that particular target business, we may be unable to complete our initial business combination with any target business. This risk will increase as we get closer to the end of the timeframe described above. In addition, we may have limited time to conduct due diligence and may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.
Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the Coronavirus disease 2019 (COVID-19) outbreak and the status of debt and equity markets.
In December 2019, a pneumonia outbreak was reported in Wuhan, China. On December 31, 2019, the outbreak was traced to a novel strain of coronavirus, which was given the interim name 2019-nCoV by the World Health Organization (WHO) and later renamed SARS-CoV-2 by the International Committee on Taxonomy of Viruses. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (“COVID-19”) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. On March 13, 2020, in Proclamation 9994, then-President Donald Trump proclaimed that the COVID-19 outbreak in the United States constitutes a national emergency and on February 24, 2021, President Joseph Biden determined that it is necessary to continue the national emergency declared in Proclamation 9994 concerning the COVID-19 pandemic. Variants of SARS-CoV-2 are now spreading among global populations, including the Delta Variant first identified in India, the UK Variant first found in London and Kent, a variant discovered in South Africa, and a variant discovered in Brazil. While various vaccines have been developed, there can be no guarantee that the vaccines will be successful in halting the spread of COVID-19 or its variants.
The COVID-19 outbreak has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide. A continuation of the COVID-19 outbreak will result in severe disruptions to the economy and financial markets for an unforeseeable time into the future. The business of any potential target business with which we may consummate a business combination could be materially and adversely affected.
Furthermore, we may be unable to complete a business combination if concerns relating to COVID-19 continue to restrict travel, limit the ability to conduct due diligence and/or limit the ability to have meetings with potential investors or target company personnel, or vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, the actions to contain COVID-19 or treat its impact, and the emergence of new variants such as the Delta Variant, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected. In addition, our ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by COVID-19 and other events, including as a result of increased market volatility, decreased market liquidity, and third-party financing being unavailable on terms acceptable to us or at all.
The outbreak of COVID-19 may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those related to the market for our securities.
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Finally, there is no indication that COVID-19 will be the last widespread health crisis. The economy and financial markets will be recovering from the COVID-19 outbreak for the foreseeable future. Another significant outbreak of other infectious diseases could result in additional disruptions to the economy and financial markets at a time when the economy and financial markets are still in recovery. This could adversely affect our ability to complete a business combination, limit our or our target company’s ability to raise any needed addition capital, or adversely affect our target company following a business combination.
We may not complete our initial business combination within the 18 months (or up to 24 months, if applicable) after the closing of this offering, in which case we would cease all operations except those necessary for winding up and we would redeem our public shares and liquidate, in which case our public stockholders may receive only their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless.
We may not be able to find a suitable target business and complete our initial business combination within 18 months (or up to 24 months, if applicable) after the closing of this offering. Our ability to complete our initial business combination may be negatively impacted by general market conditions, volatility in the capital and debt markets, and the other risks described herein. For example, the outbreak of COVID-19 continues both in the U.S. and globally and, while the extent of the impact of the outbreak on us will depend on future developments, it could limit our ability to complete our initial business combination, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all. Additionally, the outbreak of COVID-19 may negatively impact businesses we may seek to acquire and/or complicate or obstruct our ability to complete a business combination due to travel restrictions, limitations on in-person meetings and site visits and other logistical impediments that could delay or disrupt negotiations and consummation of a transaction.
If we have not completed our initial business combination within this time period and have not sought an extension of the 18-month time period (or up to 24-month time period, if applicable) as described herein, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes and less up to $100,000 of interest to pay dissolution expenses, divided by the number of then issued and outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such case, our public stockholders may only receive $10.20 per share (or $10.30 or $10.40 per public share in case we extend the period of time available for us to complete a business combination to 21 months or 24 months, respectively), and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.20 per share on the redemption of their shares, or less than the $10.30 or $10.40 per public share held in the trust account in case of one or both extensions of the time period to complete our initial business combination have been effectuated (as applicable). See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.20 per share” and other risk factors below.
If we have not completed an initial business combination within the 18-month period (or up to 24-month period, if applicable), we may seek an amendment to our amended and restated certificate of incorporation to extend the period of time we have to complete an initial business combination beyond 18 months (or up to 24 months, if applicable). Our amended and restated certificate of incorporation will require that the amendment be approved by holders of 65% of our then outstanding shares of common stock. There is no guaranty that our stockholders will approve the amendment.
If we seek stockholder approval of our initial business combination, our initial stockholders, directors, officers, advisors, and their respective affiliates may elect to purchase shares from public stockholders, which may influence a vote on a proposed business combination and reduce the public “float” of our Class A common stock or warrants.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our initial stockholders,
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directors, officers, advisors, or their respective affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation to do so. Any such price per share may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with our initial business combination.
These purchases may include a contractual acknowledgement that the selling stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our sponsor, directors, officers, advisors, or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, the selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of any purchases of shares could be to vote the shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of the business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our business combination, where it appears that the requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. This may result in the completion of our initial business combination that may not otherwise have been possible.
In addition, if purchases for this purpose are made, the public “float” of our Class A common stock or warrants and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing, or trading of our securities on a national securities exchange.
Additionally, at any time at or prior to our initial business combination, subject to applicable securities laws (including with respect to material nonpublic information), our sponsor, directors, officers, advisors or any of their respective affiliates may enter into transactions with investors and others to provide them with incentives to acquire public shares, vote their public shares in favor of our initial business combination or not redeem their public shares.
If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination, or fails to comply with the procedures for tendering its shares, the stockholder’s shares may not be redeemed.
We will comply with the proxy rules or tender offer rules, as applicable, when conducting redemptions in connection with our business combination. Despite our compliance with these rules, if a stockholder fails to receive our proxy solicitation or tender offer material, as applicable, the stockholder may not become aware of the opportunity to redeem its shares. In addition, the proxy solicitation or tender offer material, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will describe the various procedures that must be complied with in order to validly redeem or tender public shares. For example, we may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the proxy solicitation or tender offer material mailed to the stockholders, or up to two business days prior to the initially scheduled vote on the proposal to approve the initial business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. In the event that a stockholder fails to comply with these or any other procedures, the stockholder’s shares may not be redeemed.
See “Proposed Business — Redemption Rights for Public Stockholders Upon Completion of Our Initial Business Strategy Combination — Tendering Stock Certificates in Connection With a Tender Offer or Redemption Rights.”
You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. Therefore, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss.
Our public stockholders will be entitled to receive funds from the trust account only upon the earliest to occur of: (a) the completion of our initial business combination, and then only in connection with those shares of Class A common stock that a stockholder properly elected to redeem, subject to the limitations described herein,
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(b) the redemption of any public shares properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to provide holders of our Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (ii) with respect to any other provisions relating to stockholders’ rights or pre-initial business combination activity, and (c) the redemption of our public shares if we have not consummated our business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, subject to applicable law and as further described herein. In addition, if we have not completed an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering for any reason, compliance with Delaware law may require that we submit a plan of dissolution to our then-existing stockholders for approval prior to the distribution of the proceeds held in our trust account. In that case, public stockholders may be forced to wait beyond 18 months (or up to 24 months, if applicable) from the closing of this offering before they receive funds from our trust account. In no other circumstances will a public stockholder have any right or interest of any kind in the trust account. Holders of warrants will not have any right to the proceeds held in the trust account with respect to the warrants. Accordingly, to liquidate your investment, you may be forced to sell your public shares or warrants, potentially at a loss.
You will not be entitled to protections normally afforded to investors of many other blank check companies.
Because the net proceeds of this offering and the sale of the private placement warrants are intended to be used to complete an initial business combination with a target business that has not been selected, we may be deemed to be a “blank check” company under the United States securities laws. However, because we will have net tangible assets in excess of $5,000,001 upon the successful completion of this offering and the sale of the private placement warrants and we will file a Current Report on Form 8-K, including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, this means our units will be immediately tradable and we will have a longer period of time to complete our initial business combination than do companies subject to Rule 419. Moreover, if this offering were subject to Rule 419, that rule 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 completion of an initial business combination. For a more detailed comparison of our offering to offerings of those companies that are subject to Rule 419, please see “Proposed Business — Comparison of This Offering to Those of Blank Check Companies Subject to Rule 419.”
Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless.
We expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire with the net proceeds of this offering and the sale of the private placement warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses.
Furthermore, we are obligated to offer holders of our public shares the right to redeem their shares for cash at the time of our initial business combination, in conjunction with a stockholder vote or via a tender offer. Target businesses will be aware that this may reduce the resources available to us for our initial business
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combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating a business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless. In certain circumstances, our public stockholders may receive less than $10.20 per share upon our liquidation, or less than the $10.30 or $10.40 per public share held in the trust account in case of one or both extensions of the time period to complete our initial business combination have been effectuated. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.20 per share” and other risk factors below.
Our limited resources could be used in researching business combinations that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may only receive their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless.
We anticipate 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, consultants, and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the prospective transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons including those beyond our control. This will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may only receive their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless.
We may be unable to complete our initial business combination, in which case our public stockholders may only receive $10.20 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
The funds available to us outside of the trust account may not be sufficient to allow us to operate for at least the next 18 months (or up to 24 months, if applicable) following the closing of this offering, assuming that our initial business combination is not completed during that time. We expect to incur significant costs in pursuit of our acquisition plans. Our plans to address this need for capital through this offering and potential loans from certain of our affiliates are discussed in the section of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” However, our affiliates are not obligated to make loans to us in the future, and we may not be able to raise additional financing from unaffiliated parties necessary to fund our expenses. Any such event in the future may negatively impact the analysis regarding our ability to continue as a going concern at such time.
We believe that, upon the closing of this offering, the funds available to us outside of the trust account will be sufficient to allow us to operate for at least the next 18 months (or up to 24 months, if applicable) following the closing of this offering. However, we cannot assure you that our estimate is accurate. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in a letter of intent designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to the target business) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into a letter of intent where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit the funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we have not completed our initial business combination within the required timeframe, our public stockholders may receive only approximately $10.20, $10.30 or $10.40 per public share (as applicable), or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.20 per share” and other risk factors below.
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If the net proceeds of the sale of the private placement warrants is insufficient to allow us to operate for at least the next 18 months (or up to 24 months, if applicable), it could limit the amount available to fund our search for a target business or businesses and complete our initial business combination and we will depend on loans from our sponsor or management team to fund our search for a business combination, to pay our taxes, including franchise and income taxes, and to complete our initial business combination. If we are unable to obtain these loans, we may be unable to complete our initial business combination.
Of the proceeds from the sale of private placement warrants, approximately $2,950,000 will be available to us initially outside the trust account to fund operating expenses of the company and the costs of researching, investigating, and consummating a business combination with a target company. Should the proceeds from the sale of private placement warrants be sufficient to cover all operating and other expenses through the date of the business combination, any excess proceeds will be available to use in the business combination. If the proceeds from the sale of private placement warrants are not sufficient to pay expenses, we will be forced to borrow additional funds, raise additional capital, or liquidate. To the extent we borrow money in lieu of liquidation, we will likely be required to repay the borrowing upon the closing of our initial business combination and this borrowing will decrease the amount of money available for a business combination.
If we are required to seek additional capital, we may borrow funds from our sponsor, management team or other third parties to operate or may be forced to liquidate. However, none of our sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to us in these circumstances. Any borrowing would be repaid only from funds held outside the trust account or from funds released to us upon completion of our initial business combination. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and waive all rights to seek access to funds in our trust account. If we have not completed our initial business combination within the required timeframe because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. Consequently, our public stockholders may only receive an estimated $10.20, $10.30 or $10.40 per public share (as applicable), or less in certain circumstances, on our redemption of our public shares, and our warrants will expire worthless. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.20 per share” and other risk factors below.
Subsequent to the completion of our initial business combination, we may be required 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 the price of our securities, which could cause you to lose some or all of your investment.
Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will identify all material issues in relation to a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. 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 securities. 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. Accordingly, any stockholders or warrant holders who choose to remain stockholders or warrant holders, respectively, following the initial business combination could suffer a reduction in the value of their securities. These stockholders and warrant holders are unlikely to have a remedy for any reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the business combination contained an actionable material misstatement or material omission.
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If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.20 per share.
Our placing of funds in the trust account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest, or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, some parties may not agree to these terms. Even if they execute the agreements that contain a waiver, they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility, or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets which includes funds held in the trust account. If any third party refuses to execute an agreement waiving claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that the third party’s engagement would be significantly more beneficial to us than any alternative. The underwriter of this offering will not execute an agreement with us waiving claims to the monies in the trust account.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that the parties 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.
Upon redemption of our public shares, if we have not completed our initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.20 per public share initially held in the trust account, or less than the $10.30 or $10.40 per public share held in the trust account in case of one or both extensions of the time period to complete our initial business combination have been effectuated, due to claims of such creditors. Pursuant to the letter agreement, the form of which is filed as an exhibit to the registration statement of which this prospectus is a part, our sponsor has agreed that it will reimburse us if and to the extent a claim by a third party reduces the amount of funds in the trust account to below the lesser of (i) $10.20 per public share (or $10.30 or $10.40 per public share in case we extend the period of time available for us to complete a business combination to 21 months or 24 months, respectively), or (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.20, $10.30 or $10.40 per share (as applicable) due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes. The reimbursement obligation will only apply to claims for services rendered or products sold to us (other than services provided by our independent registered public accounting firm and the underwriter of this offering) or claims by a prospective target business with which we have entered into a written letter of intent, confidentiality or other similar agreement, or business combination agreement. The reimbursement obligation will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not the waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriter of this offering against certain liabilities, including liabilities under the Securities Act.
Furthermore, we have not asked our sponsor to reserve for this reimbursement obligation, nor have we independently verified whether our sponsor has sufficient funds to satisfy its obligations. We believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsor would be able to satisfy the reimbursement obligations. As a result, if any claims were successfully made against the trust account, the funds available for our initial business combination and redemptions could be reduced to less than $10.20, $10.30 or $10.40 per public share (as applicable). In that case, we may not be able to complete our initial business combination, and you would receive a lesser amount per share in connection with any redemption of your public shares. None of our officers or directors, or the equity owners of our sponsor, will be liable to us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
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Our directors may decide not to enforce the indemnification obligations of our sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our public stockholders.
In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.20 per public share (or $10.30 or $10.40 per public share in case we extend the period of time available for us to complete a business combination to 21 months or 24 months, respectively), or (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.20, $10.30 or $10.40 per public share (as applicable) due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its obligations or that it has no reimbursement obligation related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce the reimbursement obligation.
While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce the reimbursement obligations, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance. If our independent directors choose not to enforce this obligation, the amount of funds in the trust account available for distribution to our public stockholders may be reduced below $10.20, $10.30 or $10.40 per public share (as applicable).
We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.
We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed to waive any right, title, interest, or claim of any kind in or to any monies in the trust account and to not seek recourse against the trust account for any reason whatsoever, except to the extent they are entitled to funds from the trust account due to their ownership of public shares. Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient funds outside of the trust account or (ii) we consummate an initial business combination. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions. Our obligation to indemnify our officers and directors may also discourage a target company from consummating an initial business combination. An officer or director of the company entitled to indemnification is a creditor of the company and the debt owed to an officer or director entitled to indemnification may thereafter become a debt of target company after the business combination. After the business combination, the funds once held in the trust account may be available to satisfy the indemnification claim of the officer or director, thus reducing the amount available to the target company.
Changes in the market for directors and officers’ liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination.
In recent months, the market for directors and officers’ liability insurance for special purpose acquisition companies has changed in ways adverse to us and our management team. Fewer insurance companies are offering quotes for directors and officers’ liability coverage, the premiums charged for these policies have substantially increased, and the terms of these policies have generally become less favorable. These trends may continue into the future.
The increased cost and decreased availability of directors and officers’ liability insurance could make it more difficult and more expensive for us to negotiate an initial business combination. In order to obtain directors and officers’ liability insurance or modify its coverage as a result of becoming a public company, the post-business combination entity might need to incur greater expense, accept less favorable terms, or both. However, any failure to obtain adequate directors and officers liability insurance could have an adverse impact on the post-business combination’s ability to attract and retain qualified officers and directors.
In addition, even after the consummation of an initial business combination, our directors and officers could still be subject to potential liability from claims arising from conduct alleged to have occurred prior to the initial business combination. As a result, in order to protect our directors and officers, the post-business combination entity may need to purchase additional insurance with respect to these claims (“run-off insurance”). The need for
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run-off insurance would be an added expense for the post-business combination entity, and could interfere with or frustrate our ability to consummate an initial business combination on terms favorable to our investors.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover these proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor-creditor or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors or as having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in the bankruptcy proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition 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, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, 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 liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of the stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following the 18th month (or up to the 24th month, if applicable) from the closing of this offering in the event we do not complete our business combination and, therefore, we do not intend to comply with the procedures set forth in Section 280 of the DGCL.
If we do not comply with Section 280, Section 281(b) of the DGCL requires us to adopt a plan of distribution, based on facts known to us at the time that will provide for the payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, consultants, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of the stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third
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anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. A stockholder could potentially be liable for any claims to the extent of distributions received by it (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering is not considered a liquidating distribution under Delaware law and the redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
We may not hold an annual meeting of stockholders until after the consummation of our initial business combination, in which case our public stockholders will be delayed in electing directors.
In accordance with the NYSE corporate governance requirements, we are not required to hold an annual meeting until no later than one year after our first fiscal year end following our listing on the NYSE. Under Section 211(b) of the DGCL, we are, however, required to hold an annual meeting of stockholders for the purposes of electing directors in accordance with our bylaws unless the election is made by written consent in lieu of a meeting. Because our initial stockholders will hold all of our Class B common stock and because, until we consummate a business combination, only holders of Class B common stock will be entitled to vote in the election of directors, we may not hold an annual meeting of stockholders to elect new directors prior to the consummation of our initial business combination. Therefore, if our stockholders want us to hold an annual meeting prior to the consummation of our initial business combination, the only manner to force us to hold the meeting may be to submit an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL. Until we hold an annual meeting of stockholders, public stockholders may not be afforded the opportunity to discuss company affairs with management. In addition, prior to our initial business combination, (a) as holder of our Class A common stock, our public stockholders will not have the right to vote on the election or removal of our directors and (b) holders of a majority of the issued and outstanding shares of our Class B common stock may remove a member of our Board for any reason.
Because we are not limited to a particular industry, sector, geography or any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations.
We may seek to complete a business combination with an operating company of any size (subject to satisfaction of the 80% fair market value test) and in any industry, sector or geography. However, we will not, under our amended and restated certificate of incorporation, be permitted to effectuate our initial business combination solely with another blank check company or similar company with nominal operations. Because we have not yet selected or approached any specific target business with respect to a business combination, there is no basis to evaluate the possible merits or risks of any particular target business’ operations, results of operations, cash flows, liquidity, financial condition, or prospects. To the extent we complete our business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a business or an entity lacking an established record of revenues or earnings, we may be affected by the risks inherent in the business and operations of a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our units will ultimately prove to be more favorable to investors than a direct investment, if that opportunity were available, in a business combination target. Accordingly, any stockholders who choose to remain stockholders following the business combination could suffer a reduction in the value of their securities. These stockholders are unlikely to have a remedy for any reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials (as applicable) relating to the business combination contained an actionable material misstatement or material omission.
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We may seek acquisition opportunities in industries or sectors which may or may not be outside of our management’s area of expertise.
We will consider a business combination outside of our management’s area of expertise if a business combination target is presented to us and we determine that the candidate offers an attractive acquisition opportunity for our company. Although our management will endeavor to evaluate the risks inherent in any particular business combination target, we cannot assure you that we will adequately ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our units will not ultimately prove to be less favorable to investors in this offering than a direct investment, if an opportunity was available, in a business combination target. In the event we elect to pursue an acquisition outside of the areas of our management’s expertise, our management’s expertise may not be directly applicable to its evaluation or operation, and the information contained in this prospectus regarding the areas of our management’s expertise would not be relevant to an understanding of the business that we elect to acquire. As a result, our management may not be able to adequately ascertain or assess all of the significant risk factors. Accordingly, any stockholders who choose to retain their securities following the business combination could suffer a reduction in the value of their securities. These stockholders are unlikely to have a remedy for any reduction in value.
Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial business combination with a target that does not meet some or all of these criteria and guidelines, and as a result, the target business with which we enter into our initial business combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our initial business combination will not have some or all of these positive attributes. If we complete our initial business combination with a target that does not meet some or all of these guidelines, the combination may not be as successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target that does not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required by applicable law or stock exchange rules, or we decide to obtain stockholder approval for business or other legal reasons, it may be more difficult for us to attain stockholder approval of our initial business combination if the target business does not meet our general criteria and guidelines.
If we have not completed our initial business combination within the prescribed timeframe, our public stockholders may only receive their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless.
We may seek business combination opportunities with an entity lacking an established record of revenue or earnings, which could subject us to volatile revenues, cash flows, or earnings or difficulty in retaining key personnel.
To the extent we complete our initial business combination with an entity lacking an established record of revenues, cash flows, or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include investing in a business with limited historical financial data, volatile revenues, cash flows, or earnings and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
We are not required to obtain an opinion from an independent investment banking firm or from an independent accounting firm regarding fairness. Consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.
Unless we complete our business combination with an affiliated entity, or our Board cannot independently determine the fair market value of the target business or businesses (including with the assistance of financial advisors), we are not required to obtain an opinion from an independent investment banking firm or from an
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independent accounting firm that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. The standards used will be disclosed in our proxy solicitation or tender offer materials, as applicable, related to our initial business combination.
We may engage the underwriter or one of its affiliates to provide additional services to us after this offering, which may include acting as financial advisor in connection with an initial business combination or as placement agent in connection with a related financing transaction. The underwriter is entitled to receive deferred underwriting commissions that will be released from the trust account only on completion of our initial business combination. These financial incentives may cause the underwriter to have potential conflicts of interest in rendering any such additional services to us after this offering, including, for example, in connection with the sourcing and consummation of an initial business combination.
We may engage the underwriter or one of its affiliates to provide additional services to us after this offering, including, for example, identifying potential targets, providing financial advisory services, acting as a placement agent in a private offering, or arranging debt financing. We may pay the underwriter or its affiliate fair and reasonable fees or other compensation that would be determined at that time in an arm’s length negotiation. However, no agreement will be entered into with the underwriter or its affiliates and no fees or other compensation for services will be paid to the underwriter or its affiliates prior to the date that is 60 days from the date of this prospectus, unless FINRA determines that the payment would not be deemed underwriter’s compensation, or such payment would be excluded from such designation pursuant to an applicable FINRA rule, in connection with this offering. The underwriter is also entitled to receive deferred underwriting commissions from this offering that are conditioned on the completion of an initial business combination. The fact that the underwriter or its affiliates’ financial interests are tied to the consummation of a business combination transaction may give rise to potential conflicts of interest in providing any additional services to us, including potential conflicts of interest in connection with the sourcing and consummation of an initial business combination.
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete a business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us.
Although we have no commitments as of the date of this prospectus to issue any notes or other debt securities, or to otherwise incur debt following this offering, we may choose to incur substantial debt to complete our business combination. We and our officers have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest, or claim of any kind in or to the monies held in the trust account. As a result, we believe no issuance of debt will affect the per-share amount available for redemption from the trust account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:
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default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
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our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;
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our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
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our inability to pay dividends on our common stock;
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using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions and fund other general corporate purposes;
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limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
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increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;
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limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and
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other disadvantages compared to our competitors who have less debt.
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We may only be able to complete one business combination with the proceeds of this offering and the sale of the private placement warrants, which will cause us to be solely dependent on a single business which may have a limited number of products or services. This lack of diversification may negatively impact our operations and profitability.
The net proceeds from this offering and the sale of the private placement warrants will provide us with up to $206,950,000 (or $238,075,000 if the underwriter’s over-allotment option is exercised in full) that we may use to complete our initial business combination (before taking into account the $7,000,000, or $8,050,000 if the over-allotment option is exercised in full, of deferred underwriting commissions being held in the trust account and the estimated expenses of this offering).
We may effectuate our business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuate our business combination with 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.
Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:
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solely dependent upon the performance of a single business, property or asset; or
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dependent upon the development or market acceptance of a single or limited number of products, processes or services.
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By completing our initial business combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive, and regulatory developments. This lack of diversification may subject us to numerous economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our business combination.
We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our business combination and give rise to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of the sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete our initial business combination. With multiple business combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.
We may attempt to complete our initial business combination with a private company about which little information is available, which may result in a business combination with a company that is not as profitable as we suspected, if at all.
In pursuing our business combination strategy, we may seek to effectuate our initial business combination with a privately held company. Very little public information generally exists about private companies, and we
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could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in a business combination with a company that is not as profitable as we suspected, if at all.
As the number of special purpose acquisition companies evaluating targets increases, attractive targets may become scarcer and there may be more competition for attractive targets. This could increase the cost of our initial business combination and could even result in our inability to find a target or to consummate an initial business combination.
In recent years, the number of special purpose acquisition companies that have been formed has increased substantially. Many potential targets for special purpose acquisition companies have already entered into an initial business combination, and there are still many special purpose acquisition companies preparing for an initial public offering, as well as many such companies currently in registration. As a result, at times, fewer attractive targets may be available to consummate an initial business combination.
In addition, because there are more special purpose acquisition companies seeking to enter into an initial business combination with available targets, the competition for available targets with attractive fundamentals or business models has increased, which could cause targets companies to demand improved financial terms. Attractive deals could also become scarcer for other reasons, such as economic or industry sector downturns, geopolitical tensions, or increases in the cost of additional capital needed to close business combinations or operate targets post-business combination. This could increase the cost of, delay or otherwise complicate or frustrate our ability to find and consummate an initial business combination, and may result in our inability to consummate an initial business combination on terms favorable to our investors altogether.
Our management may not be able to maintain control of a target business after our initial business combination. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We may structure a business combination so that the post-transaction company in which our public stockholders own shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-transaction company owns 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares of common stock in exchange for all of the outstanding capital stock of a target business. In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common stock, our stockholders immediately prior to the transaction could own less than a majority of our outstanding shares of common stock subsequent to the transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain control of the target business.
Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses.
The Federal proxy rules require that a proxy statement with respect to a vote on a business combination include historical and pro forma financial statement disclosure. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or U.S. GAAP, or international financial reporting standards as issued by the International Accounting Standards Board, or International Financial Reporting Standards, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide financial statements in accordance with Federal proxy rules that permit us to complete our initial business combination within the prescribed time frame.
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Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our initial business combination, require substantial financial and management resources, increase the time and costs of completing our initial business combination and present risks of non-compliance in the event we successfully consummate a business combination.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls over financial reporting beginning with our Annual Report on Form 10-K for the year ending December 31, 2022. Only in the event we are deemed to be a large accelerated filer or an accelerated filer and no longer qualify as an emerging growth company, will we be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target company with which we seek to complete our business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control over financial reporting by a target company for the purpose of achieving compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete the acquisition. Moreover, there can be no assurance that the incumbent management team of a business combination target will have the necessary experience or knowledge to develop the appropriate level of internal controls over financial reporting and otherwise maintain compliance with the applicable requirements of the Sarbanes-Oxley Act. If we complete our business combination and the management team of the combined entity is unable to comply with the applicable requirements of the Sarbanes-Oxley Act, our operations might suffer and our results of operations and financial condition could be adversely impacted.
We do not have a specified maximum redemption threshold. The absence of a maximum redemption threshold may make it possible for us to complete a business combination with which a substantial majority of our stockholders do not agree.
Our amended and restated certificate of incorporation will not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 following such redemptions, or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. As a result, we may be able to complete our business combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our initial stockholders, officers, directors, advisors or any of their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, all shares of Class A common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
Our amended and restated certificate of incorporation will require the affirmative vote of a majority of our board of directors, which prior to our initial business combination will all be elected by our initial stockholders, which may have the effect of delaying or preventing a business combination that our public stockholders would consider favorable.
Our amended and restated certificate of incorporation will require the affirmative vote of a majority of our board of directors to approve our initial business combination. Prior to our initial business combination, only the holders of our Class B common stock vote in the election of directors. All of our Class B common stock is owned by our initial stockholders. Accordingly, it is unlikely that we will be able to enter into an initial business combination unless our sponsor finds the target and the business combination attractive. This may make it more difficult for us to approve and enter into an initial business combination than other blank check companies and could result in us not pursuing an acquisition target or other board or corporate action that our public stockholders would find favorable.
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In order to effectuate our initial business combination, we may seek to amend our amended and restated certificate of incorporation or governing instruments, including our warrant agreement, in a manner that will make it easier for us to complete our initial business combination but that our stockholders may not support.
In order to effectuate a business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments, including their warrant agreements. For example, blank check companies have amended the definition of business combination, increased redemption thresholds and extended the time to consummate an initial business combination and, with respect to their warrants, amended their warrant agreements to require the warrants to be exchanged for cash and/or other securities. We cannot assure you that we will not seek to amend our amended and restated certificate of incorporation or governing instruments, including our warrant agreement, or extend the time to consummate an initial business combination in order to effectuate our initial business combination. To the extent any such amendment would be deemed to fundamentally change the nature of any of the securities offered through the registration statement of which this prospectus forms a part, we would register, or seek an exemption from registration for, the affected securities.
The provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from our trust account) may be amended with the approval of holders of at least 65% of our issued and outstanding common stock, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of incorporation and the trust agreement to facilitate the completion of an initial business combination that some of our stockholders may not support.
Our amended and restated certificate of incorporation will provide that any of its provisions (other than amendments relating to the election or removal of directors prior to our initial business combination, which require the approval of holders of a majority of at least 90% of all then outstanding shares of our common stock voting at a stockholder meeting) related to pre- business combination activity (including the requirement to deposit proceeds of this offering and the private placement of warrants into the trust account and not release such amounts except in specified circumstances, and to provide redemption rights to public stockholders as described herein) may be amended if approved by holders of at least 65% of our common stock entitled to vote thereon, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of at least 65% of our common stock entitled to vote thereon. In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions of the DGCL or applicable stock exchange rules.
Our initial stockholders, including our sponsor and parties affiliated or related to our sponsor, will collectively own 20% of our common stock upon the closing of this offering (assuming they do not purchase any units in this offering), will participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of our amended and restated certificate of incorporation which govern our pre-business combination behavior more easily than some other blank check companies, and this may increase our ability to complete a business combination with which you do not agree. Our stockholders may pursue remedies against us for any breach of our amended and restated certificate of incorporation.
Our sponsor, executive officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation that would modify the substance or timing of our obligation to provide holders of our Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes, divided by the number of the then outstanding public shares. These agreements are contained in a letter agreement that we have entered into with our sponsor, officers and directors. Our public stockholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue
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remedies against our initial stockholders, officers or directors for any breach of these agreements. As a result, in the event of a breach, our public stockholders would need to pursue a stockholder derivative action, subject to applicable law.
Certain agreements related to this offering may be amended without stockholder approval.
Each of the agreements related to this offering to which we are a party, other than the warrant agreement and the investment management trust agreement, may be amended without stockholder approval. These agreements are: the underwriting agreement; the letter agreement among us and our sponsor, officers and directors; the registration and stockholder rights agreement among us and our initial stockholders; the private placement warrants purchase agreement between us and our sponsor; our subscription agreements with BlackRock; and the administrative services agreement among us, our sponsor, and an affiliate of our sponsor. These agreements contain various provisions that our public stockholders might deem to be material. For example, our letter agreement, our registration and stockholder rights agreement, our subscription agreements with BlackRock, and the underwriting agreement contain certain lock-up provisions with respect to the founder shares, private placement warrants, and other securities held by our initial stockholders, officers, and directors. Amendments to these agreements would require the consent of the applicable parties thereto and would need to be approved by our board of directors, which may do so for a variety of reasons, including to facilitate our initial business combination. While we do not expect our board of directors to approve any amendment to any of these agreements prior to our initial business combination, it may be possible that our board of directors, in exercising its business judgment and subject to its fiduciary duties, chooses to approve one or more amendments to these agreements. Any amendment entered into in connection with the consummation of our initial business combination will be disclosed in our proxy solicitation or tender offer materials, as applicable, related to the initial business combination, and any other material amendment to any of our material agreements will be disclosed in a filing with the SEC. These amendments would not require approval from our stockholders, may result in the completion of our initial business combination that may not otherwise have been possible, and may have an adverse effect on the value of an investment in our securities. For example, amendments to the lock-up provisions discussed above may result in our initial stockholders selling their securities earlier than they would otherwise be permitted, which may have an adverse effect on the price of our securities.
We may be unable to obtain additional financing 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. If we have not completed our initial business combination, our public stockholders may only receive their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless.
Although we believe that the net proceeds of this offering and the sale of the private placement warrants will be sufficient to allow us to complete our initial business combination, because we have not yet selected any prospective target business we cannot ascertain the capital requirements for any particular transaction. If the net proceeds of this offering and the sale of the private placement warrants prove to be insufficient, either because of the size of our initial business combination, the depletion of the available net proceeds in search of a target business, the obligation to redeem for cash a significant number of shares from stockholders who elect redemption in connection with our initial business combination or the terms of negotiated transactions to purchase shares in connection with our initial business combination, we may be required to seek additional financing or to abandon the proposed business combination. We cannot assure you that such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. If we have not completed our initial business combination, our public stockholders may only receive their pro rata portion of the funds in the trust account that are available for distribution to public stockholders, and our warrants will expire worthless.
In addition, even if we do not need additional financing to complete our business combination, we may require additional financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders or our sponsor is required to provide any financing to us in connection with or after our business combination.
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If we have not completed our initial business combination within 18 months (or up to 24 months, if applicable) of the closing of this offering, our public stockholders may be forced to wait beyond such 18 months (or up to 24 months, if applicable) before redemption from our trust account.
If we have not completed our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, we will distribute the aggregate amount then on deposit in the trust account, including interest (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of taxes payable), pro rata to our public stockholders by way of redemption and cease all operations except for the purposes of winding up of our affairs, as further described herein. Any redemption of public stockholders from the trust account shall be effected automatically by function of our amended and restated certificate of incorporation prior to any voluntary winding up. If we are required to windup, liquidate the trust account and distribute such amount therein, pro rata, to our public stockholders, as part of any liquidation process, such winding up, liquidation and distribution are subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In that case, investors may be forced to wait beyond the initial 18 months (or up to 24 months, if applicable) before the redemption proceeds of our trust account become available to them and they receive the return of their pro rata portion of the proceeds from our trust account. We have no obligation to return funds to investors prior to the date of our redemption or liquidation unless, prior thereto, we consummate our initial business combination or amend certain provisions of our amended and restated certificate of incorporation and then only in cases where investors have properly sought to redeem their shares of Class A common stock. Only upon our redemption or any liquidation will public stockholders be entitled to distributions if we have not completed our initial business combination within the required time period and do not amend certain provisions of our amended and restated certificate of incorporation prior thereto.
Risks Relating to our Securities
If our securities are approved for listing, the NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
We have applied to have our units listed on the NYSE on or promptly after the date of this prospectus and our Class A common stock and warrants listed on or promptly after their date of separation. After giving effect to this offering we expect to meet, on a pro forma basis, the minimum initial listing standards set forth in the NYSE listing standards; however, we cannot assure you that our securities will be, or will continue to be, listed on the NYSE in the future or prior to our initial business combination. In order to continue listing our securities on the NYSE prior to our initial business combination, we must maintain certain financial, distribution and stock price levels. Additionally, in connection with our initial business combination, we will be required to demonstrate compliance with the NYSE’s initial listing requirements, which are more rigorous than the NYSE’s continued listing requirements, in order to continue to maintain the listing of our securities on the NYSE. Generally, we must maintain a minimum market capitalization (generally $50,000,000) and a minimum number of holders of our securities (generally 300 public holders).
If the NYSE delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
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reduced liquidity for our securities;
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a determination that our Class A common stock is a “penny stock” which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
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a limited amount of news and analyst coverage; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
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The National Securities Markets Improvement Act of 1996, which is a Federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because we expect that our units and eventually our Class A common stock and warrants will be listed on the NYSE, our
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units, Class A common stock and warrants will be covered securities. Although the states are preempted from regulating the sale of covered securities, the Federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the state of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on the NYSE, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our Class A common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of that stockholder or any other person with whom that stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in this offering without our prior consent, which we refer to as the “Excess Shares.” However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our business combination. A stockholder owning Excess Shares will be reduced in its ability to influence a business combination through the redemption of shares and the stockholder owning Excess Shares could suffer a material loss on its investment in us if the stockholder is forced to sell the Excess Shares in open market transactions. Additionally, a stockholder owning Excess Shares will not receive redemption distributions with respect to the Excess Shares if we complete our business combination. As a result, the stockholder will continue to hold that number of shares exceeding 15% and, in order to dispose of the shares, would be required to sell the stock in open market transactions, potentially at less than the redemption amount.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our business combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
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restrictions on the nature of our investments; and
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restrictions on the issuance of securities,
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each of which may make it difficult for us to complete our business combination.
In addition, we may have imposed upon us burdensome requirements, including:
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registration as an investment company with the SEC;
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adoption of a specific form of corporate structure; and
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reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations that we are currently not subject to.
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In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading of securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business will be to identify and complete a business combination and thereafter to operate the post-transaction business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.
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We do not believe that our anticipated principal activities will subject us to registration under the Investment Company Act. To this end, the proceeds held in the trust account may only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Pursuant to the trust agreement, the trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments, and by having a business plan targeted at acquiring and growing businesses for the long term (rather than on buying and selling businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act.
This offering is not intended for persons who are seeking a return on investments in government securities or investment securities. The trust account is intended as a holding place for funds pending the earliest to occur of: (a) the completion of our initial business combination, (b) the redemption of any public shares properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to provide holders of our Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (ii) with respect to any other provisions relating to stockholders’ rights or pre-initial business combination activity, and the redemption of our public shares if we have not consummated our business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, subject to applicable law. If we do not invest the proceeds as discussed above, we may be required to register as an investment company and be subject to the rules and regulation of the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete a business combination. If we have not completed our initial business combination within the prescribed timeframe, our public stockholders may receive only approximately $10.20, $10.30 or $10.40 per public share (as applicable), or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.
Holders of Class A common stock will not be entitled to vote on any election of directors we hold prior to our initial business combination.
Prior to our initial business combination, only our initial stockholders will own founder shares and will have the right to vote on the election of directors. Holders of our public shares will not be entitled to vote on the election of directors during such time. In addition, prior to the completion of an initial business combination, our sponsor, as the holder of a majority of our founder shares , may remove a member of the board of directors or the entire board of directors for any reason. Accordingly, you may not have any say in the management of our company prior to the consummation of an initial business combination.
We are not registering the shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time, and a registration may not be in place when an investor desires to exercise warrants, thus precluding the investor from being able to exercise its warrants except on a cashless basis and potentially causing the warrants to expire worthless.
We are not registering the shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed that, as soon as practicable, but in no event later than fifteen business days after the closing of our initial business combination, we will use our commercially reasonable efforts to file with the SEC a registration statement covering the issuance of the shares. In addition, we will use our commercially reasonable efforts to cause the registration statement to become effective within 60 business days after the closing of our initial business combination and to maintain the effectiveness of the registration statement and a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current, complete or correct, or the SEC issues a stop order.
If the shares of our Class A common stock issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis. However,
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no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon the exercise of the warrant is registered or qualified under the securities laws of the state of the exercising holder, unless an exemption from state registration is available.
Notwithstanding the above, if the shares of our Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement. However, we will be required to use our commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants under the Securities Act or applicable state securities laws and there is no exemption available. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of the warrant will not be entitled to exercise the warrant and, as a result, the warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of our Class A common stock included in the units. There may be a circumstance where an exemption from registration exists for holders of our private placement warrants to exercise their warrants while a corresponding exemption does not exist for holders of the public warrants included as part of units sold in this offering. In such an instance, the initial purchasers of our private placement warrants and their permitted transferees (which may include our directors and executive officers) would be able to sell the common stock underlying their warrants while holders of our public warrants would not be able to exercise their warrants and sell the underlying common stock. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying shares of Class A common stock for sale under all applicable state securities laws. As a result, we may redeem the warrants as set forth above even if the holders are otherwise unable to exercise their warrants.
The grant of registration rights to our initial stockholders and their respective permitted transferees may make it more difficult to complete our initial business combination, and the future exercise of registration rights may adversely affect the market price of our Class A common stock.
Pursuant to an agreement to be entered into concurrently with the issuance and sale of the securities in this offering, our initial stockholders and their respective permitted transferees can demand that we register the Class A common stock into which founder shares are convertible, and the private placement warrants and the Class A common stock issuable upon the exercise of the private placement warrants. The holders of warrants that may be issued upon conversion of working capital loans or extension promissory notes may also demand that we register those warrants or the Class A common stock issuable upon exercise of those warrants. The registration and availability of a significant number of securities for trading in the public market may have an adverse effect on the market price of our Class A 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 Class A common stock that is expected when the securities owned by our initial stockholders, holders of working capital loans and extension promissory notes, or their respective permitted transferees are registered.
We may issue additional shares of Class A common stock or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon the conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. These issuances would dilute the interest of our stockholders and likely present other risks.
Our amended and restated certificate of incorporation will authorize the issuance of up to 70,000,000 shares of Class A common stock, par value $0.0001 per share, 12,500,000 shares of Class B common stock, par value $0.0001 per share, and 1,000,000 undesignated shares of preferred stock, par value $0.0001 per share.
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Immediately after this offering, there will be 50,000,000 and 7,500,000 (assuming, in each case, that the underwriter has not exercised its over-allotment option) authorized but unissued shares of Class A common stock and Class B common stock, respectively, available for issuance, which amount does not take into account Class A common stock reserved for issuance upon exercise of outstanding warrants or shares issuable upon conversion of Class B common stock. Our Class B common stock is convertible into Class A common stock initially at a one-for-one ratio but subject to adjustment as set forth herein, including in certain circumstances in which we issue Class A common stock or equity-linked securities related to our initial business combination (other than Class A common stock or equity-linked securities issued, or to be issued, to any seller in our initial business combination). Shares of Class B common stock are also convertible at the option of the holder at any time. Immediately after the consummation of this offering, there will be no shares of preferred stock issued and outstanding.
We may issue a substantial number of additional shares of common or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock to redeem the warrants as described in “Description of Securities — Warrants — Public Stockholders’ Warrants — Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00.” or upon conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. However, our amended and restated certificate of incorporation will provide, among other things, that prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote as a class with our public shares (a) on our initial business combination or on any other proposal presented to stockholders prior to or in connection with the completion of an initial business combination or (b) to approve an amendment to our amended and restated certificate of incorporation to (x) extend the time we have to consummate a business combination beyond 18 months (or up to 24 months, if applicable) from the closing of this offering or (y) amend the foregoing provisions. These provisions of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with a stockholder vote.
The issuance of additional shares of common or preferred stock:
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may significantly dilute the equity interest of investors in this offering;
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may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;
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could cause a change in control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
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may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us;
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may adversely affect prevailing market prices for our units, Class A common stock and/or warrants; and
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may not result in adjustment to the exercise price of our warrants.
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We may amend the terms of the public warrants in a manner that may be adverse to holders with the approval by the holders of at least 65% of the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number of shares of our Class A common stock purchasable upon exercise of a warrant could be decreased, all without your approval.
Our warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder for the purpose of (i) curing any ambiguity or correct any mistake, including to conform the provisions of the warrant agreement to the description of the terms of the warrants and the warrant agreement set forth in this prospectus, or defective provision, or (ii) adding or changing any provisions with respect to matters or questions arising under the warrant agreement as the parties to the warrant agreement may deem necessary or desirable and that the parties deem to not adversely affect the rights of the registered holders of the warrants. The approval by the holders of at least 65% of the
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then-outstanding public warrants is required to make any change that adversely affects the interests of the registered holders of public warrants. With respect to any amendment to the terms of the private placement warrants or any provision of the warrant agreement with respect to the private placement warrants, 65% of the number of the then-outstanding private placement warrants must approve any change that adversely affects the interests of the holders of private placement warrants. Although our ability to amend the terms of the public warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of possible amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period, or decrease the number of shares of our Class A common stock purchasable upon exercise of a warrant.
Our warrant agreement will designate the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.
Our warrant agreement will provide that, subject to applicable law, (i) any action, proceeding, or claim against us arising out of or relating in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to that jurisdiction, which jurisdiction shall be the exclusive forum for any action, proceeding, or claim. We will waive any objection to exclusive jurisdiction or that these courts represent an inconvenient forum.
Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants shall be deemed to have consented to the forum provisions in our warrant agreement.
If any action, the subject matter of which is within the scope of the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, the holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and Federal courts located in the State of New York in connection with any action brought in any court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon the warrant holder in any enforcement action by service upon the warrant holder’s counsel in the foreign action as agent for the warrant holder.
This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “Description of Securities ─ Warrants ─ Public Stockholders’ Warrants ─ Anti-dilution Adjustments”) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. Please see “Description of Securities ─ Warrants ─ Public Stockholders’ Warrants ─ Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00.” If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. As a result, we may redeem the warrants as set forth above even if the holders are otherwise
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unable to exercise the warrants. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants.
In addition, we may redeem your warrants after they become exercisable for $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants prior to redemption for a number of Class A common stock determined based on the redemption date and the fair market value of our Class A common stock. Please see “Description of Securities — Warrants — Public Stockholders’ Warrants — Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00.” Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemptions may occur at a time when the warrants are “out of the money,” in which case you would lose any potential embedded value from a subsequent increase in the value of the Class A common stock had your warrants remains outstanding. The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (ii) may not compensate the holders for the value of the warrants, including because the number of shares of Class A common stock received is capped at 0.361 shares of Class A common stock per warrant (subject to adjustment) irrespective of the remaining life of the warrants.
None of the private placement warrants will be redeemable by us as so long as they are held by the initial purchasers of the private placement warrants or their permitted transferees except as set forth under “Description of Securities — Warrants — Public Stockholders’ Warrants — Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00.”
Our warrants and founder shares may have an adverse effect on the market price of our Class A common stock and make it more difficult to effectuate our initial business combination.
We will be issuing warrants to purchase 10,000,000 of our shares of Class A common stock (or up to 11,500,000 shares of Class A common stock if the underwriter’s over-allotment option is exercised in full) as part of the units offered by this prospectus and, simultaneously with the closing of this offering, we will be issuing in a private placement an aggregate of 11,500,000 private placement warrants (or 13,225,000 private placement warrants if the underwriter’s over-allotment option is exercised in full), each exercisable to purchase one share of Class A common stock at $11.50 per share, subject to adjustment as provided herein. Prior to consummation of this offering, our sponsor holds 5,750,000 shares of Class B common stock (up to 750,000 of which are subject to forfeiture by our sponsor depending on the extent to which the underwriter’s over-allotment option is exercised). The shares of Class B common stock are convertible into shares of Class A common stock on a one-for-one basis, subject to adjustment as set forth herein.
In case we issue any extension promissory notes to our sponsor or its affiliates or designees in connection with implementing an extension to the time period in which we must complete our initial business combination, as described elsewhere herein (see “Summary—Initial Business Combination”), such extension promissory notes may be converted into warrants identical to the private placement warrants at the election of the lender. In addition, if the sponsor, its affiliates or a member of our management team makes any working capital loans, it may convert up to $1,500,000 of the loans into up to an additional 1,500,000 warrants, at the price of $1.00 per warrant, at the option of the lender. Such warrants would be identical to the private placement warrants. We may also issue shares of Class A common stock in connection with our redemption of our warrants.
To the extent we issue shares of Class A common stock to effectuate a business combination, the potential for the issuance of a substantial number of additional shares of Class A common stock upon exercise of these warrants and conversion rights could make us a less attractive acquisition vehicle to a target business. Any such issuance will increase the number of issued and outstanding shares of Class A common stock and reduce the value of the shares of Class A common stock issued to complete the business combination. Therefore, our warrants and founder shares may make it more difficult to effectuate a business combination or increase the cost of acquiring the target business.
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Because each unit contains one-half of one warrant and only a whole warrant may be exercised, the units may be worth less than units of other blank check companies.
Each unit contains one-half of one warrant. Because, pursuant to the warrant agreement, the warrants may only be exercised for a whole number of shares, only a whole warrant may be exercised at any given time. This is different from other offerings similar to ours whose units include one share of common stock and one whole warrant to purchase one share. We have established the components of the units in this way in order to reduce the dilutive effect of the warrants upon completion of a business combination because the warrants will be exercisable in the aggregate for one-half of the number of shares compared to units that each contain a warrant to purchase one whole share, thus making us, we believe, a more attractive merger partner for target businesses. Nevertheless, this unit structure may cause our units to be worth less than if they included a warrant to purchase one whole share.
A provision of our warrant agreement may make it more difficult for us to complete an initial business combination.
If (i) we issue additional Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at a Newly Issued Price of less than $9.20 per share of Class A common stock, (ii) the aggregate gross proceeds from the issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the completion of our initial business combination (net of redemptions), and (iii) the Market Value is below $9.20 per share, then the exercise price of the warrants will be adjusted to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption trigger prices will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively. See “Description of Securities─Public Stockholders’ Warrants─Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00” and “─Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00.” This may make it more difficult for us to complete an initial business combination with a target business.
The determination of the offering price of our units, the size of this offering and the terms of the units is more arbitrary than the pricing of securities and size of an offering of an operating company in a particular industry. You may have less assurance, therefore, that the offering price of our units properly reflects the value of the units than you would have in a typical offering of an operating company.
Prior to this offering there has been no public market for any of our securities. The public offering price of the units and the terms of the warrants were negotiated between us and the underwriter. In determining the size of this offering, management held customary organizational meetings with the underwriter, both prior to our inception and thereafter, with respect to the state of capital markets, generally, and the amount the underwriter believed it reasonably could raise on our behalf. Factors considered in determining the size of this offering, prices and terms of the units, including the Class A common stock and warrants underlying the units, include:
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the history and prospects of companies whose principal business is the acquisition of other companies;
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prior offerings of those companies;
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our prospects for acquiring an operating business at attractive value;
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a review of debt-to-equity ratios in leveraged transactions;
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an assessment of our management and their experience in identifying operating companies;
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general conditions of the securities markets at the time of this offering; and
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other factors as were deemed relevant.
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Although these factors were considered, the determination of our offering size, price and terms of the units is more arbitrary than the pricing of securities of an operating company in a particular industry because we have no historical operations or financial results.
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There is currently no market for our securities and a market for our securities may not develop, which would adversely affect the liquidity and price of our securities.
There is currently no market for our securities. Stockholders therefore have no access to information about prior market history on which to base their investment decision. Following this offering, the price of our securities may vary significantly due to one or more potential business combinations and general market or economic conditions. Furthermore, an active trading market for our securities may never develop or, if developed, it may not be sustained. You may be unable to sell your securities unless a market can be established and sustained.
Risks Relating to our Management
We are dependent upon our officers and directors, and their loss could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of individuals and, in particular, our officers and directors. We believe that our success depends on the continued service of our officers and directors, at least until we have completed our initial business combination. In addition, our officers and directors are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating their time among various business activities, including identifying potential business combinations and monitoring the related due diligence. We do not have an employment agreement with, or key-man insurance on the life of, any of our directors or officers. The unexpected loss of the services of one or more of our directors or officers could have a detrimental effect on us.
Our ability to successfully effect our initial business combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following our initial business combination. The loss of our or a target’s key personnel could negatively impact the operations and profitability of our post- combination business.
Our ability to successfully effect our business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following our business combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individual we engage after our initial business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.
In addition, the officers and directors of an acquisition candidate may resign upon completion of our initial business combination. The departure of a business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination, and a particular business combination may be conditioned on the retention or resignation of such key personnel. These agreements may provide for them to receive compensation following our business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Our key personnel may be able to remain with our company after the completion of our initial business combination only if they are able to negotiate employment or consulting agreements in connection with the business combination. These negotiations would take place simultaneously with the negotiation of the business combination and could provide for these individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the business combination. These negotiations also could make the retention or resignation of key personnel a condition to any such agreement. The personal and financial interests of the individuals may influence their motivation in identifying
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and selecting a target business. However, we believe the ability of these individuals to remain with us after the completion of our business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. There is no certainty, however, that any of our key personnel will remain with us after the completion of our business combination. We cannot assure you that any of our key personnel will remain in senior management or advisory positions with us. The determination as to whether any of our key personnel will remain with us will be made at the time of our initial business combination.
We may have a limited ability to assess the management of a prospective target business and, as a result, may affect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company and comply with applicable rules and regulations, which could, in turn, negatively impact the value of our stockholders’ investment in us.
When evaluating the desirability of effecting our initial business combination with a prospective target business, our ability to assess the management of a target business may be limited due to a lack of time, resources, or information. Our assessment of the capabilities of the management of the target business, therefore, may prove to be incorrect and the management may lack the skills, qualifications, or abilities we suspected. Should the management of the target business not possess the skills, qualifications, or abilities necessary to manage a public company and comply with applicable rules and regulations (including SEC reporting requirements), the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any stockholders who choose to remain stockholders following the business combination could suffer a reduction in the value of their securities. These stockholders are unlikely to have a remedy for any reduction in value.
The officers and directors of an acquisition candidate may resign upon completion of our initial business combination. The loss of a business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business.
The role of the key personnel of a target business upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of the management team of the target business will remain associated with the business following our initial business combination, it is possible that members of the management of the target business will not wish to remain in place.
Our officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination.
Our executive officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each of our executive officers is engaged in several other business endeavors for which he may be entitled to substantial compensation, and our executive officers are not obligated to contribute any specific number of hours per week to our affairs. Our independent directors also serve as officers and board members for other entities. If our executive officers’ and directors’ other business affairs require them to devote substantial amounts of time to those affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our initial business combination. For a complete discussion of our executive officers’ and directors’ other business affairs, please see “Management — Officers and Directors.”
Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular business opportunity should be presented.
Following the completion of this offering and until we consummate our initial business combination, we intend to engage in the business of identifying and combining with one or more businesses. Our sponsor and officers and directors are, and may in the future become, affiliated with entities that are engaged in a similar business. Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties, including the special purpose acquisition companies noted below and any other special purpose acquisition companies they may become involved with.
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Certain of our directors and officers are affiliated with other special purpose acquisition companies and our sponsor and directors and officers are also not prohibited from sponsoring, investing or otherwise becoming involved with, any other blank check companies, including in connection with their initial business combinations, prior to us completing our initial business combination. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless the opportunity is expressly offered to the person solely in his or her capacity as a director or officer of our company and the opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
For a complete discussion of our officers’ and directors’ business affiliations and the potential conflicts of interest that you should be aware of, please see “Management — Officers and Directors,” “Management — Conflicts of Interest” and “Certain Relationships and Related Party Transactions.”
Our officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
We have not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact, we may enter into a business combination with a target business that is affiliated with our sponsor, members of our sponsor, our directors or officers, although we do not intend to do so. We do not have a policy that expressly prohibits these persons from engaging for their own account in business activities of the types conducted by us. Accordingly, these persons or entities may have a conflict between their interests and ours. The personal and financial interests of our directors and officers may influence their motivation in timely identifying and selecting a target business and completing a business combination. Consequently, our directors’ and officers’ discretion in identifying and selecting a suitable target business 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.
We may engage in a business combination with one or more target businesses that have relationships with entities that may be affiliated with our sponsor, members of our sponsor, officers, directors, members of our VC Advisory Board or existing holders which may raise potential conflicts of interest.
In light of the involvement of our sponsor, executive officers, members of our VC Advisory Board and directors with other entities, we may decide to acquire one or more businesses affiliated with our sponsor, members of our sponsor, or our executive officers, or directors. Our directors and members of our VC Advisory Board also serve as officers and board members for other entities, including, without limitation, those described under “Management — Conflicts of Interest.” Our sponsor, officers, members of our VC Advisory Board and directors may sponsor, form, or participate in other blank check companies similar to ours during the period in which we are seeking an initial business combination. These entities may compete with us for business combination opportunities. Our sponsor, officers, members of our VC Advisory Board and directors are not currently aware of any specific opportunities for us to complete our initial business combination with any entities with which they are affiliated, and there have been no substantive discussions concerning a business combination with any entity or entities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction if we determined that the affiliated entity met our criteria and guidelines for a business combination as set forth in “Proposed Business — Effecting Our Initial Business Combination — Evaluation of a Target Business and Structuring of Our Initial Business Combination” and the transaction was approved by a majority of our independent and disinterested directors. Despite our agreement to obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm regarding the fairness to our company from a financial point of view of a business combination with one or more domestic or international businesses affiliated with our sponsor, members of our sponsor, or our executive officers, or directors, potential conflicts of interest still may exist and, as a result, the terms of the business combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest.
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Because our sponsor, officers and directors will lose their entire investment in us if our business combination is not completed (other than with respect to public shares they may acquire during or after this offering), a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.
On May 4, 2021, our sponsor paid $25,000, or approximately $0.004 per share, to cover certain of our offering costs in consideration of 5,750,000 shares of Class B common stock, par value $0.0001, a portion of which will be repurchased from our sponsor at cost and reissued to BlackRock. Prior to the initial investment in the company of $25,000 by the sponsor, the company had no assets, tangible or intangible. The per share price of the founder shares was determined by dividing the amount contributed to the company by the number of founder shares issued. If we increase or decrease the size of the offering, we will effect a stock split or stock dividend or share contribution back to capital, as applicable, with respect to our Class B common stock immediately prior to the consummation of this offering in such amount as to maintain the number of founder shares at 20% of the outstanding shares of our common stock upon the consummation of this offering. Up to 750,000 founder shares will be subject to forfeiture by our sponsor (or its permitted transferees) depending on the extent to which the underwriter’s over-allotment option is not exercised so that our initial stockholders will own 20% of our common stock after this offering. The founder shares will be worthless if we do not complete an initial business combination. In addition, our sponsor and BlackRock have committed, pursuant to written agreements, to purchase an aggregate of 11,500,000 private placement warrants (or 13,225,000 private placement warrants if the underwriter’s over-allotment option is exercised in full), each exercisable to purchase one share of Class A common stock at $11.50 per share, subject to adjustment, at a price of $1.00 per warrant ($11,500,000 in the aggregate or $13,225,000) if the underwriter’s over-allotment option is exercised in full), in a private placement that will close simultaneously with the closing of this offering. If we do not consummate an initial business within 18 months (or up to 24 months, if applicable) from the closing of this offering, the private placement warrants will expire worthless. We have also agreed to issue to BlackRock an aggregate of 400,000 shares of our Class B common stock (or 460,000 shares if the underwriter’s over-allotment option is exercised in full) in connection with the closing of this offering, which shares of Class B common stock will be repurchased from our sponsor at cost and reissued to BlackRock for the same per share consideration paid by our sponsor.
The personal and financial interests of our executive officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following the initial business combination. This risk may become more acute as the 18-month anniversary (or up to 24-month anniversary) of the closing of this offering nears, which is the deadline for our consummation of an initial business combination.
Members of our management team and board of directors have significant experience as board members, officers or executives of other companies. As a result, certain of those persons have been, may be, or may become, involved in proceedings, investigations and litigation relating to the business affairs of the companies with which they were, are, or may in the future be, affiliated. This may have an adverse effect on us, which may impede our ability to consummate an initial business combination.
During the course of their careers, members of our management team and board of directors have had significant experience as board members, officers or executives of other companies. As a result of their involvement and positions in these companies, certain persons were, are now, or may in the future become, involved in litigation, investigations or other proceedings relating to the business affairs of such companies or transactions entered into by such companies. Any such litigation, investigations or other proceedings may divert our management team’s and board’s attention and resources away from identifying and selecting a target business or businesses for our initial business combination and may negatively affect our reputation, which may impede our ability to complete an initial business combination.
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Members of our management team and affiliated companies have been, and may in the future be, subject to significant media coverage and involved in civil disputes or governmental investigations unrelated to our business.
Members of our management team have been (and intend to be) involved in a wide variety of businesses. Such involvement has, and may, lead to significant media coverage, including adverse media coverage, and public awareness. In addition, members of our management team and affiliated companies have been, and may in the future be, involved in civil disputes or governmental investigations unrelated to our business. Any such media coverage, public awareness, disputes or investigations may be detrimental to our reputation and could negatively affect our ability to identify and complete an initial business combination and may have an adverse effect on the price of our securities.
Our initial stockholders and anchor investors may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.
Upon the closing of this offering, our initial stockholders, including our sponsor, will own shares representing at least 20% of our issued and outstanding shares of common stock (assuming they do not purchase any units in this offering). In addition, if Magnetar purchases the full amount of units it has expressed an interest in purchasing in this offering, our initial stockholders and Magnetar will own shares representing 27.92% of our issued and outstanding shares of common stock. This percentage could increase if our anchor investors purchase additional units in this offering or in the open market. Accordingly, they may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended and restated certificate of incorporation and approval of major corporate transactions. If our initial stockholders or members thereof purchase any units in this offering or if our initial stockholders, anchor investors or members thereof purchase any additional shares of common stock in the aftermarket or in privately negotiated transactions, this would increase their control. Factors that would be considered in making such additional purchases would include consideration of the current trading price of our Class A common stock. In addition, our board of directors, whose members were elected by our sponsor, is and will be divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. We may not hold an annual meeting of stockholders to elect new directors prior to the completion of our business combination, in which case all of the current directors will continue in office until at least the completion of the business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and prior to the completion of our initial business combination, only our initial stockholders will be able to elect or remove directors. In addition, prior to the completion of an initial business combination, holders of a majority of our founder shares may remove a member of the board of directors or the entire board of directors for any reason. Accordingly, our initial stockholders will continue to exert control at least until the completion of our business combination.
Our sponsor paid an aggregate of $25,000, or approximately $0.004 per founder share, and, accordingly, you will experience immediate and substantial dilution from the purchase of our Class A common stock.
The difference between the public offering price per share (allocating all of the unit purchase price to the share of Class A common stock and none to the warrant included in the unit) and the pro forma net tangible book value per share of Class A common stock after this offering constitutes the dilution to you and the other investors in this offering. Our sponsor acquired the founder shares at a nominal price, significantly contributing to this dilution. Upon closing of this offering, and assuming no value is ascribed to the warrants included in the units, you and the other public stockholders will incur an immediate and substantial dilution of approximately 108.1% (or $10.81 per share, assuming no exercise of the underwriter’s over-allotment option), the difference between the pro forma net tangible book value per share of $(0.81) and the initial offering price of $10.00 per unit. This dilution would increase to the extent that the anti-dilution provisions of the founder shares result in the issuance of shares of Class A common stock on a greater than one-to-one basis upon conversion of the founder shares at the time of our initial business combination and would become exacerbated to the extent that public stockholders seek redemptions from the trust account for their public shares. In addition, because of the anti-dilution protection in the founder shares, any equity or equity-linked securities issued in connection with our initial business combination (other than such securities issued, or to be issued, to any seller in our initial business combination) would be disproportionately dilutive to our shares of Class A common stock.
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Risks Associated with Acquiring and Operating a Business in Foreign Countries
If we pursue a target business with operations or opportunities outside of the United States for our initial business combination, we may face additional burdens in connection with investigating, agreeing to and completing such initial business combination, and if we effect such initial business combination, we would be subject to a variety of additional risks that may negatively impact our operations.
If we pursue a target a company with operations or opportunities outside of the United States for our initial business combination, we would be subject to risks associated with cross-border business combinations, including in connection with investigating, agreeing to and completing our initial business combination, conducting due diligence in a foreign jurisdiction, having such transaction approved by any local governments, regulators or agencies and changes in the purchase price based on fluctuations in foreign exchange rates.
If we effect our initial business combination with a company in a foreign country, we would be subject to many special considerations or risks associated with companies operating in an international setting, including any of the following:
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higher costs and difficulties inherent in managing cross-border business operations and complying with different commercial and legal requirements of overseas markets;
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rules and regulations regarding currency redemption;
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imposition of withholding taxes;
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laws governing the manner in which future business combinations may be effected;
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exchange listing and/or delisting requirements;
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tariffs and trade barriers;
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regulations related to customs and import/export matters;
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local or regional economic policies and market conditions;
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unexpected changes in regulatory requirements;
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tax issues, such as tax law changes and variations in tax laws as compared to the United States;
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currency fluctuations and exchange controls;
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challenges in collecting accounts receivable;
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cultural and language differences;
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employment regulations;
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underdeveloped or unpredictable legal or regulatory systems;
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protection of intellectual property;
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social unrest, crime, strikes, riots and civil disturbances;
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regime changes and political upheaval;
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terrorist attacks and wars; and
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deterioration of political relations with the United States.
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We may not be able to adequately address these additional risks. If we were unable to do so, we may be unable to complete the initial business combination, or, if we complete the transaction, our operations might suffer, either of which may adversely impact our business, financial condition, and results of operations.
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We are subject to changing law and regulations regarding regulatory matters, corporate governance, and public disclosure that have increased both our costs and the risk of non-compliance.
We are subject to rules and regulations promulgated by various governing bodies, including, for example, the SEC, which are charged with the protection of investors and the oversight of companies whose securities are publicly traded, and to new and evolving regulatory measures under and interpretations of applicable law. Our efforts to comply with new and changing laws and regulations are likely to result in increased general and administrative expenses and a diversion of management time and attention from seeking a business combination target. To the extent that changes are the result of interpretations of existing laws, rules, or regulations, we may be required to revise or amend previously filed disclosures or restate our financial statements, which may result in significant additional expenses to the company.
Moreover, because these laws, regulations, and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes or interpretations, we may be subject to penalty and our business may be harmed.
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General Risk Factors
We are a newly formed 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 newly formed company with no operating results, and we will not commence operations until obtaining funding through this offering. Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business objective of completing our initial business combination with one or more target businesses. We have no plans, arrangements or understandings with any prospective target business concerning a business combination and may be unable to complete our business combination. If we fail to complete our initial business combination within the prescribed timeframe, we will never generate any operating revenues.
Past performance by PROOF.VC, our management team, and members of our VC Advisory Board is not indicative of future performance of an investment in us.
Information regarding performance by, or businesses associated with, PROOF.VC or our management team or our VC Advisory Board members , is presented for informational purposes only. Any past experience and performance of PROOF.VC or our management team or our VC Advisory Board Members is not a guarantee either: (i) that we will be able to successfully identify a suitable candidate for our initial business combination; or (ii) of any results with respect to any initial business combination we may consummate. You should not rely on the historical record of the performance of PROOF.VC or our management team as being indicative of the future performance of an investment in us or the returns we will, or are likely to, generate going forward. Information regarding the financial performance of funds managed by PROOF.VC, or of specific PROOF.VC portfolio company investments, is provided in this prospectus for informational purposes only. Past performance of PROOF.VC is not indicative of PROOF.VC’s future results, and you should not rely on the information relating to the performance of funds managed by PROOF.VC (which are investment funds that have invested in multiple portfolio companies), or of specific PROOF.VC portfolio company investments, as indicative of the future performance of PROOF Acquisition Corp I (which is a blank check company whose strategy is as described elsewhere in this prospectus), or of an investment in PROOF Acquisition Corp I. In addition, our management team, members of our VC Advisory Board and their respective affiliates have been involved with a large number of public and private companies in addition to those identified above, not all of which have achieved similar performance levels.
PROOF.VC is not under any obligation to source any potential opportunities for our initial business combination. PROOF.VC may have a duty to offer business combination opportunities to certain PROOF.VC funds before other parties, including our company, and may seek to engage in transactions with businesses that could have otherwise been attractive business combination opportunities for us.
PROOF.VC may become aware of a potential business combination opportunity that may be an attractive opportunity for our company. However, PROOF.VC is not under any obligation to source any potential opportunities for our initial business combination or refer any such opportunities to our company or provide any other services to our company. PROOF.VC has fiduciary and contractual duties to its investment vehicles and to certain companies in which it has invested. As a result, PROOF.VC may have a duty to offer business combination opportunities to certain PROOF.VC funds before other parties, including our company, and may seek to engage in transactions with businesses that could have otherwise been attractive business combination opportunities for us. Additionally, certain companies in which PROOF.VC has invested may enter into transactions with, provide goods or services to, or receive goods or services from an entity with which we seek to complete our initial business combination. Transactions of these types may present a conflict of interest because PROOF.VC may directly or indirectly receive a financial benefit as a result of such transaction.
Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early-stage company without significant investments in data security protection, we may not be sufficiently protected
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against these occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial business combination, and results of operations.
We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor internal controls attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A common stock held by non-affiliates exceeds $700 million as of any September 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of any fiscal year for so long as either (i) the market value of our shares of Class A common stock held by non-affiliates did not equal or exceed $250 million as of the prior September 30, or (ii) our annual revenues did not equal or exceed $100 million during such completed fiscal year and the market value of our shares of Class A common stock held by non-affiliates did not equal or exceed $700 million as of the prior September 30. To the extent we take advantage of these reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
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Provisions in our amended and restated certificate of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A common stock and could entrench management.
Our amended and restated certificate of incorporation will contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred stock, and the fact that prior to the completion of our initial business combination only holders of our shares of Class B common stock, which will be held by the sponsor and BlackRock, voting together as a single class, are entitled to vote on the election of the directors, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with our company or our company’s directors, officers or other employees.
Our amended and restated certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of our company, (ii) action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of our company to our company or our stockholders, or any claim for aiding and abetting any such alleged breach, (iii) action asserting a claim against our company or any director, or officer or employee of our company arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or our bylaws, or (iv) action asserting a claim against us or any director, or officer or employee of our company governed by the internal affairs doctrine except for, as to each of (i) through (iv) above, any claim (a) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (b) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or (c) arising under the federal securities laws, including the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall concurrently be the sole and exclusive forums.
Notwithstanding the foregoing, the provisions of this paragraph will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America shall be the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have consented to the forum provisions in our amended and restated certificate of incorporation. If any action the subject matter of which is within the scope the forum provisions is filed in a court other than a court located within the State of Delaware (a “foreign action”) in the name of any stockholder, such stockholder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”); and (y) having service of process made upon such stockholder in any such enforcement action by service upon such stockholder’s counsel in the foreign action as agent for such stockholder.
This choice-of-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company or its directors, officers or other employees, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our amended and restated certificate of incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
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An investment in this offering may result in uncertain or adverse U.S. federal income tax consequences.
An investment in this offering may result in uncertain U.S. federal income tax consequences. For instance, because there are no authorities that directly address instruments similar to the units we are issuing in this offering, the allocation an investor makes with respect to the purchase price of a unit between the share of Class A common stock and the one-half of one warrant to purchase one share of our Class A common stock included in each unit could be challenged by the U.S. Internal Revenue Service, or “IRS,” or the courts. Furthermore, the U.S. federal income tax consequences of a cashless exercise of warrants included in the units we are issuing in this offering is unclear under current law, and an adjustment to the exercise price and/or purchase price of the warrants could give rise to dividend income to investors without a corresponding payment of cash. Finally, it is unclear whether the redemption rights with respect to our shares of Class A common stock suspend the running of a U.S. holder’s holding period for purposes of determining whether any dividend we pay would be considered “qualified dividends” or qualify for the dividends received deduction for U.S. federal income tax purposes. See the section titled “United States Federal Income Tax Considerations” below for a summary of the material U.S. federal income tax considerations applicable to an investment in our securities. Prospective investors are urged to consult their tax advisors with respect to these and other tax consequences applicable to their specific circumstances when purchasing, holding or disposing of our securities.
Since only holders of our founder shares will have the right to vote on the appointment of directors, upon the listing of our shares on the NYSE, the NYSE may consider us to be a ‘controlled company’ within the meaning of the NYSE rules and, as a result, we may qualify for exemptions from certain corporate governance requirements.
After completion of this offering, only holders of our founder shares will have the right to vote on the appointment of directors. As a result, the NYSE may consider us to be a ‘controlled company’ within the meaning of the NYSE corporate governance standards. Under the NYSE corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a ‘controlled company’ and may elect not to comply with certain corporate governance requirements, including the requirements that:
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we have a board that includes a majority of ‘independent directors,’ as defined under the rules of the NYSE;
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we have a compensation committee of our board that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
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we have a nominating and corporate governance committee of our board that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
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We do not intend to utilize these exemptions and intend to comply with the corporate governance requirements of the NYSE, subject to applicable phase-in rules. However, if we determine in the future to utilize some or all of these exemptions, you will not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s 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 “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “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 prospectus may include, for example, statements about:
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our ability to select an appropriate target business or businesses;
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our ability to complete our initial business combination;
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our expectations around the performance of a prospective target business or businesses;
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our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;
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our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination;
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conflicts of interest arising with entities affiliated with our sponsor;
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our potential ability to obtain additional financing to complete our initial business combination;
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our pool of prospective target businesses;
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our ability to consummate an initial business combination due to the uncertainty resulting from the COVID-19 pandemic;
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the ability of our officers and directors to generate a number of potential business combination opportunities;
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our public securities’ potential liquidity and trading;
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the lack of a market for our securities;
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the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;
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the trust account not being subject to claims of third parties; or
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our financial performance following this offering.
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The forward-looking statements contained in this prospectus are based on our current expectations and beliefs concerning future developments and their potential effects on us. 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.
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We are offering 20,000,000 units at an offering price of $10.00 per unit. We estimate that the net proceeds of this offering, together with the funds we will receive from the sale of the private placement warrants, will be used as set forth in the following table:
Gross proceeds
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Gross proceeds from units offered to public(1)
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$200,000,000
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$230,000,000
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Gross proceeds from private placement warrants offered in the private placement
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$11,500,000
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$13,225,000
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Total gross proceeds
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$211,500,000
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$243,225,000
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Estimated offering expenses(2)
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Underwriting commissions (2.0% of gross proceeds from units offered to public, excluding deferred portion)(3)
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$4,000,000
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$4,600,000
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Legal fees and expenses
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$200,000
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$200,000
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Printing and engraving expenses
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$30,000
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$30,000
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Accounting fees and expenses
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$75,000
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$75,000
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SEC/FINRA Expenses
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$56,000
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$56,000
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Travel and road show
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$25,000
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$25,000
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NYSE listing and filing fees
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$85,000
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$85,000
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Miscellaneous
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$79,000
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$79,000
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Total estimated offering expenses (other than underwriting commissions)
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$550,000
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$550,000
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Proceeds after estimated offering expenses
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$206,950,000
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$238,075,000
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Held in trust account(3)
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$204,000,000
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$234,600,000
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% of public offering size
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102%
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102%
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Not held in trust account
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$2,950,000
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$3,475,000
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The following table shows the use of the estimated $2,950,000 of net proceeds not held in the trust account.(4)(5)
Legal, accounting, due diligence, travel, and other expenses in connection with any business combination(5)
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$400,000
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14%
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Legal and accounting fees related to regulatory reporting obligations
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$150,000
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5%
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Payment for office space, administrative and support services
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$240,000
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8%
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NYSE continued listing fees
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$71,000
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2%
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Director and officer liability insurance premiums(6)
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$750,000
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25%
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Working capital to cover miscellaneous expenses and reserves
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$1,339,000
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45%
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Total
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$2,950,000
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100.0%
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(1)
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Includes amounts payable to public stockholders who properly redeem their shares in connection with our successful completion of our initial business combination.
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(2)
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A portion of the offering expenses will be paid from the proceeds of loans from our sponsor of up to $300,000 as described in this prospectus. As of September 30, 2021, we had $110,000 borrowings outstanding under the promissory note with our sponsor. These amounts will be repaid upon completion of this offering out of the proceeds from the sale of the private placement warrants. In the event that offering expenses are less than as set forth in this table, any such amounts will be used for post-closing working capital expenses. In the event that the offering expenses are more than as set forth in this table, we may fund such excess with the remaining funds from the sale of the private placement warrants or from borrowings from our sponsor.
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(3)
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The underwriter has agreed to defer underwriting commissions equal to 3.5% of the gross proceeds of this offering. Upon and concurrently with the completion of our initial business combination, $7,000,000, which constitutes the underwriter’s deferred commissions (or $8,050,000 if the underwriter’s over-allotment option is exercised in full) will be paid to the underwriter from the funds held in the trust account. See “Underwriting.” The remaining funds, less amounts released to the trustee to pay redeeming stockholders, will be released to us and can be used to pay all or a portion of the purchase price of the business or businesses with
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which our initial business combination occurs or for general corporate purposes, including payment of principal or interest on indebtedness incurred in connection with our initial business combination, to fund the purchases of other companies or for working capital. The underwriter will not be entitled to any interest accrued on the deferred underwriting discounts and commissions.
(4)
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These expenses are estimates only. Our actual expenditures for some or all of these items may differ from the estimates set forth herein. For example, we may incur greater legal and accounting expenses than our current estimates in connection with negotiating and structuring our initial business combination based upon the level of complexity of such business combination. In the event we identify a business combination target in a specific industry subject to specific regulations, we may incur additional expenses associated with legal due diligence and the engagement of special legal counsel. In addition, our staffing needs may vary and as a result, we may engage a number of consultants to assist with legal and financial due diligence. We do not anticipate any change in our intended use of proceeds, other than fluctuations among the current categories of allocated expenses, which fluctuations, to the extent they exceed current estimates for any specific category of expenses, would not be available for our expenses. The amount in the table above does not include interest available to us from the trust account. The proceeds held in the trust account will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Assuming an interest rate of 0.1% per year, we estimate the interest earned on the trust account will be approximately $200,000 per year; however, we can provide no assurances regarding this amount.
|
(5)
|
Includes estimated amounts that may also be used in connection with our initial business combination to fund a “no shop” provision and commitment fees for financing.
|
(6)
|
This amount represents the approximate amount of annual director and officer liability insurance premiums we anticipate paying following the completion of this offering and until we complete our initial business combination.
|
We estimate that the net proceeds from (i) the sale of the units in this offering, after deducting offering expenses of approximately $550,000, underwriting commissions of $4,000,000 ($4,600,000 if the underwriter’s over-allotment option is exercised in full) (excluding deferred underwriting commissions of $7,000,000 (or $8,050,000, if the underwriter’s over-allotment option is exercised in full)), and (ii) the sale of the private placement warrants for a purchase price of approximately $11,500,000 (or $13,225,000 if the underwriter’s over-allotment option is exercised in full), will be $206,950,000 (or $238,075,000 if the underwriter’s over-allotment option is exercised in full). Of this amount, $204,000,000 (or $234,600,000 if the underwriter’s over-allotment option is exercised in full) will be deposited into a trust account at Bank of America, N.A. with Continental Stock Transfer & Trust Company acting as trustee. The funds in the trust account will be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act. Based on current interest rates, we estimate that the interest earned on the trust account will be approximately $200,000 per year, assuming an interest rate of 0.1% per year. Upon and concurrently with the completion of our initial business combination, $7,000,000, which constitutes the underwriter’s deferred commissions (or $8,050,000 if the underwriter’s over-allotment option is exercised in full) will be paid to the underwriter from the funds held in the trust account.
We will not be permitted to withdraw any of the principal or interest held in the trust account, except with respect to interest earned on the funds held in the trust account that may be released to us to pay our taxes, if any, until the earliest of (i) the completion of our initial business combination, (ii) the redemption of our public shares if we have not consummated an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, subject to applicable law, or (iii) the redemption of our public shares properly submitted in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) that would modify the substance or timing of our obligation to provide holders of our shares of Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity. Based on current interest rates, we expect that interest income earned on the trust account (if any) will be sufficient to pay our taxes.
The proceeds held in the trust account may be used as consideration to pay the sellers of a target business with which we ultimately complete our initial business combination and to pay the deferred underwriting commissions. If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or the redemption of our public shares, we may apply the balance of the cash released from the trust account for general corporate purposes, including for maintenance or expansion of operations of the
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post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital. There is no limitation on our ability to raise funds privately or through loans in connection with our initial business combination.
We believe that amounts not held in trust, together with funds available to us from loans from our sponsor, will be sufficient to pay the costs and expenses to which such proceeds are allocated. This belief is based on the fact that while we may begin preliminary due diligence of a target business in connection with an indication of interest, we intend to undertake in-depth due diligence, depending on the circumstances of the relevant prospective acquisition, only after we have negotiated and signed a letter of intent or other preliminary agreement that addresses the terms of a business combination. However, if our estimate of the costs of undertaking in-depth due diligence and negotiating a business combination is less than the actual amount necessary to do so, we may be required to raise additional capital, the amount, availability and cost of which is currently unascertainable. If we are required to seek additional capital, we could seek such additional capital through loans or additional investments from our sponsor, members of our management team or any of their affiliates, but such persons are not under any obligation to advance funds to, or invest in, us.
We will reimburse an affiliate of our sponsor for office space, secretarial and administrative services provided to members of our management team, in the amount of $10,000 per month pursuant to an administrative services agreement among us, our sponsor, and an affiliate of our sponsor. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
Prior to the closing of this offering, our sponsor has agreed to loan us up to $300,000 to be used for a portion of the expenses of this offering. As of September 30, 2021, we had $110,000 outstanding under the promissory note with our sponsor. These loans are non-interest bearing, unsecured and are due at the earlier of March 31, 2022 or the closing of this offering. The loan will be repaid out of the proceeds received by us from the sale of the private placement warrants which closing will occur concurrently with the closing of this offering.
In addition, in order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. Otherwise, such loans may be repaid only out of funds held outside the trust account. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts, but no proceeds from our trust account would be used to repay such loaned amounts. Except as set forth above, the terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our sponsor, its affiliates or any members of our management team as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, directors, officers, advisors or their respective affiliates may purchase shares in privately negotiated transactions or in the open market, either prior to or following the completion of our initial business combination. Please see “Proposed Business ─ Permitted purchases and other transactions with respect to our securities” for a description of how such persons will determine from which stockholders to seek to acquire shares. The price per share in any such transaction may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with our initial business combination. However, such persons have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act.
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We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules.
We may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 following such redemption and the agreement for our initial business combination may require as a closing condition that we have a minimum net worth or a certain amount of cash. If too many public stockholders exercise their redemption rights so that we cannot satisfy the net tangible asset requirement or any net worth or cash requirements, we would not proceed with the redemption of our public shares or the business combination, and instead may search for an alternate business combination (including, potentially, with the same target).
A public stockholder will be entitled to receive funds from the trust account only upon the earliest to occur of: (a) the completion of our initial business combination, and then only in connection with those shares of Class A common stock that such stockholder properly elected to redeem, subject to the limitations described herein, (b) the redemption of any public shares properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to provide holders of our Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (ii) with respect to any other provisions relating to stockholders’ rights or pre-business combination activity, and (c) the redemption of our public shares if we have not consummated our business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, subject to applicable law and as further described herein and any limitations (including but not limited to cash requirements) created by the terms of the proposed business combination. In no other circumstances will a public stockholder have any right or interest of any kind to or in the trust account. Holders of warrants will not have any rights to the proceeds held in the trust account with respect to the warrants.
Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed (i) to waive their redemption rights with respect to any founder shares and public shares held by them in connection with the completion of our initial business combination and a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) that would modify the substance or timing of our obligation to provide holders of shares of Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-business combination activity and (ii) to waive their rights to liquidating distributions from the trust account with respect to any founder shares they hold if we fail to consummate an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering. In addition, our initial stockholders have each agreed to waive their respective rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our business combination within the prescribed period. However, if our initial stockholders or any of our officers, directors or affiliates acquires public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the prescribed period.
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We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of our initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial business combination. The payment of any cash dividends subsequent to our initial business combination will be within the discretion of our board of directors at such time. If we increase the size of this offering, we will effect a share capitalization or other appropriate mechanism immediately prior to the consummation of this offering in such amount as to maintain the number of founder shares, on an as-converted basis, at 20% of our issued and outstanding common stock upon the consummation of this offering. Further, if we incur any indebtedness in connection with a business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
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The difference between the public offering price per share of Class A common stock, assuming no value is attributed to the warrants included in the units we are offering pursuant to this prospectus or the private placement warrants, and the pro forma net tangible book value per share of our Class A common stock after this offering constitutes the dilution to investors in this offering. Such calculation does not reflect any dilution associated with the sale and exercise of warrants, including the private placement warrants, which would cause the actual dilution to the public stockholders to be higher, particularly where a cashless exercise is utilized. Net tangible book value per share is determined by dividing our net tangible book value, which is our total tangible assets less total liabilities (including the value of Class A common stock which may be redeemed for cash), by the number of outstanding shares of our Class A common stock.
At September 30, 2021, our net tangible book deficit was $316,766, or approximately $(0.06) per share of Class B common stock. After giving effect to the sale of 20,000,000 shares of Class A common stock included in the units we are offering by this prospectus (or 23,000,000 shares of Class A common stock if the underwriter’s over-allotment option is exercised in full), the sale of the private placement warrants and the deduction of underwriting commissions and estimated expenses of this offering, our pro forma net tangible book value at September 30, 2021 would have been $(4,025,897) or $(0.81) per share (or $(0.79) per share if the underwriter’s over- allotment option is exercised in full), representing an immediate decrease in net tangible book value (as decreased by the value of 20,000,000 shares of Class A common stock that may be redeemed for cash, or 23,000,000 shares of Class A common stock if the underwriter’s over-allotment option is exercised in full) of $(0.75) per share (or $(0.73) per share if the underwriter’s over-allotment option is exercised in full) to our sponsor as of the date of this prospectus and an immediate dilution to public stockholders from this offering of $10.00 per public share. Total dilution to public stockholders from this offering will be $10.81 per share (or $10.79 if the underwriter’s over-allotment option is exercised in full).
The following table illustrates the dilution to the public stockholders on a per-share basis, assuming no value is attributed to the warrants included in the units or the private placement warrants:
Public offering price
|
|
|
$10.00
|
|
|
$10.00
|
Net tangible book deficit before this offering
|
|
|
$(0.06)
|
|
|
$(0.06)
|
Decrease attributable to public stockholders
|
|
|
$(0.75)
|
|
|
$(0.73)
|
Pro forma net tangible book value after this offering and the sale of the private placement warrants
|
|
|
$(0.81)
|
|
|
$(0.79)
|
Dilution to public stockholders
|
|
|
$10.81
|
|
|
$10.79
|
Percentage of dilution to public stockholders
|
|
|
108.1%
|
|
|
107.9%
|
For purposes of presentation, we have reduced our pro forma net tangible book value after this offering (assuming no exercise of the underwriter’s over-allotment option) by $204,000,000 because holders of up to approximately 100% of our public shares may redeem their shares for a pro rata share of the aggregate amount then on deposit in the trust account, including interest, at a per share redemption price equal to the amount in the trust account as set forth in our proxy solicitation or tender offer materials, as applicable (initially anticipated to be the aggregate amount held in trust two business days prior to the commencement of our stockholders’ meeting or tender offer, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes), divided by the number of shares of Class A common stock sold in this offering.
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The following table sets forth information with respect to our initial stockholders and the public stockholders:
Class B common stock(1)(2)
|
|
|
5,000,000
|
|
|
20.0%
|
|
|
$25,000
|
|
|
0.01%
|
|
|
$0.005
|
Public Stockholders
|
|
|
20,000,000
|
|
|
80.0%
|
|
|
200,000,000
|
|
|
99.99%
|
|
|
$10.00
|
|
|
|
25,000,000
|
|
|
100.0%
|
|
|
$200,025,000
|
|
|
100.0%
|
|
|
|
(1)
|
Assumes no exercise of the underwriter’s over-allotment option and the corresponding forfeiture of 750,000 shares of Class B common stock held by our sponsor.
|
(2)
|
Assumes conversion of Class B common stock into Class A common stock on a one-for-one basis. The dilution to the public stockholders would increase to the extent that the anti-dilution provisions of the Class B common stock result in the issuance of shares of Class A common stock on a greater than one-to-one basis upon such conversion.
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The pro forma net tangible book value per share after this offering (assuming that the underwriter does not exercise its over-allotment option) is calculated as follows:
Numerator:
|
|
|
|
|
|
|
Net tangible book deficit before this offering
|
|
|
$(316,766)
|
|
|
$(316,766)
|
Net proceeds from this offering and sale of the private placement warrants(1)
|
|
|
206,950,000
|
|
|
238,075,000
|
Plus: Offering costs accrued or paid in advance, excluded from tangible book value before this offering
|
|
|
340,869
|
|
|
340,869
|
Less: Deferred underwriting commissions
|
|
|
(7,000,000)
|
|
|
(8,050,000)
|
Less: Proceeds held in trust subject to redemption
|
|
|
(204,000,000)
|
|
|
(234,600,000)
|
|
|
|
$(4,025,897)
|
|
|
$(4,550,897)
|
Denominator:
|
|
|
|
|
|
|
Class B common stock outstanding prior to this offering
|
|
|
5,750,000
|
|
|
5,750,000
|
Class B forfeited if over-allotment option is not exercised
|
|
|
(750,000)
|
|
|
—
|
Class A common stock included in the units offered
|
|
|
20,000,000
|
|
|
23,000,000
|
Less: common stock subject to redemption
|
|
|
(20,000,000)
|
|
|
(23,000,000)
|
|
|
|
5,000,000
|
|
|
5,750,000
|
(1)
|
Expenses applied against gross proceeds include offering expenses of $550,000 and underwriting commissions of $4,000,000 or $4,600,000 if the underwriter exercises its over-allotment option (excluding deferred underwriting fees). See “Use of Proceeds.”
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The following table sets forth our capitalization at September 30, 2021, and as adjusted to give effect to the filing of our amended and restated certificate of incorporation, the sale of our units in this offering and the sale of the private placement warrants and the application of the estimated net proceeds derived from the sale of such securities:
Note payable to related party(2)
|
|
|
$110,000
|
|
|
$—
|
Deferred underwriting commissions
|
|
|
—(1)
|
|
|
7,000,000
|
Class A common stock subject to possible redemption; actual and as adjusted, respectively(3)
|
|
|
—(1)
|
|
|
204,000,000
|
Stockholders’ equity:
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value per share, 1,000,000 preference shares authorized, actual and as adjusted; 0 preference shares issued and outstanding, actual and as adjusted
|
|
|
—
|
|
|
—
|
Class A common stock, $0.0001 par value, 70,000,000 shares authorized (actual and as adjusted); no shares issued and outstanding (actual); 0 shares issued and outstanding (excluding 20,000,000 shares subject to redemption) (as adjusted)
|
|
|
—
|
|
|
—
|
Class B common stock, $0.0001 par value, 12,500,000 shares authorized, actual and as adjusted; 5,750,000 and 5,000,000 shares of Class B common stock issued and outstanding, actual and as adjusted, respectively(3)
|
|
|
575
|
|
|
500
|
Additional paid-in capital(4)
|
|
|
24,425
|
|
|
—
|
Accumulated deficit
|
|
|
(897)
|
|
|
(4,026,397)
|
Total stockholders’ equity/deficit
|
|
|
$24,103
|
|
|
$(4,025,897)
|
Total capitalization
|
|
|
$134,103
|
|
|
$206,974,103
|
(1)
|
Assumes no exercise of the underwriter’s over-allotment option and the corresponding forfeiture of 750,000 shares of Class B common stock held by our sponsor. The proceeds of the sale of such shares will not be deposited into the trust account, the shares will not be eligible for redemption from the trust account nor will they be eligible to vote upon the initial business combination.
|
(2)
|
Our sponsor has agreed to loan us up to $300,000 to be used for a portion of the expenses of this offering. As of September 30, 2021, we had $110,000 borrowings outstanding under the promissory note with our sponsor.
|
(3)
|
Upon the completion of our initial business combination, we will provide our public stockholders with the opportunity to redeem their public shares for cash at a per share price equal to the aggregate amount then on deposit in the trust account calculated as of two business days prior to the consummation of the initial business combination, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes, divided by the number of the then-outstanding public shares, subject to the limitations described herein whereby redemptions cannot cause our net tangible assets to be less than $5,000,001 following such redemptions, and any limitations (including, but not limited to, cash requirements) created by the terms of the proposed business combination.
|
(4)
|
The “as adjusted” additional paid-in capital calculation is equal to the “as adjusted” total stockholders’ equity of $(4,025,897), minus Class A common stock (par value) of $0.0001, minus Class B common stock (par value) of $0.0001, plus the accumulated deficit of $(4,026,397).
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
We are a blank check company incorporated on March 16, 2021 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We have not selected any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. We intend to effectuate our initial business combination using cash from the proceeds of this offering and the private placement of the private placement warrants, our capital stock, debt or a combination of the foregoing.
The issuance of additional shares of our common stock or preferred stock in a business combination:
•
|
may significantly dilute the equity interest of investors in this offering, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of shares of Class A common stock on a greater than one-to-one basis upon conversion of the Class B common stock;
|
•
|
may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;
|
•
|
could cause a change in control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
|
•
|
may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us;
|
•
|
may adversely affect prevailing market prices for our units, Class A common stock and/or warrants; and
|
•
|
may not result in adjustment to the exercise price of the warrants.
|
Similarly, if we issue debt or otherwise incur significant debt, it could result in:
•
|
default and foreclosure on our assets if our operating revenues after an initial business combination
|
•
|
are insufficient to repay our debt obligations;
|
•
|
acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
|
•
|
our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;
|
•
|
our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
|
•
|
our inability to pay dividends on our common stock;
|
•
|
using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions and fund other general corporate purposes;
|
•
|
limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
|
•
|
increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;
|
•
|
limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and
|
•
|
other purposes and other disadvantages compared to our competitors who have less debt.
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As indicated in the accompanying financial statements, as of September 30, 2021, we had cash of $24,070 and deferred offering costs of $340,869. Further, we expect to incur significant costs in the pursuit of our initial business combination. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary to prepare for this offering. Following this offering, we will not generate any operating revenues until after completion of our initial business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents after this offering. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. After this offering, we expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. We expect our expenses to increase substantially after the closing of this offering.
Liquidity and Capital Resources
Our liquidity needs have been satisfied prior to the completion of this offering through (i) $25,000 paid by our sponsor on May 4, 2021 to cover certain of our offering costs in exchange for the issuance of the founder shares to our sponsor and (ii) the receipt of loans to us of up to $300,000 by our sponsor under an unsecured promissory note. As of September 30, 2021, we had $110,000 outstanding under the unsecured promissory note. We estimate that the net proceeds from (i) the sale of the units in this offering, after deducting offering expenses of approximately $550,000, underwriting commissions of $4,000,000 ($4,600,000 if the underwriter’s over-allotment option is exercised in full) (excluding deferred underwriting commissions of $7,000,000 (or $8,050,000, if the underwriter’s over-allotment option is exercised in full)), and (ii) the sale of the private placement warrants for a purchase price of approximately $11,500,000 (or $13,225,000 if the underwriter’s over-allotment option is exercised in full), will be $206,950,000 (or $238,075,000 if the underwriter’s over-allotment option is exercised in full). Of this amount, $204,000,000 (or $234,600,000 if the underwriter’s over-allotment option is exercised in full) will be held in the trust account, which includes the deferred underwriting commissions described above. The proceeds held in the trust account will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. The remaining $2,950,000 will not be held in the trust account. In the event that our offering expenses exceed our estimate of $550,000, we may fund such excess with funds not to be held in the trust account. In such case, the amount of funds we intend to be held outside the trust account would decrease by a corresponding amount. Conversely, in the event that the offering expenses are less than our estimate of $550,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding amount.
We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less taxes payable and deferred underwriting discounts and commissions) to complete our initial business combination. We may withdraw interest to pay franchise and income taxes. We estimate our annual franchise tax obligations, based on the number of shares of our common stock authorized and outstanding after the completion of this offering, to be $200,000, which is the maximum per annum amount of annual franchise taxes payable by us as a Delaware corporation. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. Based on current interest rates, we expect that the interest earned on the trust account, net of income taxes, will be sufficient to pay Delaware franchise taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
Prior to the completion of our initial business combination, we will have available to us the $2,950,000 of proceeds held outside the trust account, as well as certain funds from loans from our sponsor, its affiliates or members of our management team. We will use these funds to primarily identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar
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locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination and to pay taxes to the extent the interest earned on the trust account is not sufficient to pay our taxes.
We do not believe we will need to raise additional funds following this offering in order to meet the expenditures required for operating our business prior to our initial business combination, other than funds available from loans from our sponsor, its affiliates or members of our management team. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our sponsor, its affiliates or our management team as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
We expect our primary liquidity requirements during that period to include approximately $400,000 for legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting business combinations; $150,000 for legal and accounting fees related to regulatory reporting obligations; $180,000 for office space, administrative and support services for up to 18 months (which may be extended up to 24 months, as described elsewhere herein, resulting in a total of $240,000); $750,000 for D&O insurance: $71,000 for NYSE continued listing fees; and $1,339,000 for general working capital that will be used for miscellaneous expenses and reserves.
These amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
Moreover, we may need to obtain additional financing to complete our initial business combination, either because the transaction requires more cash than is available from the proceeds held in our trust account, or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. If we have not consummated our initial business combination within the required time period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account.
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Controls and Procedures
We are not currently required to evaluate and report on our system of internal controls as defined by Section 404 of the Sarbanes-Oxley Act. We will be required to comply with the internal control requirements of the Sarbanes-Oxley Act for the fiscal year ending December 31, 2022. Only in the event that we are deemed to be a large accelerated filer or an accelerated filer and no longer qualify as an emerging growth company would we be required to comply with the independent registered public accounting firm attestation requirement on internal control over financial reporting. Further, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirement.
Prior to the closing of this offering, we have not completed an assessment, nor has our independent registered public accounting firm tested our systems, of our internal controls. We expect to assess the internal controls of our target business or businesses prior to the completion of our initial business combination and, if necessary, to implement and test additional controls as we may determine are necessary in order to state that we maintain an effective system of internal controls. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding the adequacy of internal controls. Many small and mid-sized target businesses we may consider for our initial business combination may have internal controls that need improvement in areas such as:
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staffing for financial, accounting and external reporting areas, including segregation of duties;
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reconciliation of accounts;
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proper recording of expenses and liabilities in the period to which they relate;
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evidence of internal review and approval of accounting transactions;
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documentation of processes, assumptions and conclusions underlying significant estimates; and
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documentation of accounting policies and procedures.
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Because it will take time, management involvement and perhaps outside resources to determine what internal control improvements are necessary for us to meet regulatory requirements and market expectations for our operation of a target business, we may incur significant expenses in meeting our public reporting responsibilities, particularly in the areas of designing, enhancing, or remediating internal and disclosure controls. Doing so effectively may also take longer than we expect, thus increasing our exposure to financial fraud or erroneous financing reporting.
Once our management’s report on internal controls is complete, we will retain our independent registered public accounting firm to audit and render an opinion on such report when required by Section 404 of the Sarbanes-Oxley Act. The independent registered public accounting firm may identify additional issues concerning a target business’s internal controls while performing their audit of internal control over financial reporting.
Quantitative and Qualitative Disclosures about Market Risk
The net proceeds of this offering and the sale of the private placement warrants held in the trust account will be invested in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Off-balance Sheet Arrangements; Commitments and Contractual Obligations; Quarterly Results
As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(i) of Regulation S-K and did not have any commitments or contractual obligations. No unaudited quarterly operating data is included in this prospectus as we have not conducted any operations to date.
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JOBS Act
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company”, we choose to rely on such exemptions we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the independent registered public accounting firm’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of this offering or until we are no longer an “emerging growth company,” whichever is earlier.
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General
We are a newly formed blank check company incorporated as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this prospectus as our initial business combination. To date, our efforts have been limited to organizational activities as well as activities related to this offering. We have not selected any business combination target and we have not, nor has anyone on our behalf initiated any substantive discussions, directly or indirectly, with any business combination target. We have generated no operating revenues to date and we do not expect that we will generate operating revenues until we consummate our initial business combination.
Our objective is to identify and merge with a business that has the potential to achieve sustainable growth and which addresses a large and growing market. We believe there are attractive trends in several industries in which we have expertise, including the enterprise software, health care, financial technology and consumer sectors, although we may pursue an acquisition in any business industry or sector.
PAC I intends to capitalize on the approximately 175 years of combined experience of our management team, our board of directors (the “Board”), the PROOF.VC team, our VC Advisory Board, and our advisers, in investing and managing capital across markets and industries, structuring transactions, giving sound guidance as members of boards of directors and building businesses. Our management team is led by John Backus, Michael Zarlenga, and Steve Mullins. Our strategic advisor is Brian D. Finn. Our Board includes Peter Harrison (Chairman), as well as members Lisa Suennen, Coleman Andrews and Mark Lerdal. Working with our experienced team, we will source and diligence transaction opportunities with the goal of adding post-transaction value using our complementary extensive network of relationships. The PAC I Team has enjoyed longstanding professional and personal relationships, having both invested and worked together for many years across many public and private businesses. They share a common vision for investing in and building exceptional businesses.
Our PAC I Team brings highly complementary capabilities including investing across the various stages of venture capital, leading public and private companies, serving as effective board members, and negotiating large and complex mergers and acquisition transactions. Throughout their respective careers, they have worked with founders, boards and management teams of companies operating across a broad range of industries in various stages of their life cycles and with enterprise values ranging from those exhibited by smaller microcap companies to billion-dollar enterprise value companies, including a focus on consumer, enterprise software, healthcare and financial technology-focused companies.
While our PAC I team has expertise and experience investing across many industries and sectors and we may pursue an acquisition in any business industry or sector, we intend to target businesses where our management team’s insights, expertise and networks can provide advantaged solutions to create value, including through add-on acquisitions, governance enhancements, capital structure optimization, improvements to operations and risk management and attracting and expanding institutional following and ownership.
We believe our PAC I Team is well-positioned to identify attractive business combination opportunities that have the opportunity for significant growth. Our objectives are to generate attractive returns for our shareholders and to enhance value by bringing strategic, financial and operational improvements to the acquired company. We expect to focus on potential target companies with certain industry characteristics, including compelling long-term growth prospects, attractive competitive dynamics, consolidation opportunities and products or services with large total addressable markets. The key business characteristics that we will focus on include the potential for disruptive technology or business model; attractive returns on invested capital; significant streams of recurring revenue; operational improvement opportunities; attractive steady-state margins, incremental margins and attractive free cash flow characteristics.
Past experience or performance of our management team and its affiliates is not a guarantee of either (1) our ability to successfully identify and execute a transaction or (2) success with respect to any business combination that we may consummate. You should not rely on the historical record of our management team or its affiliates as indicative of future performance. Our management team and their respective affiliates have been involved with a large number of public and private companies in addition to those identified above, not all of which have achieved similar performance levels. In addition, information regarding the financial performance of
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funds managed by PROOF.VC, or of specific PROOF.VC portfolio company investments, is provided in this prospectus for informational purposes only. Past performance of PROOF.VC is not indicative of PROOF.VC’s future results, and you should not rely on the information relating to the performance of funds managed by PROOF.VC (which are investment funds that have invested in multiple portfolio companies), or of specific PROOF.VC portfolio company investments, as indicative of the future performance of PROOF Acquisition Corp I (which is a blank check company whose strategy is as described elsewhere in this prospectus), or of an investment in PROOF Acquisition Corp I. See “Risk Factors — Past performance by PROOF.VC, our management team, and members of our VC Advisory Board is not indicative of future performance of an investment in us.” For a complete list of our executive officers and entities for which a conflict of interest may or does exist between such officers and the company, please refer to “Management — Conflicts of Interest.”
Strategic Relationship with Our Sponsor
The initial members of PROOF Acquisition Sponsor I, LLC are managing members or executive officers of PROOF.VC, a growth-stage venture capital firm which pioneered an investing strategy in venture capital that has been written up as a case study by Harvard Business School Professor Josh Lerner. PROOF.VC leverages the pro rata (preemptive) investing rights of smaller early-stage venture capital funds to obtain access to many sought-after venture-backed companies. PROOF.VC shares its profits with the early-stage venture funds. As such, we believe these early-stage venture funds are incented to share their best companies with PROOF.VC. PROOF.VC works closely with smaller venture funds to source investment opportunities. These smaller venture funds bring companies to the attention of the PROOF.VC team for investment consideration. Based on the investment criteria of PROOF.VC and other factors, PROOF.VC aims to invest in approximately 15 of those companies annually. As the investment criteria of PROOF.VC and PAC I are different, we anticipate that some of the companies in which PROOF.VC does not invest may be good prospective companies for our initial business combination. In addition, it is possible that some of the companies that PROOF.VC invests in or considers investing in will be attractive business combination targets. Through its relationship with PROOF.VC, the PAC I Team may have an early look at companies that are brought to the attention of PROOF.VC. However, PROOF.VC does not have any obligation to present any potential business combination targets to us.
Some of PROOF.VC’s prior investments include Beyond Meat Inc. (Nasdaq: BYND), Skillz Inc. (NYSE: SKLZ), Desktop Metal, Inc. (NYSE: DM), Astra Space, Inc. (Nasdaq: ASTR), Roman Health Ventures, Inc., Carta, Inc., Zipline International, Inc., Epic Games, Inc., Yanka Industries, Inc. (dba Masterclass), Sweetgreen, Inc., Bird Rides, Inc. (NYSE: BRDS), EquipmentShare.com, Inc., Varo Money, Inc., and Overtime Sports, Inc. These companies operate in sectors in which we intend to focus our attention, including enterprise software, health care, financial technology and consumer, among others. Through September 30, 2021, PROOF.VC has invested in 61 companies. The median enterprise value of these 61 companies at the time of PROOF.VC’s first investment in such companies was $344 million. The majority of PROOF.VC’s first investments in a company are at valuations between $100 million and $800 million. PROOF.VC estimates that 24 of the 61 companies in which it has invested through September 30, 2021 have market values in excess of $1 billion, with 4 of those 24 companies having market values of $5 billion or more. Included in PROOF.VC’s 61 investments are two companies which went public through traditional IPOs (Beyond Meat Inc. and Casper Sleep, Inc.), four companies which went public via a SPAC merger (Skillz Inc., Desktop Metal, Inc., Astra Space, Inc., and Bird Rides, Inc.), one company which has publicly filed a preliminary prospectus with the SEC for an IPO (Sweetgreen, Inc.), and two companies that were sold to strategic buyers (Tubi, Inc. and Frontier Car Group). PROOF.VC calculates that the financial performance of its 2016 vintage year PROOF I fund as of September 30, 2021 includes a 3.23X multiple on invested capital (“MOIC”), a 36.5% internal rate of return, net of management fees and carried interest (“net IRR”), and a 0.88X distribution to paid-in ratio, representing aggregate cash distributions made to limited partners relative to aggregate capital called from limited partners (“DPI”). PROOF.VC calculates that the financial performance of its 2019 vintage year PROOF II fund as of September 30, 2021 includes a 1.46X MOIC and a 26.2% net IRR. PROOF.VC’s calculations of MOIC and net IRR described herein include a combination of realized and estimated unrealized value. PROOF.VC estimates of MOIC, net IRR and portfolio company valuations described herein are internal estimates as of September 30, 2021, which are calculated pursuant to PROOF.VC’s internal valuation policy and, in the absence of readily ascertainable market values, represent estimated fair value as determined by PROOF.VC’s general partner, after giving consideration to, among other things, recent or impending funding rounds, operating results, financial condition and other pertinent information.
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Our PAC I Team intends to apply its decades of experience to filter through investment opportunities, identify companies with talented management teams and partner with them to help lead new industries.
John C. Backus is a founder and Managing Member of PROOF.VC, and serves on its investment committee, and each of our officers and directors presently has, and any of them in the future may have additional fiduciary or contractual obligations which may conflict with or supersede duties owed to PAC I. Please refer to “─Other Considerations” below and “Management — Conflicts of Interest.”
Our Management Team
Our management team is led by Peter Harrison (Chair), John Backus (CEO, director and a managing member of our sponsor), Steve Mullins (Chief Financial Officer and a managing member of our sponsor) and Michael Zarlenga (General Counsel and a managing member of our sponsor). The PAC I team expects to leverage the sourcing and analytics capabilities the team has developed while supporting PROOF.VC to identify and diligence potential companies for our initial business combination. Our board members have a shared history of working collaboratively and successfully on a series of growth investments sourced by PROOF.VC, including private round investments in:
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Beyond Meat Inc. & DailyPay (3 Board members)
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Skillz Inc., Zipline International, Inc., Sweetgreen, Inc., EquipmentShare.com, Inc., Yanka Industries, Inc. (dba Masterclass) (2 Board members)
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Carta, Inc., Bird Rides, Inc., Desktop Metal, Inc., Astra Space, Inc., Varo Money, Inc. (1 Board Member)
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John C. Backus, Jr. (CEO and Director). Mr. Backus brings more than 37 years of investment and executive experience spanning the private and public sectors. Mr. Backus is currently a founder and Managing Director of PROOF.VC, a venture capital firm at the forefront of monetizing expiring pro rata rights. Mr. Backus created the PROOF Fund in 2015, which he co-founded with his partners Thanasis Delistathis and John Burke. At PROOF Mr. Backus has been responsible for many high-profile investments, including Beyond Meat Inc. (IPO), Skillz Inc. (SPAC merger), Zipline International, Inc., DailyPay, Carta, Inc., and Yanka Industries, Inc. (dba Masterclass). He also is an advisor to the family office of Saudi Prince Khaled bin Alwaleed bin Talal Al Saud, as well as the venture growth firm Blue Heron Capital. Mr. Backus began his career in 1981 at Bain & Company’s small but rapidly growing Menlo Park office, with a focus on consumer product companies. He became the first Bain & Company consultant to transition to a full-time permanent role at a Bain Capital company in 1985. He became the chief financial officer of Key Airlines, Bain Capital’s first investment. At Key Airlines, Mr. Backus obtained a security clearance, and he later led the military business of the acquirer of Key Airlines, World Airways. That line of business was responsible for a majority of World Airways’ revenue at one point. In 1991, Mr. Backus was awarded the Desert Storm/Desert Shield Civilian Medal for his efforts at World Airways. Mr. Backus co-founded US Order, an early electronic banking company, in 1990. After selling part of the business to Visa in 1994, he and co-founder William F. Gorog took the company public in 1995. Mr. Backus served as CEO of US Order until 1998, when he stepped down to found Draper Atlantic, an early-stage venture capital firm. Notable exits that Mr. Backus was involved with at Draper Atlantic include DivX (IPO), Mobile365 (sold to Sybase), and GlobalLogic (sold to Apax). In 2006, Mr. Backus and his team merged with another group to form New Atlantic Ventures, where he was responsible for a number of large exits including Invincea (sold to Sophos) and TwoSix Labs (sold to Carlyle). Mr. Backus graduated from Stanford University with a degree in Economics as well as an MBA. Active in his community, Mr. Backus has served on the Board of Directors of The Wolftrap Foundation for the Performing Arts (Chair); the Northern Virginia Technology Council (Chair); The Colorectal Cancer Alliance (Chair) and The National Venture Capital Association (Executive Committee).
Peter Harrison (Chairman of the Board) will lead our investment outreach and evaluation activities with Steve Mullins (CFO) and Michael Zarlenga (General Counsel). Mr. Harrison brings 35 years of executive and investment experience spanning the private and public technology sectors. Mr. Harrison is currently the Founder and General Partner of Sand Hill Capital, a fund focused on social and environmental impact investing, which he founded in July 2018. He also serves as a board trustee of George Washington University where he co-chairs the ESG taskforce. In 1990 he co-founded, Seer Technologies, an IBM backed spin-off from Credit Suisse First Boston where he was working at the time. He led the growth of Seer’s international business, culminating in an IPO in 1995. In 1996 Mr. Harrison joined Versata, an early stage technology start-up in the Bay Area where he
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led the growth of their revenues as Senior Vice President, culminating in an IPO in 2000. In 2001 Mr. Harrison joined GlobalLogic as CEO, a technology service firm, which over the next 10 years grew to over 6,000 employees attracting investments from NEA, Sequoia Capital and Goldman Sachs along the way. GlobalLogic was itself acquired by Apax Partners in 2013. In 2013 Mr. Harrison took over as CEO of Snagajob, a marketplace for hourly workers with over 60 million users in 2015. While there, he recapitalized the business and grew software revenues significantly. He presently sits on several boards of technology companies and collaborates with venture capital and private equity funds, advising them on new investments. Mr. Harrison is a limited partner in PROOF.VC, and has co-invested in 19 PROOF.VC companies. We believe Mr. Harrison is well-qualified to serve as a chairman of our board of directors due to his extensive experience, relationships and contacts.
Steven P. Mullins (CFO). Mr. Mullins brings over 20 years of experience as a chief financial officer, board member, partner in investment funds, and senior financial advisor. Mr. Mullins, through his consulting firm, SPM Consulting, is currently the chief financial officer of several early stage technology companies, including Rebellion Defense, Inc., Bloom Protocol, LLC, Endera Systems, LLC, Redjack, LLC, A2P, LLC, Percipient.ai, Inc., Qmulos, Inc., Earth Optics, Inc., and INADEV Corporation. He is the current Chairman of the Board of Advisors of INADEV Corporation, a government services and commercial product company. He also is an advisor to the family office of Saudi Prince Khaled bin Alwaleed bin Talal Al Saud. Mr. Mullins was the Chief Financial Officer and Treasurer of InteliData Technologies Corporation which was publicly traded on the NASDAQ from 1999-2002 after serving as its Director of Finance and Controller. Mr. Mullins has also served on the Board of Visitors at his alma mater, George Mason University, where he was Chairman of the Audit Committee for 2 years and Vice Chairman of the Finance and Land Use Committee for 2 years.
Michael W. Zarlenga (General Counsel and Corporate Secretary). Mr. Zarlenga has been practicing corporate and securities law for more than 25 years and currently serves as the General Counsel for PROOF.VC. Since joining PROOF.VC in 2019, Mr. Zarlenga has formed and overseen the funding of PROOF Fund II, a $120 million venture capital fund, overseen investments in more than 60 rounds of financing utilizing special purpose vehicles totaling in excess of $140 million, and has overseen exits from Beyond Meat Inc. (IPO), Casper (IPO), Frontier Car Group (tender offer), TubiTV (merger with Fox), Skillz Inc. (SPAC merger), Desktop Metal, Inc. (SPAC merger), and Astra Space, Inc. (SPAC merger). Over the course of his legal career, Mr. Zarlenga has advised clients including publicly traded and privately-held corporations, partnerships, financial institutions, underwriters, individuals, and investor groups in connection with formation and corporate governance, mergers and acquisitions, regulatory and enforcement proceedings, reorganizations, private and public debt and equity offerings, and reporting requirements under the Securities Exchange Act of 1934. Prior to joining PROOF.VC, Mr. Zarlenga served as General Counsel and Corporate Secretary to Carson America, Inc., Dr. Benjamin S. Carson’s Principal Campaign Committee for seeking the Republican National Committee's 2016 Presidential Nomination. Mr. Zarlenga is also an entrepreneur, owning and managing a successful small business.
VC Advisory Board
The VC Advisory Board consists of individuals with significant experience growing, building, and operating and investing in technology businesses. In addition to origination activities, we expect the VC Advisory Board will be consulted on potential business combination opportunities and the sponsor and management may request the participation of VC Advisory Board members where their skills and experience are expected to enhance the investment process and the long-term value creation opportunity.
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Jennifer Schretter, Partner at PROOF.VC
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Amos Ben Meir, Investor and Board Director at Sand Hill Angels
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Jai Choi, Founder of Tekton Ventures
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Angela Dalton, Founder of Signum Growth Capital
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Paul Grossinger, Co-Founder of Gaingels (Gaingels.com)
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Alex Gurevich, Managing Partner at Javelin Capital Partners
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Kent Madsen, Managing Partner of EPIC Ventures
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Steve Marcus, Co-Founder and General Partner of Riot Ventures
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Jordan Nof, Co-Founder and Managing Partner of Tusk Venture Partners
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Paul Willard, Silicon Valley early-stage investor
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Our Board of Directors
We have assembled a Board which will evaluate investments and has the experience to consider business combination targets across industries. Additional information about the members of our Board can be found in the section entitled “Management ─ Officers and Directors.”
We believe our 5 board members have relevant and valuable experience identifying, evaluating and closing investments in high growth companies, as some or all have:
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been active investors in the technology sector;
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served on boards of directors;
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served on investment committees;
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served as CEOs (including 3 public company CEOs); and
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served on public company boards.
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Business Strategy
Our business strategy is to identify and complete our initial business combination with a company that complements the experience of our PAC I Team and can benefit from its sourcing, investing, governance and public market and value-enhancement expertise. Our selection process will capitalize on both our exposure to PROOF.VC’s proprietary deal flow from more than 100 venture capital funds together with our PAC I Team’s extensive networks of relationships to both source a transaction as well as implement an operational and growth strategy. These networks have been developed through our PAC I Team’s well-established experience across private and public market investing where they have demonstrated a distinct combination of capabilities including:
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Broad experience and a track record of identifying breakout companies in targeted industries;
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Extensive experience consummating transactions across market cycles and in partnering with operators to drive exceptional results;
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Execution ability in complex acquisitions, venture capital, private equity, business operations, IPOs and post-SPAC IPO combination transactions (“deSPAC transactions”);
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Deep investment experience in the consumer and enterprise sectors with a focus on leveraging technology to drive transformational change in legacy industries;
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Track record of co-investing and collaboration by Backus, Harrison, Andrews, Suennen and Lerdal;
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Targeted experience screening opportunities and identifying companies with excellent management teams and partnering with them at the forefront of new industries;
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Broad and diverse network of operational, investment and transactional relationships, including the PROOF.VC network, to provide access to deal flow as well as experienced operators and management teams;
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Extensive experience operating businesses, allocating capital and managing risk across a broad array of markets;
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Experience managing the complexities of global public companies with a deep understanding of the interplay between macroeconomic events, global capital flows and evolving regulatory landscapes;
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Wide-ranging and meaningful relationships with a range of sellers such as private equity firms, entrepreneurs and companies, active and retired executives and financing providers to help source ideas and targets;
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Deep experience as operators, prudent risk-takers, business builders and managers at complex institutions; and
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History of serving on public and private boards and working with public companies to effect change.
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Acquisition Criteria
Consistent with our business strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We intend to use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines.
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Is a good business today, with, we believe, the potential to be a great, category-leading business in the future;
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Has the ability to make the transition to become a public company and can benefit from being a public company with access to broader capital markets to help achieve the its business strategy and capital structure needs;
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Has a strong position within its industry with identified competitive advantages and defensible business strategies;
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Can benefit from our PAC I Team’s expertise and collective capabilities in transaction sourcing, deal execution, investing, and public company management;
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Has the potential to capitalize on disruptive technology or a business model with the potential for attractive prospective growth;
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Is focused on the enterprise software, health care, fintech or consumer end markets;
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Has products or services focused on a large total addressable market;
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Is capital efficient, with the potential for attractive returns on invested capital;
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Has sound business metrics and the potential to generate recurring revenue from customers;
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Has the potential to deploy capital for strategic growth initiatives or add-on acquisitions;
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Demonstrates growth potential and operates in an industry with positive end market trends, secular drivers and growth dynamics; and
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Has a strong and innovative management team aligned with shareholder interests.
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These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general criteria and guidelines as well as other considerations, factors and criteria that our management team may deem relevant. In the event that we decide to enter into our initial business combination with a target business that does not meet the above criteria and guidelines, we will disclose that the target business does not meet the above criteria and guidelines in our shareholder communications related to our initial business combination, which, as discussed in this prospectus, would be in the form of proxy solicitation materials or tender offer documents that we would file with the SEC. In addition to any potential business candidates we may identify on our own, or through our relationship with PROOF.VC, we anticipate that other target business candidates will be brought to our attention from various unaffiliated sources, including investment market participants, private equity funds and large business enterprises seeking to divest non-core assets or divisions.
Our Acquisition Process
In evaluating a prospective target business, we expect to conduct an extensive due diligence review which may encompass, as applicable and among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities and a review of financial and other information about the target and its industry. We will also call upon our management team’s networks of relationships with CEOs, board members and members of executive management teams, to provide specialized insights into their areas of expertise, and utilize our operational and capital planning experience.
Each of our sponsor, directors, officers, and advisors together with the members of PROOF.VC, will, directly or indirectly, own founder shares, private placement warrants or both following this offering and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, these officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of
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any of these officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination. See also “─Other Considerations.”
Initial Business Combination
In accordance with the rules of the NYSE, our initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the trust account (excluding the amount of deferred underwriting discounts held in trust and taxes payable on the income earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. We refer to this as the “80% fair market value test.” If our board of directors is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions. Our stockholders may not be provided with a copy of such opinion nor will they be able to rely on such opinion. Subject to this requirement, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations.
We will have until 18 months from the closing of this offering to consummate an initial business combination. However, if we anticipate that we may not be able to consummate our initial business combination within 18 months, we may extend the period of time to consummate a business combination two times by an additional three months each time (for a total of up to 24 months to complete a business combination). Pursuant to the terms of our amended and restated certificate of incorporation and the trust agreement to be entered into between us and Continental Stock Transfer & Trust Company on the date of this prospectus, in order to extend the time available for us to consummate our initial business combination, our sponsor or its affiliates or designees, upon five days advance notice to us prior to the applicable deadline, must deposit into the trust account $2,000,000, or up to $2,300,000 if the underwriter’s over-allotment option is exercised in full ($0.10 per public share in either case) on or prior to the date of the applicable deadline for each of the available three month extensions, providing a total possible business combination period of 24 months at a total payment value of $4,000,000 (or $4,600,000 if the underwriters’ over-allotment option is exercised in full), in exchange for a non-interest bearing, unsecured promissory note. Such loans may be converted into warrants, at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. Any such loans that are not converted to warrants will be non-interest bearing and payable upon the consummation of our initial business combination. If we complete our initial business combination, we would repay such loaned amounts out of the proceeds of the trust account released to us. If we do not complete a business combination, we will not repay such loans. Furthermore, the letter agreements with our initial shareholders contain a provision pursuant to which our sponsor has agreed to waive its right to be repaid for such loans out of the funds held in the trust account in the event that we do not complete a business combination. We will issue a press release announcing each extension at least three days prior to the deadline for each extension and we will issue a press release the day after the deadline announcing whether the funds have been timely deposited. Our sponsor and its affiliates or designees are not obligated to fund the trust account so that we may extend the time available for us to complete our initial business combination.
Our public stockholders will not be afforded an opportunity to vote on our extension of time to consummate an initial business combination from 18 months to up to 24 months described above or redeem their shares in connection with such extension. However, our public stockholders will be entitled to vote and redeem their shares in connection with a stockholder meeting held to approve an initial business combination or in a tender offer undertaken in connection with such an initial business combination if we propose such during any three-month extension period.
If we are unable to consummate an initial business combination within the applicable time period, we will redeem 100% of the outstanding public shares for a pro rata portion of the funds held in the trust account, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us, divided by the number of then outstanding public shares, subject to applicable law and as further described herein, and then seek to dissolve and liquidate. We expect that the pro rata redemption price to be approximately $10.20 per share initially, and such amount will be increased by $0.10 per public share for each three-month extension of our time to consummate our initial business
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combination, as described herein (regardless of whether or not the underwriter exercise its over-allotment option), without taking into account any interest earned on such funds. However, we cannot assure you that we will in fact be able to distribute such amounts as a result of claims of creditors which may take priority over the claims of our public stockholders.
We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders will own shares will own or acquire 100% of the issued and outstanding equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the prior owners of the target business, the target management team or stockholders or for other reasons. We only intend to complete such business combination if the post-transaction company owns or acquires 50% or more of the issued and outstanding voting securities of the target business or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act. Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to our initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target business and us in the initial business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the issued and outstanding capital stock, shares or other equity interests of a target, or issue a substantial number of new shares to third parties in connection with financing our initial business combination. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our issued and outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% fair market value test. If the business combination involves more than one target business, the 80% fair market value test will be based on the aggregate value of all of the target businesses and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.
To the extent we effect our initial business combination with a company or business that may be in its early stages of development or growth, we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.
Other Considerations
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with our sponsor or any of our officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm that such initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
We currently do not have any specific business combination under consideration. Our officers and directors have neither (nor has anyone on our behalf) individually selected nor considered a target business nor have they had any substantive discussions regarding possible target businesses among themselves or with our underwriter or other advisors. Our management team is regularly made aware of potential business opportunities, one or more of which we may desire to pursue for a business combination, but we have not (nor has anyone on our behalf) contacted any prospective target business or had any substantive discussions, formal or otherwise, with respect to
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a business combination transaction with our company. Additionally, we have not, nor has anyone on our behalf, taken any substantive measure, directly or indirectly, to identify or locate any suitable acquisition candidate for us, nor have we engaged or retained any agent or other representative to identify or locate any such acquisition candidate.
In addition, certain of our officers, advisors, and directors presently have, and any of them in the future may have additional, fiduciary, or contractual obligations to other entities, including affiliates of PROOF.VC, pursuant to which such officers and directors are or will be required to present a business combination opportunity to such entities subject to his or her fiduciary duties. As a result, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, then, subject to the officer’s or director’s fiduciary duties under Delaware law, he or she will need to honor those fiduciary or contractual obligations to present the business combination opportunity to that entity, before we can pursue the opportunity. Our officers or directors also may choose to present such a business combination opportunity to another entity before presenting it to us. If these other entities decide to pursue the opportunity, we may be precluded from pursuing the same. Our amended and restated certificate of incorporation will provide that we renounce our interest in any business combination opportunity offered to any director or officer unless the opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the company and the opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
Our directors and officers are affiliates of and may sponsor, form or participate in additional blank check companies similar to ours during the period in which we are seeking an initial business combination. Any such companies may present additional conflicts of interest in pursuing an acquisition target, particularly in the event there is overlap among investment mandates. In addition, our officers and directors, are not required to commit any specified amount of time to our affairs, and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying potential business combinations and monitoring the related due diligence.
Corporate Information
Our executive offices are located at 11911 Freedom Drive, Suite 1080, Reston, VA 20190, and our telephone number is (703) 563-4100. The information contained on or accessible through our corporate website or any other website that we may maintain is not part of this prospectus or the registration statement of which this prospectus is a part.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common
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stock that is held by non-affiliates equals or exceeds $700 million as of the prior September 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of any fiscal year for so long as either (i) the market value of our shares of Class A common stock held by non-affiliates did not equal or exceed $250 million as of the prior September 30, or (ii) our annual revenues did not equal or exceed $100 million during such completed fiscal year and the market value of our shares of Class A common stock held by non-affiliates did not equal or exceed $700 million as of the prior September 30.
Financial Position
With funds available for a business combination initially in the amount of $206,950,000, assuming no redemptions and after the payment of $4,000,000 of underwriting fees, excluding $7,000,000 of deferred underwriting fees (or $238,075,000 after the payment of $4,600,000 of underwriting fees, excluding $8,050,000 of deferred underwriting fees, if the underwriter’s over-allotment option is exercised in full), after expenses of this offering of $550,000, and before estimated operating expenses of $2,950,000, we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations and/or strengthening its balance sheet by reducing its debt ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third-party financing and there can be no assurance it will be available to us.
Effecting Our Initial Business Combination
General
We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time following this offering. We intend to effectuate our initial business combination using cash from the proceeds of this offering and the sale of the private placement warrants, our equity, debt or a combination of these as the consideration to be paid in our initial business combination. We may seek to complete our initial business combination with a company or business that may be in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If our initial business combination is paid for using equity or debt, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemptions of our shares of Class A common stock, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of the post-business combination company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
We have not selected any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. Additionally, we have not engaged or retained any agent or other representative to identify or locate any suitable acquisition candidate, to conduct any research or take any measures, directly or indirectly, to locate or contact a target business, other than our officers and directors. Accordingly, there is no current basis for investors in this offering 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 affect a target business.
We may need to obtain additional financing to complete our initial business combination, either because the transaction requires more cash than is available from the proceeds held in our trust account, or because we
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become obligated to redeem a significant number of our public shares upon completion of the business combination, in which case we may issue additional securities or incur debt in connection with such business combination.
There are no prohibitions on our ability to issue securities or incur debt in connection with our initial business combination. We are not currently a party to any arrangement or understanding with any third-party with respect to raising any additional funds through the sale of securities, the incurrence of debt or otherwise.
Sources of Target Businesses
We anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment market participants, private equity groups, investment banking firms, consultants, accounting firms and large business enterprises. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses in which they think we may be interested on an unsolicited basis, since some of these sources will have read this prospectus and know what types of businesses we are targeting. Our officers and directors, as well as their affiliates, may also bring to our attention target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions. In addition, we expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors. While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any formal basis, we may engage these firms or other individuals in the future, in which event we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of a transaction, in which case the fee will be paid out of the funds held in the trust account. In no event, however, will our sponsor or any of our existing officers or directors, or their respective affiliates be paid by us any finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the completion of our initial business combination (regardless of the type of transaction). We have agreed to reimburse our sponsor for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination. Some of our officers and directors may enter into employment or consulting agreements with the post-transaction company following our initial business combination. The presence or absence of any such fees or arrangements will not be used as a criterion in our selection process of an acquisition candidate.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with our sponsor or any of our officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm that the initial business combination is fair to our company from a financial point of view. Our stockholders may not be provided with a copy of such opinion nor will they be able to rely on such opinion. We are not required to obtain such an opinion in any other context.
As more fully discussed in the section of this prospectus entitled “Management — Conflicts of Interest,” if any of our officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has pre-existing fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
Evaluation of a Target Business and Structuring of Our Initial Business Combination
In evaluating a prospective target business, we expect to conduct an extensive due diligence review which may encompass, as applicable and among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities, and a review of financial and other information about the target and its industry. We will also utilize our management team’s operational and
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capital planning experience. If we determine to move forward with a particular target, we will proceed to structure and negotiate the terms of the business combination transaction.
The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of, and negotiation with, a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination. The company will not pay any consulting fees to members of our management team, or their respective affiliates, for services rendered to or in connection with our initial business combination.
If our initial proposed business combination is not completed, we may continue to try to complete a business combination with a different target until 18 months (or up to 24 months, if applicable) from the closing of this offering.
Lack of Business Diversification
For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single 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 completing our initial business combination with only a single entity, our lack of diversification may:
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subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination; and
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cause us to depend on the marketing and sale of a single product or limited number of products or services.
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Limited Ability to Evaluate the Target’s Management Team
Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’s management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial business combination. While it is possible that one or more of our officers or directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure you that any of the key personnel of the target company will remain in those positions with the combined company. The determination as to whether any of the key personnel will remain with the combined company will be made at the time of our initial business combination.
Following our initial business combination, we may seek to recruit additional key personnel to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional key personnel, or that additional key personnel will have the requisite skills, knowledge, or experience necessary to enhance the incumbent management.
Stockholders May Not Have the Ability to Approve Our Initial Business Combination
We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC, subject to the provisions of our amended and restated certificate of incorporation and bylaws. However, we will seek stockholder approval if it is required by law or applicable stock exchange rule, or we may decide to seek stockholder approval for business or other legal reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider and whether stockholder approval is currently required under Delaware law for each type of transaction.
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Purchase of assets
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Purchase of stock of target not involving a merger with the company
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Merger of target into a subsidiary of the company
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Merger of the company with a target
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Under the NYSE’s listing rules, stockholder approval would typically be required for our initial business combination if, for example:
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We issue common stock that will be equal to or in excess of 20% of the number or voting power of our common stock then-outstanding (other than in a public offering);
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Any of our directors, officers or substantial security holders (as defined by the rules of the NYSE) has a 5% or greater interest, directly or indirectly, in the target business or assets to be acquired and if the number of shares of common stock to be issued, or if the number of shares of common stock into which the securities may be convertible or exercisable, exceeds either (a) 1% of the number of shares of common stock or 1% of the voting power outstanding before the issuance in the case of any of our directors and officers or (b) 5% of the number of shares of common stock or 5% of the voting power outstanding before the issuance in the case of any substantial security holders; or
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The issuance or potential issuance of common stock will result in our undergoing a change of control.
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The decision as to whether we will seek stockholder approval of a proposed business combination in those instances in which stockholder approval is not required by law or applicable stock exchange rule will be made by us, solely in our discretion, and will be based on a variety of business and other factors, including, but not limited to:
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the timing of the transaction, including in the event we determine stockholder approval would require additional time and there is either not enough time to seek stockholder approval or doing so would place the company at a disadvantage in the transaction or result in other additional burdens on the company;
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the expected cost of holding a stockholder vote;
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the risk that the stockholders would fail to approve the proposed business combination;
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other time and budget constraints of the company; and
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additional legal complexities of a proposed business combination that would be time-consuming and burdensome to present to stockholders.
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Permitted Purchases and Other Transactions with Respect to Our Securities
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, directors, executive officers, advisors, or their respective affiliates may purchase public shares or warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. Additionally, at any time at or prior to our initial business combination, subject to applicable securities laws (including with respect to material non-public information), our sponsor, directors, executive officers, advisors, or their respective affiliates may enter into transactions with investors and others to provide them with incentives to acquire public shares, vote their public shares in favor of our initial business combination, or not redeem their public shares. However, they have no current commitments, plans, or intentions to engage in these transactions and have not formulated any terms or conditions for any of these transactions. In the event our sponsor, directors, executive officers, advisors or their respective affiliates determine to undertake any such transactions, such transactions could have the effect of influencing the vote necessary to approve our initial business combination. None of the funds in the trust account will be used to purchase public shares or
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warrants in these transactions. If our sponsor, directors, executive officers, advisors, or their affiliates wish to engage in these types of transactions, they will be restricted from making any purchases if they are in possession of any material non-public information not disclosed to the seller or if the purchases are prohibited by Regulation M under the Exchange Act.
In the event that our sponsor, directors, officers, advisors, or their respective affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights or submitted a proxy to vote against our initial business combination, the selling stockholders would be required to revoke their prior elections to redeem their shares and any proxy to vote against our initial business combination. We do not currently anticipate that purchases made in privately negotiated transactions, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act. However, if the purchasers determine at the time of the purchases that the purchases are subject to the going-private rules, the purchasers will be required to comply with the rules.
The purpose of any of these transactions could be to (i) vote in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of our initial business combination, (ii) reduce the number of public warrants outstanding or vote the warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination, or (iii) satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. Purchases of our securities by our sponsor, directors, officers, advisors, or their affiliates may result in the completion of an initial business combination that may not otherwise have been possible.
In addition, if purchases are made by our sponsor, directors, officers, advisors, or their affiliates, the public “float” of our shares of Class A common stock or public warrants may be reduced and the number of beneficial holders of our securities may be reduced. This may make it difficult to maintain or obtain the quotation, listing, or trading of our securities on a national securities exchange.
We anticipate that our sponsor, directors, officers, advisors, or their respective affiliates may identify the stockholders with whom they may pursue privately negotiated transactions by either the stockholders contacting them directly or by our receipt of redemption requests submitted by stockholders (in the case of shares of Class A common stock) following our mailing of tender offer or proxy materials in connection with our initial business combination. To the extent that our sponsor, officers, directors, advisors, or their affiliates enter into a private transaction, they would identify and contact only potential selling or redeeming stockholders who have expressed a desire to redeem their shares for a pro rata share of the trust account or vote against our initial business combination prior to the shares being voted at the stockholder meeting related to our initial business combination. Our sponsor, executive officers, directors, advisors, or their respective affiliates will select which stockholders to purchase shares from based on the negotiated price, number of shares available and any other factors that they may deem relevant at the time of purchase, and will be restricted from purchasing shares if the purchases do not comply with Regulation M under the Exchange Act and the other Federal securities laws. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with our initial business combination.
Our sponsor, officers, directors, and their respective affiliates will be restricted from making purchases of shares if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. We expect any purchases would be reported by the purchaser pursuant to Section 13 and Section 16 of the Exchange Act to the extent the purchaser is subject to the Section 16 reporting requirements.
Redemption Rights for Public Stockholders upon Completion of Our Initial Business Combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account calculated as of two business days prior to the consummation of the initial business combination, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, if any, divided by the number of then-issued and outstanding public shares, subject to the limitations and on the conditions described herein. At the completion of our initial business combination, we will be required to purchase any public shares properly delivered for redemption and not withdrawn. The amount in the trust account is initially anticipated to be $10.20 per public
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share, and such amount will be increased by $0.10 per public share for any three-month extension of our time to consummate our initial business combination, as described herein. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriter. The redemption rights will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. There will be no redemption rights upon the completion of our initial business combination with respect to our warrants. Further, we will not proceed with redeeming our public shares, even if a public stockholder has properly elected to redeem its shares, if a business combination does not close. Our sponsor and each member of our management team have entered into an agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and public shares held by them in connection with the completion of our initial business combination, and BlackRock has agreed to waive its redemption rights with respect to any founder shares held by it.
Limitations on Redemptions
Our amended and restated certificate of incorporation will provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination and after payment of the underwriter’s fees and commissions (so that we are not subject to the SEC’s “penny stock” rules). However, the proposed business combination may require (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the business combination or (ii) by means of a tender offer. In the case of a stockholder meeting, the election must be made, unless extended by us in our sole discretion, no later than two business days prior to the initially scheduled vote on the proposal to approve the initial business combination. Asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our issued and outstanding common stock or seek to amend our amended and restated certificate of incorporation would typically require stockholder approval. If we structure a business combination transaction with a target business in a manner that requires stockholder approval, we will not have discretion as to whether to seek a stockholder vote to approve the proposed business combination. We currently intend to conduct redemptions in connection with a stockholder vote unless stockholder approval is not required by applicable law or stock exchange listing requirement and we choose to conduct redemptions pursuant to the tender offer rules of the SEC for business or other legal reasons.
If we hold a stockholder vote to approve our initial business combination, we will, pursuant to our amended and restated certificate of incorporation:
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conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules; and
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file proxy materials with the SEC.
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We expect that a final proxy statement would be mailed to public stockholders at least ten days prior to the stockholder vote. However, we expect that a draft proxy statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. Although we are not required to do so, we currently intend to comply with the substantive and procedural requirements of Regulation 14A in connection with any stockholder vote even if we are not able to maintain our NYSE listing or Exchange Act registration.
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In the event that we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the initial business combination.
If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination at a stockholder meeting where a quorum is present. A quorum for the meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at the meeting. Shares held by our initial stockholders, officers and directors will count toward this quorum, and our sponsor, directors and officers have agreed (and their permitted transferees will agree) to vote any founder shares held by them and any public shares purchased during or after this offering in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. As a result, in addition to the shares held by our sponsor, we would need 7,900,001, or 38.7% of the remaining 20,400,000 outstanding shares of common stock of the Company owned by public stockholders and BlackRock immediately following this offering to be voted in favor of a transaction in order to have our initial business combination approved. If Magnetar purchases the full amount of units it has expressed an interest in purchasing in this offering and votes the public shares underlying such units in favor of our initial business combination, we would need only 5,920,001 or approximately 32.1%, of the remaining outstanding shares of common stock of the Company owned by public stockholders and BlackRock immediately following this offering to be voted in favor of an initial business combination. If BlackRock purchases units in this offering or in the open market following the offering and votes the public shares underlying the units and its founder shares in favor of our initial business combination, this number would decrease further.
These quorum and voting thresholds, and the voting agreements of our sponsor, directors and officers, may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares irrespective of whether it votes for or against the proposed transaction. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed (and their permitted transferees will agree) to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination.
If we conduct redemptions pursuant to the tender offer rules of the SEC, we will, pursuant to our amended and restated certificate of incorporation:
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conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers; and
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file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies. Although we are not required to do so, we currently intend to comply with the substantive and procedural requirements of Regulation 14A in connection with any stockholder vote even if we are not able to maintain our NYSE listing or Exchange Act registration.
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Upon the public announcement of our initial business combination, if we elect to conduct redemptions pursuant to the tender offer rules, we and our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of Class A common stock in the open market, in order to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than the number of public shares we are permitted to redeem, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets to be less than $5,000,001 following such redemptions, or any greater net tangible asset or cash requirement that may be contained in the agreement
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relating to our initial business combination. See “─ Limitations on Redemptions” above. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination, and we instead may search for an alternate business combination.
Limitation on Redemption upon Completion of Our Initial Business Combination If We Seek Stockholder Approval
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of that stockholder or any other person with whom that stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to Excess Shares without our prior consent. We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by the holders to use their ability to exercise their redemption rights against a proposed business combination. Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in this offering could threaten to exercise its redemption rights if the holder’s shares are not purchased by us, our sponsor or its affiliates or our management team at a premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in this offering, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with a business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.
Tendering Stock Certificates in Connection with a Tender Offer or Redemption Rights
As described above, we intend to require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to, at the holder’s option, either deliver their stock certificates to our transfer agent or deliver their shares to our transfer agent electronically using The Depository Trust Company’s Deposit/Withdrawal At Custodian (“DWAC”) system, prior to the date set forth in the proxy materials or tender offer documents, as applicable. In the case of proxy materials, this date may be up to two business days prior to the date on which the vote on the proposal to approve the initial business combination is initially to be held. In addition, if we conduct redemptions in connection with a stockholder vote, we intend to require a public stockholder seeking redemption of its public shares to also submit a written request for redemption to our transfer agent two business days prior to the initially scheduled vote in which the name and other identifying information of the beneficial owner of the shares is included. The proxy materials or tender offer documents, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public stockholders to satisfy these delivery requirements. Accordingly, a public stockholder would have up to two business days prior to the initially scheduled vote on the initial business combination if we distribute proxy materials, or from the time we send out our tender offer materials until the close of the tender offer period, as applicable, to submit or tender its shares if it wishes to seek to exercise its redemption rights. Pursuant to the tender offer rules, the tender offer period will be not less than 20 business days and, in the case of a stockholder vote, a final proxy statement would be mailed to public holders at least ten days prior to the stockholder vote. However, we expect that a draft proxy statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. In the event that a stockholder fails to comply with these or any other procedures disclosed in the proxy or tender offer materials, as applicable, its shares may not be redeemed. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the broker submitting or tendering shares a fee of approximately $80.00 and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to submit or tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when the delivery must be effectuated.
Any request to redeem such shares, once made, may be withdrawn at any time up to the date set forth in the proxy materials or tender offer documents, as applicable. Furthermore, if a holder of a public share delivered
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its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise those rights, the holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our initial business combination.
If our initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In that case, we will promptly return any certificates delivered by public holders who elected to redeem their shares. If our initial proposed business combination is not completed, we may continue to try to complete a business combination with a different target until 18 months (or up to 24 months, if applicable) from the closing of this offering.
Redemption of Public Shares and Liquidation If No Initial Business Combination
Our initial stockholders, executive officers and directors have agreed, and our amended and restated certificate of incorporation that will be in effect upon the closing of this offering will provide, that we will have only 18 months (or up to 24 months, if applicable) from the closing of this offering to complete our initial business combination. If we have not completed our initial business combination within such 18-month period (or up to 24-month period, if applicable), we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 18-month time period (or up to 24-month time period, if applicable).
Our sponsor, officers and directors have entered into a letter agreement with us, and BlackRock has entered into agreements with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering. However, if our initial stockholders, officers or directors acquire public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted 18-month time period (or up to 24-month time period, if applicable).
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation that would modify the substance or timing of our obligation to provide holders of our Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes, divided by the number of the then issued and outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 following such redemptions upon consummation of our initial business combination.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $2,950,000 held
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outside of the trust account (after paying offering expenses), although we cannot assure you that there will be sufficient funds for such purpose. If those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay franchise and income taxes on interest income earned on the trust account balance, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds of this offering and the sale of the private placement warrants, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received by stockholders upon our dissolution would be approximately $10.20, $10.30 or $10.40 per public share (as applicable), or less in certain circumstances. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual per-share redemption amount received by stockholders will not be substantially less than $10.20, $10.30 or $10.40 per public share, as applicable. Please see “Risk Factors ─ “If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.20 per share” and other risk factors described above. Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Making such a request of a potential target business may make our acquisition proposal less attractive to them and, to the extent prospectus target businesses refuse to execute such a waiver, it may limit the field of potential target businesses that we might pursue. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where our management team is unable to find a service provider willing to execute 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. Upon redemption of our public shares, if we have not completed our initial business combination within the required time period, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the ten years following redemption. Our sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $10.20 per public share (or $10.30 or $10.40 per public share in case we extend the period of time available for us to complete a business combination to 21 months or 24 months, respectively), or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the interest that may be withdrawn to pay our taxes, including franchise and income taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriter of this offering against certain liabilities,
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including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, then our sponsor will not be responsible to the extent of any liability for such third party claims. We have not independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. We have not asked our sponsor to reserve for such indemnification obligations. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the trust account, the funds available for our initial business combination and redemptions could be reduced to less than $10.20, $10.30 or $10.40 per public share, as applicable. In such event, we may not be able to complete our initial business combination, and you would receive such lesser amount per share in connection with any redemption of your public shares. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the trust account are reduced below (i) $10.20 per public share (or $10.30 or $10.40 per public share in case we extend the period of time available for us to complete a business combination to 21 months or 24 months, respectively), or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. We have not asked our sponsor to reserve for such indemnification obligations and we cannot assure you that our sponsor would be able to satisfy those obligations. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be less than $10.20, $10.30 or $10.40 per public share, as applicable. Please see “Risk Factors ─ “If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.20 per share” and other risk factors described above.
We will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriter of this offering against certain liabilities, including liabilities under the Securities Act. We will have access to up to approximately $2,950,000 from the sale of the private placement warrants with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000). In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our trust account could be liable for claims made by creditors. In the event that our offering expenses exceed our estimate of $550,000, we may fund such excess with funds from the funds not to be held in the trust account. In such case, the amount of funds we intend to be held outside the trust account would decrease by a corresponding amount. Conversely, in the event that the offering expenses are less than our estimate of $550,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding amount.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering may be considered a liquidating distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, 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
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period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we have not completed our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following our 18th month (or up to the 24th month, if applicable) and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account. As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the trust account is remote. Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below (i) $10.20 per public share (or $10.30 or $10.40 per public share in case we extend the period of time available for us to complete a business combination to 21 months or 24 months, respectively), or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in the value of the trust assets, in each case net of the amount of interest withdrawn to pay our taxes, including franchise and income taxes, and will not be liable as to any claims under our indemnity of the underwriter of this offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims.
If we file a bankruptcy petition or an involuntary bankruptcy petition 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 we will be able to return $10.20, $10.30 or $10.40 per public share, as applicable, to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. Furthermore, our Board may be viewed as having
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breached its fiduciary duty to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons. Please see “Risk Factors ─ If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover these proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.”
Our public stockholders will be entitled to receive funds from the trust account only upon the earliest to occur of: (a) the completion of our initial business combination, and then only in connection with those shares of Class A common stock that such stockholder properly elected to redeem, subject to the limitations described herein, (b) the redemption of any public shares properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to provide holders of our Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (ii) with respect to any other provisions relating to stockholders’ rights or pre-initial business combination activity, and (c) the redemption of our public shares if we have not consummated our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, subject to applicable law. In no other circumstances will a stockholder have any right or interest of any kind to or in the trust account. Holders of warrants will not have any rights to the proceeds held in the trust account with respect to the warrants. These provisions of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with a stockholder vote.
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Comparison of Redemption or Purchase Prices in Connection with Our Initial
Business Combination and If We Fail to Complete Our Initial Business Combination
The following table compares the redemptions and other permitted purchases of public shares that may take place in connection with the completion of our initial business combination and if we have not consummated an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering:
Calculation of redemption price
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Redemptions at the time of our initial business combination may be made pursuant to a tender offer or in connection with a stockholder vote. The redemption price will be the same whether we conduct redemptions pursuant to a tender offer or in connection with a stockholder vote. In either case, our public stockholders may redeem their public shares for cash equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination (which is initially anticipated to be $10.20 per public share, and such amount will be increased by $0.10 per public share for any three-month extension of our time to consummate our initial business combination, as described herein), including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes, divided by the number of then issued and outstanding public shares, subject to the limitation that no redemptions will take place, if all of the redemptions would cause our net tangible assets to be less than $5,000,001 following such redemptions upon consummation of our initial business combination agreed to in connection with the
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If we seek stockholder approval of our initial business combination, our initial stockholders, directors, officers, advisors or their respective affiliates may purchase public shares or warrants in privately negotiated transactions or in the open market prior to or following completion of our initial business combination. There is no limit to the prices that our initial stockholders, directors, officers, advisors or their affiliates may pay in these transactions. If they engage in such transactions, they will be restricted from making any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going- private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will be required to comply with such rules.
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If we have not completed our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, we will redeem all public shares at a per-share price, payable in cash, equal to the aggregate amount, then on deposit in the trust account (which is initially anticipated to be $10.20 per public share and such amount will be increased by $0.10 per public share for any three-month extension of our time to consummate our initial business combination, as described herein, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses)), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law.
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negotiation of terms of a proposed business combination.
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Impact to remaining stockholders
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The redemptions in connection with our initial business combination will reduce the book value per share for our remaining stockholders, who will bear the burden of the deferred underwriting discounts and commissions and interest withdrawn in order to pay our taxes, including franchise and income taxes payable (to the extent not paid from amounts accrued as interest on the funds held in the trust account).
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If the permitted purchases described above are made there would be no impact to our remaining stockholders because the purchase price would not be paid by us.
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The redemption of our public shares if we fail to complete our initial business combination will reduce the book value per share for the shares held by our initial stockholders, who will be our only remaining stockholders after such redemptions.
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Comparison of This Offering to Those of Blank Check
Companies Subject to Rule 419
The following table compares the terms of this offering to the terms of an offering by a blank check company subject to the provisions of Rule 419 under the Securities Act. This comparison assumes that the gross proceeds, underwriting commissions and underwriting expenses of our offering would be identical to those of an offering undertaken by a company subject to Rule 419, and that the underwriter will not exercise its over-allotment option. None of the provisions of Rule 419 apply to our offering.
Escrow of offering proceeds
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The NYSE listing rules provide that at least 90% of the gross proceeds from this offering be deposited in a trust account. $204,000,000 of the net proceeds of this offering and the sale of the private placement warrants will be deposited into a trust account located in the United States at Bank of America, N.A. with Continental Stock Transfer & Trust Company acting as trustee.
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Approximately $170,100,000 of the offering proceeds, representing the gross proceeds of this offering less allowable underwriting commissions, expenses and company deductions under Rule 419, would be required to be deposited into either an escrow account with an insured depositary institution or in a separate bank account established by a broker-dealer in which the broker-dealer acts as trustee for persons having the beneficial interests in the account.
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Investment of net proceeds
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$204,000,000 of the net proceeds of this offering and the sale of the private placement warrants held in trust will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under
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Proceeds could be invested only in specified securities such as a money market fund meeting conditions of the Investment Company Act or in securities that are direct obligations of, or obligations guaranteed as to principal or interest by, the United States.
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the Investment Company Act which invest only in direct U.S. government treasury obligations.
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Receipt of interest on escrowed funds
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Interest on proceeds from the trust account to be paid to stockholders is reduced by any income or franchise taxes paid or payable and in the event of our liquidation for failure to complete our initial business combination within the allotted time, up to $100,000 of net interest that may be released to us should we have no or insufficient working capital to fund the costs and expenses of our dissolution and liquidation.
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Interest income on funds in escrow account would be held for the sole benefit of investors, unless and only after the funds held in escrow were released to us in connection with our completion of a business combination.
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Limitation on fair value or net assets of target business
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Our initial business combination must occur with one or more operating target businesses or assets that together have an aggregate fair market value of at least 80% of our assets held in the trust account (excluding the amount of deferred underwriting discounts held in trust and taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination..
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The fair value or net assets of a target business must represent at least 80% of the maximum offering proceeds.
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Trading of securities issued
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The units are expected to begin trading on or promptly after the date of this prospectus. The shares of Class A common stock and warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus (or, if such date is not a business day, the following business day) unless BofA Securities, Inc. informs us of its decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. We will file the Current Report on Form 8-K promptly after the closing of this offering. If the over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the over- allotment option. The units will
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No trading of the units or the underlying shares of Class A common stock and warrants would be permitted until the completion of a business combination. During this period, the securities would be held in the escrow or trust account.
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automatically separate into their component parts and will not be traded after completion of our initial business combination.
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Exercise of the warrants
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The warrants cannot be exercised until the later of 30 days after the completion of our initial business combination and twelve months from the closing of this offering.
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The warrants could be exercised prior to the completion of a business combination, but securities received and cash paid in connection with the exercise would be deposited in the escrow or trust account.
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Election to remain an investor
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We will provide our public stockholders with the opportunity to redeem their public shares for cash equal to their pro rata share of the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of our initial business combination, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes, upon the completion of our initial business combination, subject to the limitations described herein. We may not be required by applicable law or stock exchange requirements to hold a stockholder vote. If we are not required by law or stock exchange rules and do not otherwise decide to hold a stockholder vote, we will, pursuant to our amended and restated certificate of incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under the SEC’s proxy rules. If, however, we hold a stockholder vote, we will, like many blank check companies, offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Pursuant to the tender offer rules, the tender offer period will be not less than 20 business days and, in the case of a stockholder vote, a final proxy statement would be mailed to public stockholders at least 10 days prior to the stockholder vote. However, we expect
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A prospectus containing information pertaining to the business combination required by the SEC would be sent to each investor. Each investor would be given the opportunity to notify the company in writing, within a period of no less than 20 business days and no more than 45 business days from the effective date of a post-effective amendment to the company’s registration statement, to decide if he, she or it elects to remain a stockholder of the company or require the return of his, her or its investment. If the company has not received the notification by the end of the 45th business day, funds and interest or dividends, if any, held in the trust or escrow account are automatically returned to the stockholder. Unless a sufficient number of investors elect to remain investors, all funds on deposit in the escrow account must be returned to all of the investors and none of the securities are issued.
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that a draft proxy statement would be made available to such stockholders well in advance of such time, providing additional notice of redemption if we conduct redemptions in conjunction with a proxy solicitation. If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination. Additionally, each public stockholder may elect to redeem their public shares irrespective of whether they vote for or against the proposed transaction.
A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting
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Business combination deadline
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If we have not completed an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, we will cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject
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If an acquisition has not been completed within 18 months (or up to 24 months, if applicable) after the effective date of the company’s registration statement, funds held in the trust or escrow account are returned to investors.
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in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
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Release of funds
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Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our taxes, including franchise and income tax obligations, the proceeds from this offering and the sale of the private placement warrants held in the trust account will not be released from the trust account until the earliest of: (i) the completion of our initial business combination (including the release of funds to pay any amounts due to any public stockholders who properly exercise their redemption rights in connection therewith), (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) that would modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, and (iii) the redemption of our public shares if we have not completed our business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, subject to applicable law.
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The proceeds held in the escrow account are not released until the earlier of the completion of a business combination or the failure to affect a business combination within the allotted time.
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Limitation on redemption rights of stockholders holding more than 15% of the shares sold in this offering if we hold a stockholder vote
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If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be
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Most blank check companies provide no restrictions on the ability of stockholders to redeem shares based on the number of shares held by such stockholders in connection with an initial business combination.
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restricted from seeking redemption rights with respect Excess Shares (more than an aggregate of 15% of the shares sold in this offering). Our public stockholders’ inability to redeem Excess Shares will reduce their influence over our ability to complete our initial business combination and they could suffer a material loss on their investment in us if they sell Excess Shares in open market transactions.
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Tendering share certificates in connection with a tender offer or redemption rights
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We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents or proxy materials mailed to such holders, or up to two business days prior to the initially scheduled vote on the proposal to approve our initial business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option. The tender offer or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements. Accordingly, a public stockholder would have from the time we send out our tender offer materials until the close of the tender offer period, or up to two business days prior to the initially scheduled vote on the business combination if we distribute proxy materials, as applicable, to tender its shares if it wishes to seek to exercise its redemption rights
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In order to perfect redemption rights in connection with their business combinations, holders could vote against a proposed business combination and check a box on the proxy card indicating such holders were seeking to exercise their redemption rights. After the business combination was approved, the company would contact such stockholders to arrange for them to deliver their certificate to verify ownership.
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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, public companies, and operating businesses seeking strategic 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. 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 pay cash in connection
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with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Facilities
We currently maintain our executive offices at 11911 Freedom Drive, Suite 1080, Reston, VA 20190. We consider our current office space adequate for our current operations.
Employees
We currently have three executive officers. These individuals are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time they will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the stage of the business combination process we are in. We do not intend to have any full-time employees prior to the completion of our initial business combination.
Periodic Reporting and Financial Information
We will register our units, shares of Class A common stock and warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual reports will contain financial statements audited and reported on by our independent registered public accountants.
We will provide stockholders with audited financial statements of the prospective target business as part of the proxy solicitation or tender offer materials, as applicable, sent to stockholders. These financial statements may be required to be prepared in accordance with, or reconciled to, U.S. GAAP, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide compliant financial statements in time for us to disclose the financial statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential acquisition candidate will have financial statements prepared in accordance with the requirements outlined above, or that the potential target business will be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that these requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential acquisition candidates, we do not believe that this limitation will be material.
We will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2022 as required by the Sarbanes-Oxley Act. Only in the event we are deemed to be a large accelerated filer or an accelerated filer and no longer qualify as an emerging growth company, will we not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any initial business combination.
Prior to the effectiveness of the registration statement of which this prospectus forms a part, we will file a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we will be subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial business combination.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the
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Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates equals or exceeds $700 million as of the prior September 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of any fiscal year for so long as either (i) the market value of our shares of Class A common stock held by non-affiliates did not equal or exceed $250 million as of the prior September 30, or (ii) our annual revenues did not equal or exceed $100 million during such completed fiscal year and the market value of our shares of Class A common stock held by non-affiliates did not equal or exceed $700 million as of the prior September 30.
Legal Proceedings
There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such, and we and the members of our management team have not been subject to any such proceeding in the 12 months preceding the date of this prospectus.
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Officers and Directors
Our officers and directors are as follows:
John C. Backus, Jr.
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Chief Executive Officer and Member of the Board
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Steven P. Mullins
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Chief Financial Officer
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Michael W. Zarlenga
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General Counsel and Corporate Secretary
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Peter C. Harrison
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Chairman of the Board
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Coleman Andrews
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Member of the Board (Lead Independent Director)
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Mark Lerdal
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Member of the Board
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Lisa Suennen
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Member of the Board
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John C. Backus, Jr. (CEO and Director). Mr. Backus brings more than 37 years of investment and executive experience spanning the private and public sectors. Mr. Backus is currently a founder and Managing Director of PROOF.VC, a venture capital firm at the forefront of monetizing expiring pro rata rights. Mr. Backus has served as co-founder and Managing Partner of the PROOF Fund since 2015, which he co-founded with his partners Thanasis Delistathis and John Burke. At PROOF.VC, Mr. Backus has been responsible for many high-profile investments, including Beyond Meat Inc. (IPO), Skillz Inc. (SPAC merger), Zipline International, Inc., DailyPay, Carta, Inc., and Yanka Industries, Inc. (dba Masterclass). He also is an advisor to the family office of Saudi Prince Khaled bin Alwaleed bin Talal Al Saud, as well as the venture growth firm Blue Heron Capital. Mr. Backus began his career in 1981 at Bain & Company’s small but rapidly growing Menlo Park office, with a focus on consumer product companies. He became the first Bain & Company consultant to transition to a full-time permanent role at a Bain Capital company in 1985. He became the chief financial officer of Key Airlines, Bain Capital’s first investment. At Key Airlines, Mr. Backus obtained a security clearance, and he later led the military business of the acquirer of Key Airlines, World Airways. That line of business was responsible for a majority of World Airways’ revenue at one point. In 1991, Mr. Backus was awarded the Desert Storm/Desert Shield Civilian Medal for his efforts at World Airways. Mr. Backus co-founded US Order, an early electronic banking company, in 1990. After selling part of the business to Visa in 1994, he and co-founder William F. Gorog took the company public in 1995. Mr. Backus served as CEO of US Order until 1998, when he stepped down to found Draper Atlantic, an early-stage venture capital firm. Notable exits that Mr. Backus was involved with at Draper Atlantic include DivX (IPO), Mobile365 (sold to Sybase), and GlobalLogic (sold to Apax). In 2006, Mr. Backus and his team merged with another group to form New Atlantic Ventures, where he was responsible for a number of large exits including Invincea (sold to Sophos) and TwoSix Labs (sold to Carlyle). Mr. Backus graduated from Stanford University with both a degree in Economics as well as an MBA. Active in his community, Mr. Backus has served on the Board of Directors of The Wolftrap Foundation for the Performing Arts (Chair); the Northern Virginia Technology Council (Chair); The Colorectal Cancer Alliance (Chair) and The National Venture Capital Association (Executive Committee).
Steven P. Mullins (CFO). Mr. Mullins brings over 20 years of experience as a chief financial officer, board member, partner in investment funds, and senior financial advisor. Mr. Mullins, through his consulting firm, SPM Consulting, is currently the chief financial officer of several early stage technology companies, including Rebellion Defense, Inc., Bloom Protocol, LLC, Endera Systems, LLC, Redjack, LLC, A2P, LLC, Percipient.ai, Inc., Qmulos, Inc., Earth Optics, Inc., and INADEV Corporation. He is the current Chairman of the Board of Advisors of INADEV Corporation, a government services and commercial product company. He also is an advisor to the family office of Saudi Prince Khaled bin Alwaleed bin Talal Al Saud. Mr. Mullins was the Chief Financial Officer and Treasurer of InteliData Technologies Corporation which was publicly traded on the NASDAQ from 1999-2002 after serving as its Director of Finance and Controller. Mr. Mullins has also served on the Board of Visitors at his alma mater, George Mason University, where he was Chairman of the Audit Committee for 2 years and Vice Chairman of the Finance and Land Use Committee for 2 years.
Michael W. Zarlenga (General Counsel and Corporate Secretary). Mr. Zarlenga has been practicing corporate and securities law for more than 25 years and currently serves as the General Counsel for PROOF.VC, a role he has held since January 2019. Since joining PROOF.VC, Mr. Zarlenga has formed and overseen the funding of PROOF Fund II, a $120 million venture capital fund, overseen investments in more than 60 rounds of financing utilizing special purpose vehicles totaling in excess of $140 million, and has overseen exits from
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Beyond Meat Inc. (IPO), Casper (IPO), Frontier Car Group (tender offer), TubiTV (merger with Fox), Skillz Inc. (SPAC merger), Desktop Metal, Inc. (SPAC merger), and Astra Space, Inc. (SPAC merger). Prior to joining PROOF.VC, Mr. Zarlenga served as Of Counsel at Bergstrom Law Firm, PLLC, from January 2015 to December 2018. Over the course of his legal career, Mr. Zarlenga has advised clients including publicly traded and privately-held corporations, partnerships, financial institutions, underwriters, individuals, and investor groups in connection with formation and corporate governance, mergers and acquisitions, regulatory and enforcement proceedings, reorganizations, private and public debt and equity offerings, and reporting requirements under the Securities Exchange Act of 1934. Prior to joining PROOF.VC, Mr. Zarlenga served as General Counsel and Corporate Secretary to Carson America, Inc., Dr. Benjamin S. Carson’s Principal Campaign Committee for seeking the Republican National Committee's 2016 Presidential Nomination. Mr. Zarlenga is also an entrepreneur, owning and managing a successful small business.
Strategic Advisors
Brian D. Finn (Capital Markets Adviser). Mr. Finn has over 35 years of experience in the financial services industry as well as a variety of corporate and philanthropic board roles. Mr. Finn is currently the Chief Executive Officer of Rotor Acquisition Corp., a special purpose acquisition company traded on the New York Stock Exchange. He is also the Chairman of Siddhi Capital, a private fund investing in emerging food and beverage companies. From 2008 until he retired in 2013, Mr. Finn served as Chairman and Chief Executive Officer of Asset Management Finance Corp (AMF) and as a Senior Advisor to Credit Suisse. From 2004 to 2008, Mr. Finn was Chairman and Head of Alternative Investments (AI) at Credit Suisse. During his tenure at Credit Suisse, the firm launched a series of alternative investment management firms, including GSO (now Blackstone-GSO), Global Infrastructure Partners (partnership with General Electric), China Renaissance Capital (China Private Equity), Gulf Capital (Middle East-North Africa PE), Mubadala Infrastructure Partners (Middle East Infrastructure in partnership with Mubadala and GE), Ospraie Special Opportunities (Commodities PE), Hudson Clean Energy (Alternative Energy PE) and Matlin Patterson (distressed). From 2002 to 2005, Mr. Finn held senior managements positions within Credit Suisse, including President of Credit Suisse First Boston (CSFB), President of Investment Banking, Co-President of Institutional Securities, CEO of Credit Suisse USA and a member of the Office of the Chairman of CSFB. He was also a member of the Executive Board of Credit Suisse Group. Mr. Finn began his career in 1982 as a member of the Mergers & Acquisitions Group (M&A) at The First Boston Corporation, ultimately becoming Co-Head of M&A in 1993. In 1997, he joined the private equity firm Clayton, Dubilier & Rice as a partner and then later rejoined Credit Suisse in 2002. Mr. Finn is a member of the boards of The Scotts Miracle-Gro Company and Owl Rock Capital. He is currently Chairman of Star Mountain Capital, Chairman of Covr Financial Technologies, an Investment Partner at Nyca Partners (fintech VC) as well as a board member of a number of early stage companies. He has previously been a Strategic Advisor to KKR, member of the boards of Baxter International, Telemundo, MGM Pictures, and a number of other public and private companies. Mr. Finn is past Chairman of the Undergraduate Executive Board of The Wharton School of the University of Pennsylvania, Vice Chairman of the Board of the City Kids Foundation and a member of the Boards of the Intrepid Fallen Heroes Fund, the Gordon A. Rich Memorial Foundation and the Starmar Foundation. Mr. Finn received a Bachelor of Science Degree in Economics from The Wharton School of the University of Pennsylvania.
Katy Arris-Wilson (Due Diligence Adviser) Ms. Arris-Wilson brings over 25 years of experience as a management consultant, board member, private equity advisor and investor. She currently serves as an independent advisor to pre-revenue and private equity portfolio companies with less than $50 million of top line revenue. Since 2002 Ms. Arris-Wilson has been a founding member of Whistler Capital and has helped oversee and make private equity investments in a number of companies. During this same time period she has overseen and managed a non-profit organization, Tide Swimming, that has tripled in membership revenue, expanded from 2 to 7 locations and formed a partnership that resulted in the area’s first outdoor Olympic size competitive and recreation aquatic venue of its kind in the state of Virginia. From 1993-2000, Ms. Arris-Wilson served as a Manager at Bain and Company for a range of Fortune 500 and growth company clients while living in Dallas, TX, Amsterdam, Netherlands and Johannesburg, South Africa. Her consulting experience includes growth strategy, portfolio analysis, and operational efficiency. Ms. Arris-Wilson worked on, designed and led comprehensive, complex, coordinated workstreams. Implementation of growth strategy recommendations included overseeing distribution channel and product line optimization, alternative asset acquisition and deployment and
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organizational redesign. Ms. Arris-Wilson holds a BA in Economics (with honors) from the University of Texas at Austin and was a Dean’s Distinguished Graduate. She represented the US on three National Swimming Teams, is a three-time NCAA champion and 20 time All-American.
Board of Directors
Peter Harrison (Chairman of the Board) will lead our investment outreach and evaluation activities with Steve Mullins (CFO) and Michael Zarlenga (General Counsel). Mr. Harrison brings 35 years of executive and investment experience spanning the private and public technology sectors. Since July 2018, Mr. Harrison has served as the Founder and General Partner of Sand Hill Capital, a fund focused on social and environmental impact investing. He also serves as a board trustee of George Washington University where he co-chairs the ESG taskforce. In 1990 he co-founded, Seer Technologies, an IBM backed spin-off from Credit Suisse First Boston where he was working at the time. He led the growth of Seer’s international business , culminating in an IPO in 1995. In 1996 Mr. Harrison joined Versata, an early stage technology start-up in the Bay Area where he led the growth of their revenues as Senior Vice President, culminating in an IPO in 2000. In 2001 Mr. Harrison joined GlobalLogic as CEO, a technology service firm, which over the next 10 years grew to over 6,000 employees attracting investments from NEA, Sequoia Capital and Goldman Sachs along the way. GlobalLogic was itself acquired by Apax Partners in 2013. In 2013 Mr. Harrison took over as CEO of Snagajob, a marketplace for hourly workers with over 60 million users in 2015. While there, he recapitalized the business and grew software revenues significantly. He presently sits on several boards of technology companies and collaborates with venture capital and private equity funds, advising them on new investments. Mr. Harrison is a limited partner in PROOF.VC, and has co-invested in 19 PROOF.VC companies. We believe Mr. Harrison is well-qualified to serve as a chairman of our board of directors due to his extensive experience, relationships and contacts.
Coleman Andrews (Lead Independent Director) Mr. Andrews is the Founder, Chief Executive Officer, and Co-Owner of RMWC, a role he has held since June 2008, managing strategies primarily in private credit markets. Previously, Mr. Andrews was Co-Founding Partner of Bain Capital, one of the nation’s pre-eminent private equity firms. During his nine-year tenure at Bain Capital and Bain & Company, he progressed from Associate to Partner of Bain & Company before starting Bain Capital in partnership with Mitt Romney, among others. Mr. Andrews previously served as Chairman and CEO of Rocky Mountain Capital, a financial services enterprise with investment management and banking interests. In 1998, Mr. Andrews was recruited by the government of President Nelson Mandela to serve as CEO of South African Airways. From 1986-1997, Mr. Andrews was Chairman/CEO of World Airways. Mr. Andrews is a member of the Board of Directors of the Stanford University Department of Athletics, Physical Education and Recreation (DAPER) Investment Fund. He previously served for 13 years as a global advisor to Trilantic Capital Partners. He is also a board member of Achungo Children’s Center in western Kenya, where he participates in teaching, tutoring, and mentoring the orphans and vulnerable children of Achungo, as well as in setting and overseeing the strategic and financial direction of that entity. Mr. Andrews was awarded the Civilian Desert Shield/Desert Storm Air Medal by the United States Air Force for his volunteer service in the war zone during the 1990/1991 Gulf War. He served in The White House of President Gerald Ford, where he advanced from a summer intern to a Presidential appointment on the staff of The White House Economic Policy Board. He holds an M.B.A. from Stanford University, where he was named an Arjay Miller Scholar, and holds a B.A. from Dartmouth College, High Honors in Economics, magna cum laude, where he was a Rufus Choate Scholar. We believe Mr. Andrews is well-qualified to serve as a member of our board of directors due to his extensive experience, relationships and contacts.
Mark Lerdal (Director) Mark Lerdal brings more than 30 years of executive leadership experience. Since April 2014, he has served as the Executive Chairman of Leaf Clean Energy Company, formerly listed on the LSE, a renewable energy and sustainable technology investment firm which provides venture and growth capital across the renewable energy industry. He is an independent director at Allied Minds, plc (LSE:ALM) an IP commercialization company focused on early stage development within the technology sector, a role he has held since December 2019. Since July 2016, he has acted as an adviser to Northleaf Capital Partners in its US based investments in renewable energy. Additionally, he serves on the boards (including as chairman) of several private companies. Mr. Lerdal served as Chief Executive Officer of MP2 Capital, LLC, a photovoltaic development and finance firm, from June 2009 through December 2015. He was president of Hydrogen Energy California, a developer of a carbon capture and sequestration facility, from September 2011 through March 2013, and he acted as Managing Director at KKR Finance in its debt securities division from 2006 through 2008. Earlier in his
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career he was president and chief executive officer of Kenetech Corporation a publicly traded supplier of goods and services to the electric utility industry. Later, he participated in a take-private transaction of Kenetech together with an affiliate of ValueAct Capital. He began his career as a corporate and securities attorney with Brobeck, Phleger & Harrison. He has a law degree from Northwestern University and an AB from Stanford University. We believe Mr. Lerdal is well-qualified to serve as a member of our board of directors due to his extensive experience, relationships and contacts.
Lisa Suennen (Director) Lisa Suennen has 35 years’ experience as an entrepreneur, corporate executive, venture investor, board member and management consultant in the healthcare field. Since January 2019, Ms. Suennen has served in various roles at Manatt, Phelps & Phillips, a large multi-disciplinary professional services firm, where she currently leads the Digital & Technology Practice. Ms. Suennen also currently leads the firm’s venture capital fund, Manatt Venture Fund, LLC, and its sister entity, MPP Holdings, LLC. In these roles, she sits on the firm’s Executive Committee, is a business development leader and leads the fund’s investment strategy, in addition to providing consulting services. From 2016 to 2018, Ms. Suennen was Senior Managing Director at GE Ventures, leading the firm’s healthcare venture fund. At the time, GE Ventures was ranked among the world’s top 20 best performing corporate venture funds by CB Insights. From 2014 to 2016, Ms. Suennen operated Venture Valkyrie Consulting, advising global healthcare corporations around corporate venture capital and digital health strategy. During that time, she worked with the American Heart Association to establish Cardeation Capital the AHA’s first venture fund. From 1998-2014, Ms. Suennen was a partner of Psilos Group, a healthcare-focused venture capital firm. Ms. Suennen headed Psilos’ West Coast office from the firm’s founding in 1998 and focused on investments in the healthcare information technology, healthcare services and medtech sectors. From 1989 through 1998, Ms. Suennen held several senior executive roles at Merit Behavioral Care (formerly American Biodyne, Inc.), one of the first managed behavioral healthcare firms. Previously, Ms. Suennen worked in various product and marketing roles in the tech sector, including at Ingres, XOpen and Regis McKenna, Inc. Ms. Suennen is currently a Board Member of digital health companies VIVE Benefits and Health Reveal, and global digital health organization HealthXL. She is Chairman of the Advisory Board of NASA’s Translational Research Institute, which is focused on innovative approaches to reduce risks to humans on long-duration exploration missions. She also currently serves on the Advisory Boards of Longitude Capital, Aphelion Capital and Nina Capital, all healthcare-focused venture funds. Ms. Suennen is also on faculty at the UC Berkeley Haas School of Business; she is a Fellow of the inaugural class of the Aspen Institute’s Health Innovators Fellowship. Ms. Suennen was a co-founder of CSweetener, a not-for-profit focused on matching women in and nearing the healthcare C-Suite with mentors. CSweetener was acquired by the HLTH Foundation in 2019. Ms. Suennen serves on the Board of the Dignity Health Foundation, is a member of the American Heart Association One Brave Idea II Advisory Board, is a member of the International Digital Health Advisory Board of the Murdoch Children’s Research Institute, an affiliate of the Royal Murdoch Children’s Hospital, and is Chair of the Investment Advisory Committee for ANDHealth, Australia’s National Digital Health Initiative. In 2013 Ms. Suennen published the book Tech Tonics about the intersection of technology and health. We believe Ms. Suennen is well-qualified to serve as a member of our board of directors due to her extensive experience, relationships and contacts.
VC Advisory Board
Jennifer Schretter is a Partner at PROOF.VC and serves as the Chairman of the VC Board of Advisors. She has worked in the startup and venture capital ecosystem for a decade as a founder and operator, advisor, and investor. Prior to joining PROOF, Ms. Schretter served as a Venture Partner at Squadra Ventures and a Director at Dreamit Ventures. She previously worked in the Investment Management Division at Goldman, Sachs & Co. in San Francisco, CA. Before Goldman, Ms. Schretter founded and ran a consumer products business and served as an independent consultant and advisor for technology startups in a variety of capacities. Ms. Schretter began her career on Wall Street as an interdealer broker in fixed income at Tullett Prebon and ICAP. She holds a B.A. degree from Boston College and an M.B.A. from the University of Virginia Darden School of Business.
Amos Ben Meir is a Member and Board Director of Sand Hill Angels and Silicon Catalyst Angels in the San Francisco Bay Area. Prior to his angel & venture investing career, he was involved in a number of startups, either as an early employee or founder. Mr. Ben Meir has held Director and VP Engineering positions during his entrepreneurial career. During these roles, Mr. Ben Meir built and managed large engineering teams. In addition, Mr. Ben Meir holds various board director, observer, and advisor positions in companies where he is an active investor. He holds a B.S. from Technion-Machon Technologi Le’ Israel.
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Jai Choi is a Founding Partner of Tekton Ventures. Mr. Choi has spent over 15 years in Silicon Valley as an entrepreneur and early-stage investor. Prior to founding Tekton in 2010, Mr. Choi joined Partech Ventures in 2007, a large U.S.-European venture capital firms with offices in San Francisco, Paris and Berlin where he is currently a Venture Partner. Mr. Choi has invested in numerous early-stage companies since inception of Tekton including Coupang, Toss, Outdoorsy, Frontier Car Group, Signifyd, and Bugcrowd. Prior to Tekton, Mr. Choi was a partner with Ignite Ventures. He was an early employee at OnePage Software, a content personalization platform acquired by Sybase in 2001. Jai previously co-founded On-Air Networks in 1997, an online radio company acquired by Loudeye (Nokia). He started his career in management consulting at PA Consulting Group. Mr. Choi holds a B.S. degree from the University of Southern California.
Angela Dalton is the Founder of Signum Growth Capital, an M&A Advisory and capital raising firm, with a focus on the intersection of video gaming, blockchain, art and the emergence of digital economies in “the Metaverse.” She has more than 20 years of experience in global capital markets in the Technology, Media and Telecom sectors. She has served as a Managing Director for three investment banking firms: UBS, Evercore and Guggenheim Partners, and as Senior Partner of Technology for Signum Global Advisors, a policy advisory firm. At Evercore, Angela participated as an initial investor and Co-Founder of the Equities business in 2010, building out its Research, Sales and Trading teams prior to Evercore’s acquisition of ISI. Ms. Dalton is on the Advisory Boards of the Wall Street Blockchain Alliance in New York and Mythical Games, a next generation video game company. She also serves as a Venture Partner for Griffin Gaming Partners and a Nexus Partner for Gaingels. Ms. Dalton holds a BS and a B.A. from The University of Kansas and an M.B.A. from The University of Chicago.
Paul Grossinger is a Co-Founder of Gaingels, which is a leading diversity investment ecosystem. Gaingels has funded scores of companies since inception in January 2018, with a number of exits including several IPOs or SPACs in under 48 months of investing. In addition, Mr. Grossinger is the co-founder of Blue Jay Syndicate and A-Level Capital for Johns Hopkins alumni startups. He holds a B.A. in Political Science from Johns Hopkins University.
Alex Gurevich is a Managing Partner at Javelin Capital Partners (“Javelin”). Mr. Gurevich is on the boards of HitRecord, MasterClass, Mythical Games, PAIR Eyewear, Rinse, Stensul, Telerivet, and Vendigo. Mr. Gurevich also sourced and is a board observer at Thumbtack, and led Javelin’s investments in Clutter, Viable, Wheels, and WorkPatterns. Prior to joining Javelin, he was a Principal at DFJ Aurora, where he helped establish one of the first venture capital funds focused on high tech investments in Eastern Europe. Prior to DFJ, Mr. Gurevich was one of the first employees at ooma (NYSE: OOMA), and was a co-founder of Say-Hey-Hey.com. Mr. Gurevich holds an M.B.A. from the Stanford Graduate School of Business and a B.S. in Management Science and Engineering, a B.A. in International Relations, and an M.S. in Management Science and Engineering from Stanford University, where he was a Mayfield Fellow.
Kent Madsen is a Managing Partner at EPIC Ventures and helped manage eight funds. He has been investing in a wide range of early-stage software and technology companies for more than two decades and has directly worked on numerous acquisitions and IPO’s. Mr. Madsen has served on numerous for profit and non-profit boards of directors, including almost a decade on Zions Bank’s Advisory Board of Directors (a full-service bank with approximately $20 billion in deposits). Before working in venture capital, Mr. Madsen worked for Ford Motor Company in the Advanced Technology Group where he developed mathematical and computational models for optimizing vehicles’ aerodynamic and thermodynamic properties and systems. He then transferred to Ford China Operations where he helped establish new vehicle operations and joint ventures. Mr. Madsen has a B.S. degree in Mechanical Engineering and Applied Mechanics from the University of Pennsylvania. He has a M.S.E. from the University in Michigan in Mechanical Engineering and an M.A. in International Studies from the University of Pennsylvania as well as an M.B.A. from Wharton.
Steve Marcus is Co-Founder and General Partner at Riot Ventures, an early-stage hard tech focused fund based in Los Angeles. Mr. Marcus has been the founder of several companies in hard tech and has invested in numerous early and growth stage companies including Desktop Metal, Inc., Stripe, Toast, and Shield.AI. He holds a B.S. degree from Worcester Polytechnic Institute and an M.B.A. from MIT Sloan School of Management.
Jordan Nof is a Co-founder and Managing Partner at Tusk Venture Partners L.P. He has led many of the firm’s investments including Lemonade, Bird Rides, Inc., Coinbase, Alma, Sunday, and Wheel and currently
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serves on the board of directors of Alma, Sunday, and Wheel. Prior to Tusk Venture Partners, Mr. Nof spent six years as a Director at Blackstone, where he focused on the development of the firm’s corporate venture capital portfolio and investing in early-stage technology companies. He led Blackstone’s first-ever real estate technology investment and worked within the Innovations team to execute investments in financial technology and cyber-security startups. Before joining Blackstone, Mr. Nof worked in the institutional investment management division at AllianceBernstein. He received an M.B.A. from Rollins Graduate School of Business and holds a B.S. in Finance from Florida State University.
Paul Willard is a Silicon Valley early-stage investor focused on Robotics-as-a-Service and automation for enterprise. For 14 years, he was a product, design, and marketing executive at tech startups including Atlassian, Coupons.com, NextCard, and Practice Fusion. Mr. Willard was previously an aerodynamics engineer at Boeing where he worked on Commercial and Military aircraft including autonomous vehicles. Mr. Willard has an Aerospace Engineering B.S. from Iowa State University, a Manufacturing Systems Engineering M.S. from Stanford, and an E.M.B.A. from Singularity University.
Number and Terms of Office of Officers and Directors
Upon the effectiveness of the registration statement of which this prospectus forms a part, we expect that our Board will consist of five directors.
Our board of directors is divided into three classes, with only one class of directors being elected in each year, and with each class (except for those directors appointed prior to our first annual general meeting) serving a three-year term. In accordance with the NYSE corporate governance requirements, we are not required to hold an annual general meeting until one year after our first fiscal year end following our listing on the NYSE. The term of office of the first class of directors, consisting of Lisa Suennen, will expire at our first annual general meeting. The term of office of the second class of directors, consisting of T. Coleman Andrews III and Mark Lerdal, will expire at our second annual meeting of stockholders. The term of office of the third class of directors, consisting of Peter Harrison and John Backus, will expire at our third annual meeting of stockholders.
Prior to the completion of an initial business combination, any vacancy on the board of directors may be filled by a nominee chosen by holders of a majority of our founder shares. In addition, prior to the completion of an initial business combination, holders of a majority of our founder shares may remove a member of the board of directors for any reason. These provisions of our amended and restated certificate of incorporation may only be amended if approved by holders of a majority of at least 90% of all then outstanding shares of our common stock voting at a stockholder meeting.
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our amended and restated certificate of incorporation as it deems appropriate. Our amended and restated certificate of incorporation will provide that our officers may consist of one or more chairman of the board, chief executive officer, president, chief financial officer, vice presidents, secretary, treasurer and such other offices as may be determined by the board of directors.
Director Independence
NYSE listing standards require that a majority of our board of directors be independent within one year of our initial public offering. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Peter Harrison, Coleman Andrews, Mark Lerdal and Lisa Suennen are “independent directors” as defined in the NYSE listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
Executive Officer and Director Compensation
None of our executive officers or directors have received any cash compensation for services rendered to us. Commencing on the date that our securities are first listed on the NYSE through the earlier of the consummation of our initial business combination and our liquidation, we will pay an affiliate of our sponsor a total of
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$10,000 per month for office space, secretarial and administrative services . In addition, our sponsor, executive officers and directors, or their respective affiliates 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. Our audit committee will review on a quarterly basis all payments that were made by us to our sponsor, executive officers or directors, or their affiliates. Any such payments prior to an initial business combination will be made using funds held outside the trust account. Other than quarterly audit committee review of such reimbursements, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with our activities on our behalf in connection with identifying and consummating an initial business combination. Other than these payments and reimbursements, no compensation of any kind, including finder’s and consulting fees, will be paid by the company to our sponsor, directors, or their respective affiliates, prior to completion of our initial business combination.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees or other compensation from the combined company. All of these fees or other compensation will be fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials or tender offer materials furnished to our stockholders in connection with a proposed business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed business combination, because the directors of the post-combination business will be responsible for determining executive officer and director compensation. Any compensation to be paid to our executive officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our executive officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our executive officers and directors that provide for benefits upon termination of employment.
Committees of the Board of Directors
Our board of directors has three standing committees: an audit committee, a compensation committee and a corporate governance and nominating committee. Subject to phase-in rules and a limited exception, the rules of the NYSE and Rule 10A of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors. Subject to phase-in rules and a limited exception, the rules of the NYSE require that the compensation committee of a listed company be comprised solely of independent directors. We do not currently intend to take advantage of the phase-in rules or exception.
Each committee will operate under a charter that will be approved by the Board and will have the composition and responsibilities described below.
Audit Committee
Upon the effectiveness of the registration statement of which this prospectus forms a part, we will establish an audit committee of the board of directors. Lisa Suennen, Mark Lerdal and Peter Harrison will serve as members of our audit committee, each of whom is independent under the NYSE listing standards and applicable SEC rules. Lisa Suennen will serve as the chairman of the audit committee. Each member of the audit committee is financially literate and our board of directors has determined that Mark Lerdal qualifies as an “audit committee financial expert” as defined in applicable SEC rules. None of the Audit Committee members serves on the audit committee of more than three public companies.
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The audit committee is responsible for:
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meeting with our independent registered public accounting firm regarding, among other issues, audits, and the adequacy of our accounting and control systems;
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monitoring the independence of the independent registered public accounting firm;
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verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;
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inquiring and discussing with management our compliance with applicable laws and regulations;
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pre-approving all audit services and permitted non-audit services to be performed by our independent registered public accounting firm, including the fees and terms of the services to be performed;
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appointing or replacing the independent registered public accounting firm;
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determining the compensation and oversight of the work of the independent registered public accounting firm (including resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or related work;
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establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies;
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monitoring compliance on a quarterly basis with the terms of this offering and, if any noncompliance is identified, immediately taking all action necessary to rectify such noncompliance or otherwise causing compliance with the terms of this offering; and
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reviewing and approving all payments made to our existing stockholders, executive officers or directors and their respective affiliates. 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.
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Corporate Governance and Nominating Committee
Upon the effectiveness of the registration statement of which this prospectus forms a part, we will establish a corporate governance and nominating committee of our board of directors. The members of our corporate governance and nominating committee will be Coleman Andrews and Peter Harrison, each of whom is independent, and Peter Harrison serves as the chairperson of the corporate governance and nominating committee.
The primary function of the corporate governance and nominating committee include:
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identifying individuals qualified to become members of the board of directors and making recommendations to the board of directors regarding nominees for election;
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reviewing the independence of each director and making a recommendation to the board of directors with respect to each director’s independence;
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developing and recommending to the board of directors the corporate governance principles applicable to us and reviewing our corporate governance guidelines at least annually;
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making recommendations to the board of directors with respect to the membership of the audit, compensation and corporate governance and nominating committees;
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overseeing the evaluation of the performance of the board of directors and its committees on a continuing basis, including an annual self-evaluation of the performance of the corporate governance and nominating committee;
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considering the adequacy of our governance structures and policies, including as they relate to our environmental sustainability and governance practices;
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considering director nominees recommended by stockholders; and
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reviewing our overall corporate governance and reporting to the board of directors on its findings and any recommendations.
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Guidelines for Selecting Director Nominees
The guidelines for selecting nominees, which will be specified in a charter to be adopted by us, generally will provide that persons to be nominated:
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should have demonstrated notable or significant achievements in business, education or public service;
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should possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and
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•
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should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the stockholders.
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The nominating committee will consider a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The nominating committee does not distinguish among nominees recommended by stockholders and other persons.
Compensation Committee
Upon the effectiveness of the registration statement of which this prospectus forms a part, we will establish a compensation committee of our board of directors. The members of our compensation committee will consist of Coleman Andrews and Mark Lerdal, all of whom are independent, and Mark Lerdal serves as the chairman of the compensation committee.
We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:
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reviewing and approving corporate goals and objectives relevant to our CEO’s compensation, evaluating our CEO’s performance in light of those goals and objectives, and setting our CEO’s compensation level based on this evaluation;
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setting salaries and approving incentive compensation and equity awards, as well as compensation policies, for all other officers who file reports of their ownership, and changes in ownership, of our common stock under Section 16(a) of the Exchange Act (the “Section 16 Officers”), as designated by our board of directors;
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making recommendations to the board with respect to incentive compensation programs and equity-based plans that are subject to board approval;
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approving any employment or severance agreements with our Section 16 Officers;
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granting any awards under equity compensation plans and annual bonus plans to our executive officers and the Section 16 Officers;
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approving the compensation of our directors; and
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producing an annual report on executive compensation for inclusion in our proxy statement, in accordance with applicable rules and regulations.
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The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by the NYSE and the SEC.
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Compensation Committee Interlocks and Insider Participation
None of our executive officers currently serves, and in the past year has not served, as a member of the compensation committee of any entity that has one or more executive officers serving on our board of directors.
Code of Ethics
Upon the effectiveness of the registration statement of which this prospectus forms a part, we will have adopted a Code of Ethics applicable to our directors, officers and employees. A copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
Corporate Governance Guidelines
Our board of directors will adopt corporate governance guidelines in accordance with the corporate governance rules of the NYSE that serve as a flexible framework within which our board of directors and its committees operate. These guidelines will cover a number of areas including board membership criteria and director qualifications, director responsibilities, board agenda, roles of the chairman of the board, chief executive officer and presiding director, meetings of independent directors, committee responsibilities and assignments, board member access to management and independent advisors, director communications with third parties, director compensation, director orientation and continuing education, evaluation of senior management and management succession planning.
Conflicts of Interest
Each of our officers and directors presently has, and any of them in the future may have additional fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such other entity. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue. Our directors and officers are also not required to commit any specified amount of time to our affairs, and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying potential business combinations and monitoring the related due diligence.
Below is a table summarizing the entities to which our executive officers and directors currently have fiduciary duties, contractual obligations or other material management relationships:
John C. Backus
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PROOF.VC
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Venture Capital
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Founder, Managing Director
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Family Office of Saudi Prince Khaled bin Alwaleed bin Tala Al Saud
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Investment
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Advisor
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Blue Heron Capital
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Investment
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Advisor
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Michael W. Zarlenga
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PROOF.VC
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Venture Capital
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General Counsel
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Steven P. Mullins
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INADEV Corporation
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Software
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Chief Financial Officer, Director
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SPM Consulting
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CFO Consulting
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Chief Financial Officer
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Percipient A.I.
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Computer Vision and Artificial Intelligence
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Chief Financial Officer
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Rebellion Defense
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Machine Learning and Artificial Intelligence
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Chief Financial Officer
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KBW Ventures
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Investment
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Chief Financial Officer
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Bloom Protocol
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Identity Verification and Credit Sourcing
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Chief Financial Officer
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LogicNets
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Software
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Chief Financial Officer
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SignalFrame
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Software
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Chief Financial Officer
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Qmulos
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Enterprise Security
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Chief Financial Officer
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GroundTruth AG
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Technology
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Chief Financial Officer
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Endera Systems
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Software
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Chief Financial Officer
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A2P
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Marketing
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Chief Financial Officer
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RedJack
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Enterprise Security
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Chief Financial Officer
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Family Office of Saudi Prince Khaled bin Alwaleed bin Tala Al Saud
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Investment
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Advisor
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Peter C. Harrison
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Collabera
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Information Technology
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Director
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Smartlinx
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Healthcare
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Director
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Shiftkey
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Healthcare
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Chairman
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Traackr
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Software
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Director
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George Washington University
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Education
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Board Trustee
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Sand Hill Capital
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Investment
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Founder, General Partner, Director
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Coleman Andrews
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RMWC
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Private Credit Markets
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Founder, Chief Executive Officer, and Co-Owner
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DAPER Investment Fund of Stanford University
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Investment
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Director
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Achungo Children’s Center
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Education
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Director
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Monacan LLC
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Investment
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Director
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Pristine Waters Environmental Services, Inc.
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Environmental Services
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Director
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Mark Lerdal
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Leaf Clean Energy Company
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Investment
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Executive Chairman
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Allied Minds, plc
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Technology
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Director
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Northleaf Capital Partners
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Investment
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Advisor
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Gi Dynamics, Inc.
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Healthcare
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Chairman
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BluePath Finance
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Energy
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Director
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Empower Energies, Inc.
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Energy
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Chairman
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Southern Current
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Energy
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Director
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Lisa Suennen
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Manatt, Phelps & Phillips
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Professional Services
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Lead of Digital & Technology Group
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Manatt Ventures
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Venture Capital
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Managing Partner
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Health Reveal
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Healthcare
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Director
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HealthXL
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Healthcare
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Director
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Dignity Health Foundation
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Healthcare
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Director
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VIVE Benefits
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Healthcare
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Director
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Potential investors should also be aware of the following other potential conflicts of interest:
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Our executive officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each of our executive officers is engaged in several other business endeavors for which he may be entitled to substantial compensation, and our executive officers are not obligated to contribute any specific number of hours per week to our affairs.
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Our initial stockholders subscribed for founder shares prior to the date of this prospectus and will purchase private placement warrants in a transaction that will close simultaneously with the closing of this offering.
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Our sponsors, executive officers and directors have agreed (i) to waive their redemption rights with respect to any founder shares and public shares held by them in connection with the completion of our initial business combination and a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) that would modify the substance or timing of our obligation to provide holders of shares of Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights and pre-initial business combination activity and (ii) to waive their rights to liquidating distributions from the trust account with respect to any founder shares they hold if we fail to consummate an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame). If we do not complete our initial business combination within such applicable time period, the proceeds of the sale of the private placement warrants held in the trust account will be used to fund the redemption of our public shares, and the private placement warrants will expire worthless. Pursuant to a letter agreement that our sponsors, officers and directors have entered into with us, and pursuant to our agreements with BlackRock with certain limited exceptions, the founder shares will not be transferable, assignable or salable by our initial stockholders until the earlier of: (A) one year after the completion of our initial business combination; or (B) subsequent to our initial business combination, (x) if the closing price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our public stockholders having the right to exchange their shares of common stock for cash, securities or other property. With certain limited exceptions, the private placement warrants and the Class A common stock underlying such warrants, will not be transferable, assignable or salable by the initial purchasers of the private placement warrants or their permitted transferees until 30 days after the completion of our initial business combination. Since our initial stockholders and officers and directors will directly or indirectly own common stock and warrants following this offering, our officers and directors may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination.
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Our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any of these officers and directors is included by a target business as a condition to any agreement with respect to our initial business combination. In addition, our sponsor, officers and directors may sponsor, form or participate in other blank check companies similar to ours during the period in which we are seeking an initial business combination. Any such companies may present additional conflicts of interest in pursuing an acquisition target, particularly in the event there is overlap among investment mandates.
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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:
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the corporation could financially undertake the opportunity;
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the opportunity is within the corporation’s line of business; and
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it would not be fair to our company and its stockholders for the opportunity not to be brought to the attention of the corporation.
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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.
Accordingly, if any of the above executive officers and directors becomes aware of a business combination opportunity which is suitable for any of the above entities to which he or she has current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, and only present it to us if such entity rejects the opportunity. We do not believe, however, that any of the foregoing fiduciary duties or contractual obligations will materially affect our ability to complete our business combination. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with a company that is affiliated with our sponsor or any of our officers or directors, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm that such initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
In addition, our sponsor or any of its affiliates may make additional investments in the company in connection with the initial business combination, although our sponsor and its affiliates have no obligation or current intention to do so. If our sponsor or any of its affiliates elects to make additional investments, such proposed investments could influence our sponsor’s motivation to complete an initial business combination.
In the event that we submit our initial business combination to our public stockholders for a vote, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. Our sponsor, directors and officers have agreed (and their permitted transferees will agree) to vote any founder shares held by them and any public shares purchased during or after the offering in favor of our initial business combination and our officers and directors have also agreed (and their permitted transferees will agree) to vote any public shares purchased during or after the offering in favor of our initial business combination.
Furthermore, in no event will our sponsor or any of our existing officers or directors, or their respective affiliates, be paid by us any finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the completion of our initial business combination.
We cannot assure you that any of the above-mentioned conflicts will be resolved in our favor.
Limitation on Liability and Indemnification of Officers and Directors
Our amended and restated certificate of incorporation will provide that our officers and directors will be indemnified by us to the fullest extent permitted by Delaware law, as it now exists or may in the future be amended. In addition, our amended and restated certificate of incorporation will provide that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.
We will enter into agreements with our directors and officers to provide contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation. Our bylaws
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also will permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether or not we would have the power to indemnify such person against such liability under the provisions of article 7 of the bylaws. We expect to purchase a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.
Our officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account, and have agreed to waive any right, title, interest or claim of any kind they may have in the future as a result of, or arising out of, any services provided to us and will not seek recourse against the trust account for any reason whatsoever (except to the extent they are entitled to funds from the trust account due to their ownership of public shares). Accordingly, any indemnification provided will only be able to be satisfied by us if (i) we have sufficient funds outside of the trust account or (ii) we consummate an initial business combination.
Our indemnification obligations may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
We believe that these provisions, the insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
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The following table sets forth information regarding the beneficial ownership of our common stock as of the date of this prospectus, and as adjusted to reflect the sale of our common stock included in the units offered by this prospectus, and assuming no purchase of units in this offering, by:
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each person known by us to be the beneficial owner of more than 5% of our issued and outstanding common stock;
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each of our executive officers and directors; and
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all our executive officers and directors as a group.
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Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all of our common stock beneficially owned by them. The following table does not reflect record or beneficial ownership of the private placement warrants as these warrants are not exercisable within 60 days of the date of this prospectus.
On March 31, 2021, the sponsor committed to pay $25,000, or approximately $0.004 per share, to cover certain of our offering costs in consideration of 5,750,000 shares of Class B common stock, par value $0.0001. This amount was subsequently paid on May 4, 2021. Prior to the initial investment in the company of $25,000 by the sponsor, the company had no assets, tangible or intangible. The per share price of the founder shares was determined by dividing the amount contributed to the company by the number of founder shares issued. The post-offering percentages in the following table assume that the underwriter exercised its over-allotment option and that there are 28,750,000 shares of common stock issued and outstanding after this offering. The following table does not reflect the repurchase by us of an aggregate of 400,000 shares of Class B common stock (or 460,000 shares if the underwriter’s over-allotment option is exercised in full) from our sponsor in connection with the closing of this offering and our reissuance of such shares to BlackRock as described elsewhere in this prospectus.
PROOF Acquisition Sponsor I, LLC (our sponsor)(2)
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5,750,000(3)(4)
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100.0%
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20.0%
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John C. Backus, Jr.(5)(6)
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—
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Steven P. Mullins(5)(6)
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—
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Michael W. Zarlenga(5)(6)
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—
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Peter C. Harrison(6)
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—
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Coleman Andrews(6)
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—
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Mark Lerdal(6)
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—
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Lisa Suennen(6)
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—
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All officers and directors as a group (7 individuals)
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5,750,000
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100.0%
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20.0%
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(1)
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Unless otherwise noted, the business address of each of our officers and directors is 11911 Freedom Drive, Suite 1080 Reston, VA 20190.
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(2)
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Interests shown consist solely of founder shares, classified as shares of Class B common stock. Such shares will automatically convert into shares of Class A common stock at the time of our initial business combination, or earlier at the election of the holder, as described in the section entitled “Description of Securities.”
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(3)
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Includes up to 750,000 founder shares that will be surrendered to us for no consideration by our sponsor depending on the extent to which the underwriter’s over-allotment option is exercised.
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(4)
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Our sponsor is the record holder of such shares. Our sponsor is controlled by its manager, PROOF Sponsor Management, LLC.
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(5)
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Messrs. Backus, Mullins and Zarlenga are managing members of PROOF Sponsor Management, LLC, the manager of our sponsor and no person individually has the power to vote or control the interests of our sponsor. Each individual disclaims beneficial ownership of these shares except to the extent of any pecuniary interest therein.
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(6)
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This individual does not beneficially own any founder shares or private placement warrants. However, this individual has a pecuniary interest in these securities through his or her ownership of membership interests of our sponsor.
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Immediately after this offering, our initial stockholders will beneficially own 20% of the then issued and outstanding common stock (assuming it do not purchase any units in this offering) and will have the right to elect all of our directors prior to our initial business combination as a result of holding all of the founder shares. Holders of our public shares will not have the right to elect any directors to our board of directors prior to our initial business combination. Because of this ownership block, our initial stockholders may be able to effectively influence the outcome of all other matters requiring approval by our stockholders, including amendments to our amended and restated certificate of incorporation and approval of significant corporate transactions including our initial business combination. If we increase or decrease the size of this offering, we will effect a share capitalization or a share surrender or redemption or other appropriate mechanism, as applicable, with respect to our shares of Class B common stock immediately prior to the consummation of this offering in such amount as to maintain the number of founder shares, on an as- converted basis, at 20% of our issued and outstanding common stock upon the consummation of this offering.
Magnetar has expressed to us an interest to purchase up to 9.9% of the units in this offering, and we have agreed to direct the underwriter to sell to Magnetar the units. There can be no assurance that Magnetar will acquire any units in this offering, or as to the amount of equity Magnetar will retain, if any, upon the consummation of our initial business combination. In the event that Magnetar purchases such units (either in this offering or after) and votes them in favor of our initial business combination, it is possible that no votes from other public stockholders would be required to approve our initial business combination, depending on the number of shares that are present at the meeting to approve such transaction. As a result of the shares of common stock that Magnetar may hold (directly or indirectly) and Magnetar’s membership interests in our sponsor, Magnetar may have different interests with respect to a vote on an initial business combination than other public stockholders.
Our sponsor, officers and directors have agreed (and their permitted transferees will agree) (a) to vote any founder shares and public shares held by them in favor of any proposed business combination and (b) not to redeem any founder shares or public shares held by them in connection with a stockholder vote to approve a proposed initial business combination.
Our sponsor and BlackRock have committed, pursuant to written agreements, to purchase an aggregate of $11,500,000 (or $13,225,000 if the underwriter’s over-allotment option is exercised in full) of private placement warrants at a price of $1.00 per warrant in a private placement that will occur simultaneously with the closing of this offering. Each private placement warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein. If we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering the private placement warrants will expire worthless. The private placement warrants are identical to the warrants sold as part of the units in this offering except that, so long as they are held by the initial purchasers of the warrants or their permitted transferees: (i) they will not be redeemable by us (except as described below under “Description of Securities —Warrants — Public Stockholders’ Warrants — Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00”); (ii) they (including the shares of Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the initial purchasers until 30 days after the completion of our initial business combination, as described below; (iii) they may be exercised by the holders on a cashless basis; and (iv) they (including the shares of Class A common stock issuable upon exercise of these warrants) are entitled to registration rights, as described below.
Our sponsor is deemed to be our “promoter” as such term is defined under the federal securities laws. See “Certain Relationships and Related Party Transactions” for additional information regarding our relationships with our promoters.
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Transfers of Founder Shares and Private Placement Warrants
The founder shares, private placement warrants and any shares of Class A common stock issued upon conversion or exercise thereof are each subject to transfer restrictions pursuant to lock-up provisions in the letter agreement entered into by our sponsor and management team and pursuant to our agreements with BlackRock. Our sponsor, each member of our management team and BlackRock have agreed not to transfer, assign or sell any of their founder shares until the earliest of (a) one year after the completion of our initial business combination and (b) subsequent to our initial business combination, (x) if the closing price of our shares of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination or (y) the date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of our public stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property. The private placement warrants and the respective shares of Class A common stock underlying such warrants are not transferable or salable until 30 days after the completion of our initial business combination.
Permitted transfers include: (a) transfers to our officers or directors, any affiliates or family members of any of our officers or directors, officers, directors or members of our initial stockholders or their affiliates, or any affiliates of our initial stockholders (or former sponsor if such transfer occurs after a dissolution of the sponsor); (b) in the case of an individual, transfers by gift to members of the individual’s immediate family, an estate planning vehicle or to a trust, the beneficiary of which is a member of one of the individual’s immediate family, an affiliate of such person or to a charitable organization; (c) in the case of an individual, transfers by virtue of laws of descent and distribution upon death of the individual; (d) in the case of an individual, transfers pursuant to a qualified domestic relations order; (e) transfers by virtue of the laws of the state of Delaware or our sponsor’s operating agreement or BlackRock’s organizational documents upon dissolution of our sponsor or BlackRock; (g) transfers by private sales or transfers made in connection with the consummation of a business combination at prices no greater than the price at which the founder shares, private placement warrants or shares of Class A common stock were originally purchased; (i) in the event of our liquidation prior to the completion of our initial business combination; or (j) in the event of our completion of a liquidation, merger, share exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property subsequent to our completion of our initial business combination; provided, however, that in the case of clauses (a) through (g) these permitted transferees must enter into a written agreement agreeing to be bound by these transfer restrictions and the other restrictions contained in the applicable agreement.
Permitted transferees of our sponsor, directors and officers would be subject to the same written agreements as our sponsor, directors and officers with respect to such securities, including (i) voting any founder shares held by them in favor of the initial business combination, (ii) agreeing to not propose any amendment to our amended and restated certificate of incorporation that would modify the substance or timing of our obligation to redeem 100% of public shares if we do not complete an initial business combination within 18 months (or up to 24 months, if applicable) and (iii) waiving their redemption rights and rights to liquidating distributions. Permitted transferees of BlackRock would be subject to the same written agreements as BlackRock with respect to such securities, including waiving their redemption rights and rights to liquidating distributions.
Registration and Stockholder Rights
The holders of the founder shares, private placement warrants and any warrants that may be issued upon conversion of working capital loans or extension promissory notes (and any shares of Class A common stock issuable upon the exercise of the private placement warrants and warrants that may be issued upon conversion of working capital loans or extension promissory notes) will be entitled to registration rights pursuant to a registration and stockholder rights agreement to be signed prior to or on the effective date of this offering requiring us to register such securities for resale (in the case of the founder shares, only after conversion to shares of our Class A common stock). See the section of this prospectus entitled “Description of Securities — Registration and Stockholder Rights.”
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On March 31, 2021, the sponsor committed to pay $25,000, or approximately $0.004 per share, to cover certain of our offering costs in consideration of 5,750,000 shares of Class B common stock, par value $0.0001. This amount was subsequently paid on May 4, 2021. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the issued and outstanding shares upon completion of this offering. If we increase or decrease the size of the offering, we will effect a stock split or stock dividend or a share contribution back to capital or other appropriate mechanism, as applicable, with respect to our Class B common stock immediately prior to the consummation of the offering in such amount as to maintain the ownership of our initial stockholders at 20.0% of the issued and outstanding shares of our common stock following the consummation of this offering. Up to 750,000 founder shares are subject to forfeiture by our sponsor depending on the extent to which the underwriter’s over-allotment option is exercised. The founder shares (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
Our sponsor and BlackRock have committed, pursuant to written agreements, to purchase an aggregate of 11,500,000 private placement warrants (or 13,225,000 if the underwriter’s over-allotment option is exercised in full) in a private placement that will occur simultaneously with the closing of this offering. Each whole private placement warrant is exercisable for one share of Class A common stock at $11.50 per share. The initial purchasers will be permitted to transfer the private placement warrants held by them to certain permitted transferees, including our officers and directors and other persons or entities affiliated with or related to them, but the transferees receiving such securities will be subject to the same agreements with respect to such securities as the initial purchasers. Otherwise, these warrants will not, subject to certain limited exceptions, be transferable or salable until 30 days after the completion of our initial business combination. The private placement warrants will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees (except as described in “Description of Securities — Warrants — Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00”). The private placement warrants may also be exercised by the holders and their permitted transferees for cash or on a cashless basis and are (as well as the Class A common stock issuable upon exercise of the private placement warrants) entitled to registration rights as described herein. Otherwise, the private placement warrants have terms and provisions that are identical to those of the warrants being sold as part of the units in this offering, including as to exercise price, exercisability and exercise period. We have also agreed to issue to BlackRock an aggregate of 400,000 shares of our Class B common stock (or 460,000 shares if the underwriter’s over-allotment option is exercised in full) in connection with the closing of this offering, which shares of Class B common stock will be repurchased from our sponsor at cost and reissued to BlackRock for the same per share consideration paid by our sponsor. We will receive an aggregate of $11,525,000 (or $13,250,000 if the underwriter’s over-allotment option is exercised in full) from these sales of private placement warrants and shares of Class B common stock.
We will have until 18 months from the closing of this offering to consummate an initial business combination. However, if we anticipate that we may not be able to consummate our initial business combination within 18 months, we may extend the period of time to consummate a business combination two times by an additional three months each time (for a total of up to 24 months to complete a business combination). Pursuant to the terms of our amended and restated certificate of incorporation and the trust agreement to be entered into between us and Continental Stock Transfer & Trust Company on the date of this prospectus, in order to extend the time available for us to consummate our initial business combination, our sponsor or its affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the trust account $2,000,000, or up to $2,300,000 if the underwriter’s over-allotment option is exercised in full ($0.10 per public share in either case) on or prior to the date of the applicable deadline for each of the available three month extensions, providing a total possible business combination period of 24 months at a total payment value of $4,000,000 (or $4,600,000 if the underwriters’ over-allotment option is exercised in full), in exchange for a non-interest bearing, unsecured promissory note. Such loans may be converted into warrants, at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. Any such loans that are not converted to warrants will be non-interest bearing and payable upon the consummation of our initial business combination. If we complete our initial business combination, we would repay such loaned amounts out of the proceeds of the trust account released to us. If we do not complete a business combination, we will not repay such loans. Furthermore, the letter agreements with our initial shareholders contain a provision pursuant to which our sponsor has agreed to waive its right to be repaid for
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such loans out of the funds held in the trust account in the event that we do not complete a business combination. Our sponsor and its affiliates or designees are not obligated to fund the trust account so that we may extend the time available for us to complete our initial business combination.
Magnetar has expressed to us an interest to purchase up to 9.9% of the units in this offering, and we have agreed to direct the underwriter to sell to Magnetar such units.
There can be no assurance Magnetar will acquire any units in this offering, or as to the amount of equity Magnetar will retain, if any, upon the consummation of our initial business combination. In the event that Magnetar purchases such units (either in this offering or after) and votes them in favor of our initial business combination, it is possible that no votes from other public stockholders would be required to approve our initial business combination, depending on the number of shares that are present at the meeting to approve such transaction.
Certain funds and accounts managed by Magnetar have committed an aggregate of $575,000 (subject to reduction in proportion to any amount of the underwriter’s overallotment option that is not exercised) to our sponsor in exchange for membership interests in our sponsor.
Each of John C. Backus, Jr., Steven P. Mullins, Michael W. Zarlenga, Peter C. Harrison, Coleman Andrews, Mark Lerdal and Lisa Suennen, each of whom is a director or officer of our company, has an economic interest in the founder shares and private placement warrants purchased by our sponsor as a result of his or her direct or indirect ownership of membership interests in our sponsor and, accordingly, may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. See “Principal Stockholders.”
As more fully discussed in the section of this prospectus entitled “Management — Conflicts of Interest,” if any of our officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such entity prior to presenting such opportunity to us. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
No compensation of any kind, including finder’s and consulting fees, will be paid to our sponsor, directors, or their respective affiliates, for services rendered prior to or in connection with the completion of an initial business combination. However, these individuals 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. In connection with their services to PAC I, our officers, directors and advisors will receive membership interests in the sponsor. Our audit committee will review on a quarterly basis all payments that were made by us to our sponsor, officers, directors or their respective affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
We will enter into an administrative services agreement with an affiliate of our sponsor, pursuant to which we will pay a total of $10,000 per month for office space, secretarial and administrative services. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees. Accordingly, in the event the consummation of our initial business combination takes 18 months, an affiliate of our sponsor will be paid a total of $180,000 ($10,000 per month for 18 months, which may be extended up to 24 months, as described elsewhere herein, for a total of $240,000) for office space, secretarial and administrative services.
Prior to the consummation of this offering, our sponsor has agreed to loan us up to $300,000 to be used for a portion of the expenses of this offering. These loans are non-interest bearing, unsecured and are due at the earlier of March 31, 2022 and the closing of this offering. The loan will be repaid out of the proceeds received by us from the sale of the private placement warrants which closing will occur concurrently with the closing of this offering. The value of our sponsor’s interest in this loan transaction corresponds to the principal amount outstanding under any such loan.
In addition, in order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete an initial business
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combination, we may repay such loaned amounts out of the proceeds of the trust account released to us. Otherwise, such loans may be repaid only out of funds held outside the trust account. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the private placement warrants, including as to exercise price, exercisability and exercise period. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor, its affiliates or our management team as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
After our initial business combination, members of our management team 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 our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.
We will enter into a registration and stockholder rights agreement pursuant to which our sponsor, holders of private placement warrants and founder shares and the warrants issuable upon conversion of working capital loans or extension promissory notes (if any) and the shares of Class A common stock issuable upon exercise of the foregoing and upon conversion of the founder shares will be entitled to certain registration rights with respect to the private placement warrants, the warrants issuable upon conversion of working capital loans or extension promissory notes (if any) and the shares of Class A common stock issuable upon exercise of the foregoing and upon conversion of the founder shares, which is described under the section of this prospectus entitled “Description of Securities — Registration and Stockholder Rights.”
Policy for Approval of Related Party Transactions
We have not yet adopted a formal policy for the review, approval or ratification of related party transactions. Accordingly, the transactions discussed above were not reviewed, approved or ratified in accordance with any such policy.
The audit committee of our board of directors will adopt a charter, providing for the review, approval and/or ratification of “related party transactions,” which are those transactions required to be disclosed pursuant to Item 404 of Regulation S-K as promulgated by the SEC, by the audit committee. At its meetings, the audit committee shall be provided with the details of each new, existing, or proposed related party transaction, including the terms of the transaction, any contractual restrictions that the company has already committed to, the business purpose of the transaction, and the benefits of the transaction to the company and to the relevant related party. Any member of the committee who has an interest in the related party transaction under review by the committee shall abstain from voting on the approval of the related party transaction, but may, if so requested by the chairman of the committee, participate in some or all of the committee’s discussions of the related party transaction. Upon completion of its review of the related party transaction, the committee may determine to permit or to prohibit the related party transaction.
To further minimize conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our sponsor, directors or officers unless we, or a committee of independent and disinterested directors, have obtained an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm, that such initial business combination is fair to our company from a financial point of view. Furthermore, there will be no finder’s fees, reimbursements or cash payments made by us to our sponsor, directors, or our or any of their respective affiliates, for services rendered
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to us prior to or in connection with the completion of our initial business combination, other than the following payments, none of which will be made from the proceeds of this offering and the sale of the private placement warrants held in the trust account prior to the completion of our initial business combination:
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payment to an affiliate of our sponsor of a total of $10,000 per month for office space, administrative and support services;
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repayment of up to an aggregate of $300,000 in loans made to us by our sponsor to cover offering-related and organizational expenses;
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reimbursement for any out-of-pocket expenses related to identifying, investigating, negotiating and completing an initial business combination; and
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repayment of loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination.
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The above payments may be funded using the net proceeds of the sale of the private placement warrants or, upon completion of the initial business combination, from the proceeds of the trust account released to us in connection therewith.
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DESCRIPTION OF SECURITIES
Pursuant to our amended and restated certificate of incorporation, which will be adopted prior to the consummation of this offering, we will be authorized to issue 70,000,000 shares of Class A common stock, $0.0001 par value per share, 12,500,000 shares of Class B common stock, $0.0001 par value per share, and 1,000,000 shares of undesignated preferred stock, $0.0001 par value per share. The following description summarizes certain terms of our capital stock as set out more particularly in our amended and restated certificate of incorporation. Because it is only a summary, it may not contain all the information that is important to you.
Units
Each unit has an offering price of $10.00 and consists of one whole share of Class A common stock and one-half of one warrant. Each whole warrant entitles the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share, subject to adjustment as described in this prospectus. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of Class A common stock. This means that only a whole warrant may be exercised at any given time by a warrant holder. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, unless you purchase at least two units, you will not be able to receive or trade a whole warrant. The Class A common stock and warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus (or, if such date is not a business day, the following business day) unless the BofA Securities, Inc. informs us of its decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. Once the shares of Class A common stock and warrants commence separate trading, holders will have the option to continue to hold units or separate their units into the component securities. Holders will need to have their brokers contact our transfer agent in order to separate the units into shares of Class A common stock and warrants. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, unless you purchase at least two units, you will not be able to receive or trade a whole warrant.
In no event will the Class A common stock and warrants be traded separately until we have filed with the SEC a Current Report on Form 8-K that includes an audited balance sheet reflecting our receipt of the gross proceeds at the closing of this offering. We will file a Current Report on Form 8-K that includes this audited balance sheet promptly upon the completion of this offering, which is anticipated to take place two business days after the date of this prospectus. If the underwriter’s over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the underwriter’s over-allotment option.
Additionally, the units will automatically separate into their component parts and will not be traded after completion of our initial business combination.
Common Stock
Prior to the date of this prospectus, there were 5,750,000 shares of Class B common stock issued and outstanding, all of which were held of record by our sponsor. We intend to issue and sell an aggregate of 400,000 shares of Class B common stock to BlackRock and to redeem an equal number of shares of Class B common stock from our sponsor, so that our sponsor and BlackRock will own 20% of our issued and outstanding shares after this offering (assuming our sponsor and BlackRock do not purchase any units in this offering and no exercise of the underwriter’s over-allotment option). Upon the closing of this offering, 25,000,000 of our shares of common stock will be outstanding (assuming no exercise of the underwriter’s over-allotment option and forfeiture of 750,000 shares of Class B common stock by our sponsor) including:
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20,000,000 shares of Class A common stock underlying the units issued as part of this offering; and
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5,000,000 shares of Class B common stock held by our initial stockholders.
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If we increase or decrease the size of this offering, we will effect a stock split or stock dividend or share contribution back to capital or other appropriate mechanism, as applicable, with respect to our Class B common stock immediately prior to the consummation of this offering in such amount as to maintain the ownership of founder shares by our sponsor and BlackRock prior to this offering at 20% of our issued and outstanding shares of our common stock upon the consummation of this offering.
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Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders; provided that, prior to our initial business combination, holders of our Class B common stock will have the right to elect all of our directors and remove members of the Board for any reason, and holders of our Class A common stock will not be entitled to vote on the election of directors during such time. These provisions of our amended and restated certificate of incorporation may only be amended if approved by holders of a majority of at least 90% of all then outstanding shares of our common stock voting at a stockholder meeting. Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all other matters submitted to a vote of our stockholders except as required by law or stock exchange rule. Unless specified in our amended and restated certificate of incorporation or bylaws, or as required by applicable provisions of the DGCL or applicable stock exchange rules, the affirmative vote of a majority of our shares of common stock that are voted is required to approve any such matter voted on by our stockholders.
Our board of directors will be divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year (except for those directors appointed prior to our first annual meeting of stockholders). There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the common stock voted for the election of directors can elect all of the directors. Our stockholders are entitled to receive ratable dividends when, as and if declared by the board of directors out of funds legally available therefor.
Because our amended and restated certificate of incorporation will authorize the issuance of up to 70,000,000 shares of Class A common stock, if we were to enter into a business combination, we may (depending on the terms of such a business combination) be required to increase the number of shares of Class A common stock which we are authorized to issue at the same time as our stockholders vote on the business combination to the extent we seek stockholder approval in connection with our business combination.
Our board of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. In accordance with the NYSE corporate governance requirements, we are not required to hold an annual meeting until no later than one year after our first fiscal year end following our listing on the NYSE. Under Section 211(b) of the DGCL, we are, however, required to hold an annual meeting of stockholders for the purposes of electing directors in accordance with our bylaws, unless such election is made by written consent in lieu of such a meeting. We may not hold an annual meeting of stockholders to elect new directors prior to the consummation of our initial business combination, and thus, we may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting. Therefore, if our stockholders want us to hold an annual meeting prior to the consummation of our initial business combination, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.
We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account calculated as of two business days prior to the consummation of our initial business combination including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is initially anticipated to be approximately $10.20 per public share, and such amount will be increased by $0.10 per public share for any three-month extension of our time to consummate our initial business combination, as described herein. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting discounts and commissions we will pay to the underwriter. The redemption rights will include the requirement that a beneficial owner must identify itself in order to validly redeem its shares. Each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction. Our sponsor, officers and directors have entered into a letter agreement with us pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our business combination or amendments to our amended and restated certificate of incorporation as described elsewhere in this prospectus and BlackRock has agreed to waive its redemption rights with respect to founder shares held by it. Permitted transferees of our initial stockholders, officers and directors will be subject to the same obligations.
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Unlike some blank check companies that hold stockholder votes and conduct proxy solicitations in conjunction with their initial business combinations and provide for related redemptions of public shares for cash upon completion of such initial business combinations even when a vote is not required by applicable law or stock exchange listing requirements, if a stockholder vote is not required by applicable law or stock exchange listing requirements and we do not decide to hold a stockholder vote for business or other reasons, we will, pursuant to our amended and restated certificate of incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC, and file tender offer documents with the SEC prior to completing our initial business combination. Our amended and restated certificate of incorporation will require these tender offer documents to contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under the SEC’s proxy rules. If, however, stockholder approval of the transaction is required by law or stock exchange rules, or we decide to obtain stockholder approval for business or other legal reasons, we will, like many blank check companies, offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the business combination. Unless otherwise required by applicable law or stock exchange rule, a quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting. However, the participation of our initial stockholders, officers, directors, advisors or their affiliates in privately-negotiated transactions (as described in this prospectus), if any, could result in the approval of our business combination even if a majority of our public stockholders vote, or indicate their intention to vote, against such business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the approval of our business combination once a quorum is obtained. We will give not less than 10 days nor more than 60 days prior written notice of any such meeting, if required, at which a vote shall be taken to approve our business combination. These quorum and voting thresholds, and the voting agreements of our sponsor, officers and directors may make it more likely that we will consummate our initial business combination.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its Excess Shares without our prior consent. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Our stockholders’ inability to redeem the Excess Shares will reduce their influence over our ability to complete our initial business combination, and such stockholders could suffer a material loss in their investment if they sell such Excess Shares on the open market. Additionally, such stockholders will not receive redemption distributions with respect to the Excess Shares if we complete the business combination. And, as a result, such stockholders will continue to hold that number of shares exceeding 15% and, in order to dispose such shares would be required to sell their stock in open market transactions, potentially at a loss.
If we seek stockholder approval in connection with our business combination, our sponsor, officers and directors have agreed (and their permitted transferees will agree) to vote any founder shares held by them and any public shares purchased during or after this offering in favor of our initial business combination. As a result, in addition to the shares held by our sponsor, we would need (x) 7,900,001, or 38.7% (assuming all issued and outstanding shares are voted, the over-allotment option is not exercised and the parties to the letter agreement do not acquire any Class A common stock), or (y) 1,250,001, or 6.25% (assuming only the minimum number of shares representing a quorum are voted, the over-allotment option is not exercised and the parties to the letter agreement do not acquire any Class A common stock), in each case, of the remaining 20,400,000 outstanding shares of common stock of the Company owned by public stockholders and BlackRock immediately following this offering to be voted in favor of a transaction in order to have our initial business combination approved. If Magnetar purchases the full amount of units it has expressed an interest in purchasing in this offering and votes the public shares underlying such units in favor of our initial business combination, we would need only 5,920,001 or approximately 32.1%, of the remaining outstanding shares of common stock of the Company owned by public stockholders and BlackRock immediately following this offering to be voted in favor of an initial business combination. If BlackRock purchases units in this offering or in the open market following the offering
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and votes the public shares underlying the units and its founder shares in favor of our initial business combination, this number would decrease further. Additionally, each public stockholder may elect to redeem its public shares irrespective of whether it votes for or against the proposed transaction (subject to the limitation described in the preceding paragraph).
Pursuant to our amended and restated certificate of incorporation, if we have not completed our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter subject to lawfully available funds therefor, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering. However, if our initial stockholders, officers or directors acquire public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the prescribed time period.
In the event of a liquidation, dissolution or winding up of the company after a business combination, our stockholders at such time will be entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. Our stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the common stock, except that we will provide our public stockholders with the opportunity to redeem their public shares for cash equal to their pro rata share of the aggregate amount then on deposit in the trust account, including interest, upon the completion of our initial business combination, subject to the limitations described herein.
Founder Shares
The founder shares are designated as Class B common stock and are identical to the shares of Class A common stock included in the units being sold in this offering, and holders of founder shares have the same stockholder rights as public stockholders, except that (a) prior to our initial business combination, only holders of our Class B common stock have the right to vote on the election of directors and holders of a majority of our issued and outstanding shares of Class B common stock may remove a member of the Board for any reason, (b) the founder shares are subject to certain transfer restrictions, as described in more detail below, (c) our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed (i) to waive their redemption rights with respect to any founder shares and public shares held by them in connection with the completion of our initial business combination and a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) that would modify the substance or timing of our obligation to provide holders of shares of Class A common stock the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights and pre-initial business combination activity, and (ii) to waive their rights to liquidating distributions from the trust account with respect to any founder shares they hold if we fail to consummate an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame), (d) the founder shares are shares of our Class B common stock that will automatically convert into shares of our Class A common stock at the time of our initial business combination, or at any time prior thereto at the option of the holder, on a one-for-one basis,
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subject to adjustment pursuant to certain anti-dilution rights, as described herein and (e) the founder shares are entitled to registration rights. If we submit our initial business combination to our public stockholders for a vote, our sponsor, officers and directors have agreed (and their permitted transferees will agree), pursuant to the terms of a letter agreement entered into with us, to vote any founder shares held by them and any public shares purchased during or after this offering in favor of our initial business combination.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like), and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in this offering and related to the closing of our initial business combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the issued and outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock issued and outstanding upon completion of this offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued (after giving effect to any redemptions of Class A common stock) in connection with the business combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the business combination). Holders of founder shares may also elect to convert their shares of Class B common stock into an equal number of shares of Class A common stock, subject to adjustment as provided above, at any time.
Pursuant to a letter agreement that our sponsor, officers and directors entered into with us and our agreements with BlackRock, with certain limited exceptions, the founder shares are not transferable, assignable or salable (except to our officers and directors and other persons or entities affiliated with our initial stockholders, each of whom will be subject to the same transfer restrictions) until the earlier of (A) one year after the completion of our initial business combination or (B) subsequent to our initial business combination, (x) if the closing price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our public stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property.
Prior to our initial business combination, only holders of our founder shares will have the right to vote on the election of directors. Holders of our public shares will not be entitled to vote on the election of directors during such time. In addition, prior to the completion of an initial business combination, holders of a majority of our founder shares may remove a member of the board of directors for any reason. These provisions of our amended and restated certificate of incorporation may only be amended by approval of a majority of at least 90% of all then outstanding common stock voting at a stockholder meeting. With respect to any other matter submitted to a vote of our stockholders, including any vote in connection with our initial business combination, except as required by law, holders of our founder shares and holders of our public shares will vote together as a single class, with each share entitling the holder to one vote.
Preferred Stock
Our amended and restated certificate of incorporation will authorize 1,000,000 shares of preferred stock and provide that shares of preferred stock may be issued from time to time in one or more series. Our board of directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our board of directors will be able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti- takeover effects. The ability of our board of directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management. We have no preferred stock issued and outstanding at the date hereof. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future. No shares of preferred stock are being issued or registered in this offering.
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Warrants
Public Stockholders’ Warrants
Each whole warrant entitles the registered holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing on the later of one year from the closing of this offering and 30 days after the completion of our initial business combination, except as discussed in the immediately succeeding paragraph. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of Class A common stock. This means only a whole warrant may be exercised at a given time by a warrant holder. No fractional warrants will be issued upon separation of the units and only whole warrants will trade. Accordingly, unless you purchase at least two units, you will not be able to receive or trade a whole warrant. The warrants will expire five years after the completion of our initial business combination, at 5:00 p.m., Washington, D.C. time, or earlier upon redemption or liquidation.
We will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration, or a valid exemption from registration is available, including in connection with a cashless exercise permitted as a result of a notice of redemption described below under “Redemption of warrants when the price per share of our Class A common stock equals or exceeds $10.00.” No warrant will be exercisable and we will not be obligated to issue a share of Class A common stock upon exercise of a warrant unless the share of Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will we be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock underlying such unit.
We are not registering the shares of our Class A common stock issuable upon exercise of the warrants at this time. However, we have agreed that as soon as practicable, but in no event later than fifteen business days after the closing of our initial business combination, we will use our commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the warrants, and we will use our commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of our initial business combination, and to maintain the effectiveness of such registration statement and a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement; provided that if our shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they do not satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th day after the closing of the initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption, but we will use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the excess of the “fair market value” (defined below) less the exercise price of the warrants by (y) the fair market value and (B) 0.361 shares of Class A common stock per warrant (subject to adjustment). The “fair market value” as used in this paragraph shall mean the volume weighted average price of the shares of Class A common stock for the 10 trading days ending on the trading day prior to the date on which the notice of exercise is received by the warrant agent.
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Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00. Once the warrants become exercisable, we may redeem the outstanding warrants (except as described herein with respect to the private placement warrants):
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in whole and not in part;
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•
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at a price of $0.01 per warrant;
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•
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upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
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•
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if, and only if, the closing price of the shares of Class A common stock equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “— Warrants — Public Stockholders’ Warrants — Anti-Dilution Adjustments”) for any 20 trading days within a 30-trading day period ending three trading days before we send the notice of redemption to the warrant holders.
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We will not redeem the warrants as described above unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption notice. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the warrants, each warrant holder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date. Any such exercise would not be done on a “cashless” basis and would require the exercising warrant holder to pay the exercise price for each warrant being exercised. However, the price of the shares of Class A common stock may fall below the $18.00 redemption trigger price (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “— Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments”) as well as the $11.50 (for whole shares) warrant exercise price after the redemption notice is issued.
Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00. Once the warrants become exercisable, we may redeem the outstanding warrants (except as described herein with respect to the private placement warrants):
•
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in whole and not in part;
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•
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at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table below, based on the redemption date and the “fair market value” of our Class A common stock (as defined below) except as otherwise described below;
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•
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if, and only if, the closing price of our Class A common stock equals or exceeds $10.00 per public share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “— Warrants — Public Stockholders’ Warrants — Anti-Dilution Adjustments”) for any 20 trading days within the 30-trading day period ending three trading days before we send the notice of redemption to the warrant holders; and
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•
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if the closing price of the Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant as described under the heading “— Warrants — Public Stockholders’ Warrants — Anti-dilution Adjustments”), the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.
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Beginning on the date the notice of redemption is given until the warrants are redeemed or exercised, holders may elect to exercise their warrants on a cashless basis. The numbers in the table below represent the
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number of Class A common stock that a warrant holder will receive upon such cashless exercise in connection with a redemption by us pursuant to this redemption feature, based on the “fair market value” of our Class A common stock on the corresponding redemption date (assuming holders elect to exercise their warrants and such warrants are not redeemed for $0.10 per warrant), determined for these purposes based on volume weighted average price of our Class A common stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants, and the number of months that the corresponding redemption date precedes the expiration date of the warrants, each as set forth in the table below. We will provide our warrant holders with the final fair market value no later than one business day after the 10-trading day period described above ends.
Pursuant to the warrant agreement, references above to shares of Class A common stock shall include a security other than shares of Class A common stock into which the shares of Class A common stock have been converted or exchanged for in the event we are not the surviving company in our initial business combination. The numbers in the table below will not be adjusted when determining the number of shares of Class A common stock to be issued upon exercise of the warrants if we are not the surviving entity following our initial business combination.
The share prices set forth in the column headings of the table below will be adjusted as of any date on which the number of shares issuable upon exercise of a warrant or the exercise price of a warrant is adjusted as set forth under the heading “— Anti-dilution Adjustments” below. If the number of shares issuable upon exercise of a warrant is adjusted, the adjusted share prices in the column headings will equal the share prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the number of shares deliverable upon exercise of a warrant immediately prior to such adjustment and the denominator of which is the number of shares deliverable upon exercise of a warrant as so adjusted. The number of shares in the table below shall be adjusted in the same manner and at the same time as the number of shares issuable upon exercise of a warrant. If the exercise price of a warrant is adjusted, (a) in the case of an adjustment pursuant to the fifth paragraph under the heading “— Anti-dilution Adjustments” below, the adjusted share prices in the column headings will equal the unadjusted share price multiplied by a fraction, the numerator of which is the higher of the Market Value and the Newly Issued Price as set forth under the heading “— Anti-dilution Adjustments” and the denominator of which is $10.00 and (b) in the case of an adjustment pursuant to the second paragraph under the heading “— Anti-dilution Adjustments” below, the adjusted share prices in the column headings will equal the unadjusted share price less the decrease in the exercise price of a warrant pursuant to such exercise price adjustment.
60 months
|
|
|
0.261
|
|
|
0.281
|
|
|
0.297
|
|
|
0.311
|
|
|
0.324
|
|
|
0.337
|
|
|
0.348
|
|
|
0.358
|
|
|
0.361
|
57 months
|
|
|
0.257
|
|
|
0.277
|
|
|
0.294
|
|
|
0.310
|
|
|
0.324
|
|
|
0.337
|
|
|
0.348
|
|
|
0.358
|
|
|
0.361
|
54 months
|
|
|
0.252
|
|
|
0.272
|
|
|
0.291
|
|
|
0.307
|
|
|
0.322
|
|
|
0.335
|
|
|
0.347
|
|
|
0.357
|
|
|
0.361
|
51 months
|
|
|
0.246
|
|
|
0.268
|
|
|
0.287
|
|
|
0.304
|
|
|
0.320
|
|
|
0.333
|
|
|
0.346
|
|
|
0.357
|
|
|
0.361
|
48 months
|
|
|
0.241
|
|
|
0.263
|
|
|
0.283
|
|
|
0.301
|
|
|
0.317
|
|
|
0.332
|
|
|
0.344
|
|
|
0.356
|
|
|
0.361
|
45 months
|
|
|
0.235
|
|
|
0.258
|
|
|
0.279
|
|
|
0.298
|
|
|
0.315
|
|
|
0.330
|
|
|
0.343
|
|
|
0.356
|
|
|
0.361
|
42 months
|
|
|
0.228
|
|
|
0.252
|
|
|
0.274
|
|
|
0.294
|
|
|
0.312
|
|
|
0.328
|
|
|
0.342
|
|
|
0.355
|
|
|
0.361
|
39 months
|
|
|
0.221
|
|
|
0.246
|
|
|
0.269
|
|
|
0.290
|
|
|
0.309
|
|
|
0.325
|
|
|
0.340
|
|
|
0.354
|
|
|
0.361
|
36 months
|
|
|
0.213
|
|
|
0.239
|
|
|
0.263
|
|
|
0.285
|
|
|
0.305
|
|
|
0.323
|
|
|
0.339
|
|
|
0.353
|
|
|
0.361
|
33 months
|
|
|
0.205
|
|
|
0.232
|
|
|
0.257
|
|
|
0.280
|
|
|
0.301
|
|
|
0.320
|
|
|
0.337
|
|
|
0.352
|
|
|
0.361
|
30 months
|
|
|
0.196
|
|
|
0.224
|
|
|
0.250
|
|
|
0.274
|
|
|
0.297
|
|
|
0.316
|
|
|
0.335
|
|
|
0.351
|
|
|
0.361
|
27 months
|
|
|
0.185
|
|
|
0.214
|
|
|
0.242
|
|
|
0.268
|
|
|
0.291
|
|
|
0.313
|
|
|
0.332
|
|
|
0.350
|
|
|
0.361
|
24 months
|
|
|
0.173
|
|
|
0.204
|
|
|
0.233
|
|
|
0.260
|
|
|
0.285
|
|
|
0.308
|
|
|
0.329
|
|
|
0.348
|
|
|
0.361
|
21 months
|
|
|
0.161
|
|
|
0.193
|
|
|
0.223
|
|
|
0.252
|
|
|
0.279
|
|
|
0.304
|
|
|
0.326
|
|
|
0.347
|
|
|
0.361
|
18 months
|
|
|
0.146
|
|
|
0.179
|
|
|
0.211
|
|
|
0.242
|
|
|
0.271
|
|
|
0.298
|
|
|
0.322
|
|
|
0.345
|
|
|
0.361
|
15 months
|
|
|
0.130
|
|
|
0.164
|
|
|
0.197
|
|
|
0.230
|
|
|
0.262
|
|
|
0.291
|
|
|
0.317
|
|
|
0.342
|
|
|
0.361
|
12 months
|
|
|
0.111
|
|
|
0.146
|
|
|
0.181
|
|
|
0.216
|
|
|
0.250
|
|
|
0.282
|
|
|
0.312
|
|
|
0.339
|
|
|
0.361
|
9 months
|
|
|
0.090
|
|
|
0.125
|
|
|
0.162
|
|
|
0.199
|
|
|
0.237
|
|
|
0.272
|
|
|
0.305
|
|
|
0.336
|
|
|
0.361
|
6 months
|
|
|
0.065
|
|
|
0.099
|
|
|
0.137
|
|
|
0.178
|
|
|
0.219
|
|
|
0.259
|
|
|
0.296
|
|
|
0.331
|
|
|
0.361
|
3 months
|
|
|
0.034
|
|
|
0.065
|
|
|
0.104
|
|
|
0.150
|
|
|
0.197
|
|
|
0.243
|
|
|
0.286
|
|
|
0.326
|
|
|
0.361
|
0 months
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|
|
—
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|
|
—
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|
|
0.042
|
|
|
0.115
|
|
|
0.179
|
|
|
0.233
|
|
|
0.281
|
|
|
0.323
|
|
|
0.361
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The exact fair market value and redemption date may not be set forth in the table above, in which case, if the fair market value is between two values in the table or the redemption date is between two redemption dates in the table, the number of shares of Class A common stock to be issued for each warrant exercised will be determined by a straight-line interpolation between the number of shares set forth for the higher and lower fair market values and the earlier and later redemption dates, as applicable, based on a 365 or 366-day year, as applicable. For example, if the volume weighted average price of our Class A common stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of the warrants is $11.00 per share, and at such time there are 57 months until the expiration of the warrants, holders may choose to, in connection with this redemption feature, exercise their warrants for 0.277 shares of Class A common stock for each whole warrant. For an example where the exact fair market value and redemption date are not as set forth in the table above, if the volume weighted average price of our Class A common stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of the warrants is $13.50 per share, and at such time there are 38 months until the expiration of the warrants, holders may choose to, in connection with this redemption feature, exercise their warrants for 0.298 shares of Class A common stock for each whole warrant. In no event will the warrants be exercisable on a cashless basis in connection with this redemption feature for more than 0.361 shares of Class A common stock per warrant (subject to adjustment). Finally, as reflected in the table above, if the warrants are out of the money and about to expire, they cannot be exercised on a cashless basis in connection with a redemption by us pursuant to this redemption feature, since they will not be exercisable for any shares of Class A common stock.
This redemption feature is structured to allow for all of the outstanding warrants to be redeemed when the Class A common stock is trading at or above $10.00 per public share, which may be at a time when the trading price of our Class A common stock is below the exercise price of the warrants. We have established this redemption feature to provide us with the flexibility to redeem the warrants without the warrants having to reach the $18.00 per share threshold set forth above under “— Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00.” Holders choosing to exercise their warrants in connection with a redemption pursuant to this feature will, in effect, receive a number of shares for their warrants based on an option pricing model with a fixed volatility input as of the date of this prospectus. This redemption right provides us with an additional mechanism by which to redeem all of the outstanding warrants, and therefore have certainty as to our capital structure as the warrants would no longer be outstanding and would have been exercised or redeemed. We will be required to pay the applicable redemption price to warrant holders if we choose to exercise this redemption right and it will allow us to quickly proceed with a redemption of the warrants if we determine it is in our best interest to do so. As such, we would redeem the warrants in this manner when we believe it is in our best interest to update our capital structure to remove the warrants and pay the redemption price to the warrant holders.
As stated above, we can redeem the warrants when the Class A common stock is trading at a price starting at $10.00, which is below the exercise price of $11.50, because it will provide certainty with respect to our capital structure and cash position while providing warrant holders with the opportunity to exercise their warrants on a cashless basis for the applicable number of shares. If we choose to redeem the warrants when the shares of Class A common stock are trading at a price below the exercise price of the warrants, this could result in the warrant holders receiving fewer shares of Class A common stock than they would have received if they had chosen to wait to exercise their warrants for shares of Class A common stock if and when such shares of Class A common stock were trading at a price higher than the exercise price of $11.50.
No fractional shares of Class A common stock will be issued upon exercise. If, upon exercise, a holder would be entitled to receive a fractional interest in a share, we will round down to the nearest whole number of the number of shares of Class A common stock to be issued to the holder. If, at the time of redemption, the warrants are exercisable for a security other than the shares of Class A common stock pursuant to the warrant agreement (for instance, if we are not the surviving company in our initial business combination), the warrants may be exercised for such security. At such time as the warrants become exercisable for a security other than the Class A common stock, the Company (or surviving company) will use its commercially reasonable efforts to register under the Securities Act the security issuable upon the exercise of the warrants.
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Ownership limit. A holder of a warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 9.8% (or such other amount as a holder may specify) of the shares of Class A common stock issued and outstanding immediately after giving effect to such exercise.
Anti-dilution Adjustments. If the number of issued and outstanding shares of Class A common stock is increased by a stock dividend payable in shares of Class A common stock, or by a split-up of shares of Class A common stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Class A common stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of Class A common stock. A rights offering made to all or substantially all holders of Class A common stock entitling holders to purchase shares of Class A common stock at a price less than the “historical fair market value” (as defined below) will be deemed a stock dividend of a number of shares of Class A common stock equal to the product of (i) the number of shares of Class A common stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for shares of Class A common stock) and (ii) one minus the quotient of (x) the price per share of Class A common stock paid in such rights offering and (y) the historical fair market value. For these purposes, (i) if the rights offering is for securities convertible into or exercisable for shares of Class A common stock, in determining the price payable for shares of Class A common stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) “historical fair market value” means the volume weighted average price of the Class A common stock as reported during the 10 trading day period ending on the trading day prior to the first date on which the Class A common stock trades on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if we, at any time while the warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to all or substantially all of the holders of the shares of Class A common stock on account of such shares of Class A common stock (or other securities into which the warrants are convertible), other than (a) as described above, (b) any cash dividends or cash distributions which, when combined on a per share basis with all other cash dividends and cash distributions paid on the shares of Class A common stock during the 365-day period ending on the date of declaration of such dividend or distribution does not exceed $0.50 (as adjusted to appropriately reflect any other adjustments and excluding cash dividends or cash distributions that resulted in an adjustment to the exercise price or to the number of shares of Class A common stock issuable on exercise of each warrant) but only with respect to the amount of the aggregate cash dividends or cash distributions equal to or less than $0.50 per share, (c) to satisfy the redemption rights of the holders of shares of Class A common stock in connection with a proposed initial business combination, (d) to satisfy the redemption rights of the holders of shares of Class A common stock in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or amendments to our amended and restated certificate of incorporation prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, or (B) with respect to any other provisions relating to stockholders’ rights or pre-initial business combination activity, or (e) in connection with the redemption of our public shares upon our failure to complete our initial business combination, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Class A common stock in respect of such event.
If the number of issued and outstanding shares of Class A common stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Class A common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Class A common stock issuable on exercise of each warrant will be decreased in proportion to such decrease in issued and outstanding shares of Class A common stock.
Whenever the number of shares of Class A common stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise
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price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Class A common stock purchasable upon the exercise of the warrants immediately prior to such adjustment and (y) the denominator of which will be the number of shares of Class A common stock so purchasable immediately thereafter.
In addition, if (x) we issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at an issue price or effective issue price of less than $9.20 per share of our Class A common stock (with such issue price or effective issue price to be determined in good faith by our board of directors and, in the case of any such issuance to our sponsor or their affiliates, without taking into account any founder shares held by our sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the completion of our initial business combination (net of redemptions), and (z) the volume-weighted average trading price of our Class A common stock during the 20 trading day period starting on the trading day prior to the day on which we complete our initial business combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption trigger prices described adjacent to “Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00” and “Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.
In case of any reclassification or reorganization of the issued and outstanding shares of Class A common stock (other than those described above or that solely affects the par value of such shares of Class A common stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our issued and outstanding shares of Class A common stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of Class A common stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of Class A common stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event. However, if such holders were entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets for which each warrant will become exercisable will be deemed to be the weighted average of the kind and amount received per share by such holders in such consolidation or merger that affirmatively make such election, and if a tender, exchange or redemption offer has been made to and accepted by such holders (other than a tender, exchange or redemption offer made by the company in connection with redemption rights held by stockholders of the company as provided for in the company’s amended and restated certificate of incorporation or as a result of the redemption of shares of Class A common stock by the company if a proposed initial business combination is presented to the stockholders of the company for approval) under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the issued and outstanding shares of Class A common stock, the holder of a warrant will be entitled to receive the highest amount of cash, securities or other property to which such holder would actually have been entitled as a stockholder if such warrant holder had exercised the warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the shares of Class A common stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustment (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in the warrant agreement. If less than 70% of the consideration receivable by the holders of shares of Class A common stock in such a transaction is payable in the form of shares of Class A
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common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within 30 days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the warrant agreement based on the Black-Scholes value (as defined in the warrant agreement) of the warrant. The purpose of such exercise price reduction is to provide additional value to holders of the warrants when an extraordinary transaction occurs during the exercise period of the warrants pursuant to which the holders of the warrants otherwise do not receive the full potential value of the warrants.
The warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder for the purpose of (i) curing any ambiguity or correct any mistake, including to conform the provisions of the warrant agreement to the description of the terms of the warrants and the warrant agreement set forth in this prospectus, or defective provision or (ii) adding or changing any provisions with respect to matters or questions arising under the warrant agreement as the parties to the warrant agreement may deem necessary or desirable and that the parties deem to not adversely affect the rights of the registered holders of the warrants, provided that the approval by the holders of at least 65% of the then-outstanding public warrants is required to make any change that adversely affects the interests of the registered holders of public warrants. You should review a copy of the warrant agreement, which will be filed as an exhibit to the registration statement of which this prospectus is a part, for a complete description of the terms and conditions applicable to the warrants.
The warrant holders do not have the rights or privileges of holders of common stock and any voting rights until they exercise their warrants and receive shares of Class A common stock. After the issuance of shares of Class A common stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
No fractional warrants will be issued upon separation of the units and only whole warrants will trade. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of shares of Class A common stock to be issued to the warrant holder.
We have agreed that, subject to applicable law, any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and we irrevocably submit to such jurisdiction, which jurisdiction will be the exclusive forum for any such action, proceeding or claim. See “Risk Factors — Our warrant agreement will designate the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.” This provision applies to claims under the Securities Act but does not apply to claims under the Exchange Act or any claim for which the federal district courts of the United States of America are the sole and exclusive forum.
Private Placement Warrants
Except as described below, the private placement warrants have terms and provisions that are identical to those of the warrants being sold as part of the units in this offering. The private placement warrants (including the shares of Class A common stock issuable upon exercise of the private placement warrants) will not be transferable, assignable or salable until 30 days after the completion of our initial business combination (except pursuant to limited exceptions as described under “Principal Stockholders — Transfers of Founder Shares and Private Placement Warrants,” to our officers and directors and other persons or entities affiliated with the initial purchasers of the private placement warrants) and they will not be redeemable by us (except as described under “— Warrants — Public Stockholders’ Warrants — Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00”) so long as they are held by the initial purchasers or their permitted transferees (except as otherwise set forth herein). Each initial purchaser of private placement warrants, or its permitted transferees, has the option to exercise the private placement warrants on a cashless basis and have certain registration rights described herein. If the private placement warrants are held by holders other than the initial purchasers or their permitted transferees, the private placement warrants will be redeemable by us in all
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redemption scenarios and exercisable by the holders on the same basis as the warrants included in the units being sold in this offering. Any amendment to the terms of the private placement warrants or any provision of the warrant agreement with respect to the private placement warrants will require a vote of holders of at least 65% of the number of the then outstanding private placement warrants.
Except as described above under “— Public Stockholders’ Warrants — Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00,” if holders of the private placement warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering his, her or its warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the excess of the “Sponsor fair market value” (defined below) over the exercise price of the warrants by (y) the Sponsor fair market value. For these purposes, the “Sponsor fair market value” shall mean the average reported closing price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent. The reason that we have agreed that these warrants will be exercisable on a cashless basis so long as they are held by the initial purchasers and their permitted transferees is because it is not known at this time whether they will be affiliated with us following a business combination. If they remain affiliated with us, their ability to sell our securities in the open market will be significantly limited. We expect to have policies in place that restrict insiders from selling our securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell our securities, an insider cannot trade in our securities if he or she is in possession of material non-public information. Accordingly, unlike public stockholders who could exercise their warrants and sell the shares of Class A common stock received upon such exercise freely in the open market in order to recoup the cost of such exercise, the insiders could be significantly restricted from selling such securities. As a result, we believe that allowing the holders to exercise such warrants on a cashless basis is appropriate.
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. Up to $1,500,000 of such loans may be convertible into warrants of the post business combination entity at a price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the private placement warrants.
Dividends
We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of a business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial conditions subsequent to completion of a business combination. The payment of any cash dividends subsequent to a business combination will be within the discretion of our board of directors at such time. Our board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future, except if we increase the size of the offering, in which case we will effect a stock split or stock dividend immediately prior to the consummation of the offering in such amount as to maintain the ownership of founder shares by our sponsor prior to this offering at 20% of the issued and outstanding shares of our common stock upon the consummation of this offering. Further, if we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Our Transfer Agent and Warrant Agent
The transfer agent for our common stock and warrant agent for our warrants is Continental Stock Transfer & Trust Company. We have agreed to indemnify Continental Stock Transfer & Trust Company in its roles as transfer agent and warrant agent, its agents and each of its stockholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted for its activities in that capacity, except for any claims and losses due to any gross negligence or intentional misconduct of the indemnified person or entity.
Our Amended and Restated Certificate of Incorporation
Our amended and restated certificate of incorporation will contain certain requirements and restrictions relating to this offering that will apply to us until the completion of our initial business combination. These provisions (other than amendments relating to the election or removal of directors prior to completion of our
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initial business combination, which require the approval of a majority of at least 90% of all then outstanding common stock voting in a stockholder meeting) cannot be amended without the approval of the holders of at least 65% of our common stock. Our initial stockholders and their permitted transferees, if any, who will collectively beneficially own 20% of our common stock upon the closing of this offering (assuming they do not purchase any units in this offering), will participate in any vote to amend our amended and restated certificate of incorporation and will have the discretion to vote in any manner they choose. Specifically, our amended and restated certificate of incorporation provides, among other things, that:
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If we have not completed our initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter subject to lawfully available funds therefor, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law;
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After completion of this offering and prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote as a class with our public shares on any initial business combination or to approve an amendment to our amended and restated certificate of incorporation to amend the foregoing provisions;
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Although we do not intend to enter into a business combination with a target business that is affiliated with our sponsor, our directors or our officers, we are not prohibited from doing so. In the event we enter into such a transaction, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm or an independent accounting firm that such a business combination is fair to our company from a financial point of view;
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If a stockholder vote on our initial business combination is not required by law and we do not decide to hold a stockholder vote for business or other legal reasons, we will offer to redeem our public shares pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, and will file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about our initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act;
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As long as we are listed on the NYSE, our initial business combination must occur with one or more operating target businesses or assets that together have an aggregate fair market value of at least 80% of our assets held in the trust account (excluding the deferred underwriting discounts and commissions and funds previously released to us to pay taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination;
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If our stockholders approve an amendment to our amended and restated certificate of incorporation (i) that would modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we have not consummated an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, we will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon such approval at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, including franchise and income taxes, divided by the number of then issued and outstanding public shares; and
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We will not effectuate our initial business combination solely with another blank check company or a similar company with nominal operations.
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In addition, our amended and restated certificate of incorporation will provide that under no circumstances will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 following such redemption upon consummation of our initial business combination.
Certain Anti-Takeover Provisions of Delaware Law and Our Amended and Restated Certificate of Incorporation and Bylaws
We have elected to be exempt from the restrictions imposed under Section 203 of the DGCL. However, our amended and restated certificate of incorporation contains provisions providing that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the stockholder became an interested stockholder, unless:
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prior to such time, our board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;
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upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding certain shares; or
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at or subsequent to that time, the business combination is approved by our board of directors and by the affirmative vote of holders of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.
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Generally, a “business combination” includes a merger, asset or stock sale or certain other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder” is a person who, together with that person’s affiliates and associates, owns, or within the previous three years owned, 20% or more of our voting stock.
Under certain circumstances, this provision will make it more difficult for a person who would be an “interested stockholder” to effect various business combinations with a corporation for a three-year period. This provision may encourage companies interested in acquiring our company to negotiate in advance with our board of directors because the stockholder approval requirement would be avoided if our board of directors approves either the business combination or the transaction which results in the stockholder becoming an interested stockholder. These provisions also may have the effect of preventing changes in our board of directors and may make it more difficult to accomplish transactions which stockholders may otherwise deem to be in their best interests.
Our amended and restated certificate of incorporation provides that our sponsor and its respective affiliates, any of their respective direct or indirect transferees of at least 20% of our outstanding common stock and any group as to which such persons are party to, do not constitute “interested stockholders” for purposes of this provision.
Our amended and restated certificate of incorporation will provide that our board of directors will be classified into three classes of directors. As a result, in most circumstances, a person can gain control of our board only by successfully engaging in a proxy contest at two or more annual meetings.
Our authorized but unissued common stock and preferred stock are available for future issuances without stockholder approval, subject to the limitations set forth in our amended and restated certificate of incorporation, and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Exclusive Forum for Certain Lawsuits
Our amended and restated certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of our company, (ii) action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of our company to our company or our stockholders, or any claim for aiding and abetting any such alleged breach, (iii) action asserting a claim against our company or any director, or officer or employee of
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our company arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or our bylaws, or (iv) action asserting a claim against us or any director, or officer or employee of our company governed by the internal affairs doctrine except for, as to each of (i) through (iv) above, any claim (a) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (b) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or (c) arising under the federal securities laws, including the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall concurrently be the sole and exclusive forums. Notwithstanding the foregoing, the provisions of this paragraph will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America shall be the sole and exclusive forum. If an action is brought outside Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
Special Meeting of Stockholders
Our bylaws provide that special meetings of our stockholders may be called only by a majority vote of our board of directors, by our Chief Executive Officer or by our Chairman.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
Our bylaws provide that stockholders seeking to bring business before our annual meeting of stockholders, or to nominate candidates for election as directors at our annual meeting of stockholders must provide timely notice of their intent in writing. To be timely, a stockholder’s notice will need to be received by the company secretary at our principal executive offices not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day prior to the first anniversary date of the immediately preceding annual meeting of stockholders. Pursuant to Rule 14a-8 under the Exchange Act, proposals seeking inclusion in our annual proxy statement must comply with the notice periods contained therein. Our bylaws also specify certain requirements as to the form and content of a stockholder’s notice and a stockholders’ meeting. These provisions may preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders.
Action by Written Consent
Subsequent to the consummation of the offering, any action required or permitted to be taken by our common stockholders must be effected by a duly called annual or special meeting of such stockholders and may not be effected by written consent of the stockholders other than with respect to our Class B common stock.
Classified Board of Directors
Our board of directors will initially be divided into three classes, Class I, Class II and Class III, with members of each class serving staggered three-year terms. Our amended and restated certificate of incorporation will provide that the authorized number of directors may be changed only by resolution of the board of directors. Subject to the terms of any preferred stock, following completion of our initial business combination any or all of the directors may be removed from office at any time, but only for cause and only by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class. Any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of our directors then in office.
Class B Common Stock Consent Right
For so long as any shares of Class B common stock remain outstanding, we may not, without the prior vote or written consent of the holders of a majority of the shares of Class B common stock then outstanding, voting separately as a single class, amend, alter or repeal any provision of our certificate of incorporation, whether by merger, consolidation or otherwise, if such amendment, alteration or repeal would alter or change the powers,
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preferences or relative, participating, optional or other or special rights of the Class B common stock. Any action required or permitted to be taken at any meeting of the holders of Class B common stock may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of the outstanding Class B common stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of Class B common stock were present and voted.
Securities Eligible for Future Sale
Immediately after this offering we will have 25,000,000 shares of common stock (or 28,750,000 shares of common stock if the underwriter’s over-allotment option is exercised in full) issued and outstanding on an as-converted basis. Of these shares, the shares of our Class A common stock sold in this offering (20,000,000 shares of Class A common stock if the underwriter’s over-allotment option is not exercised and 23,000,000 shares of Class A common stock if the underwriter’s over-allotment option is exercised in full) will be freely tradable without restriction or further registration under the Securities Act, except for any shares of Class A common stock purchased by one of our affiliates within the meaning of Rule 144 under the Securities Act. All of the 5,000,000 (or 5,750,000 if the underwriter’s over-allotment option is fully exercised) issued and outstanding founder shares and all of the outstanding private placement warrants will be restricted securities under Rule 144 of the Securities Act (“Rule 144”), in that they were issued in private transactions not involving a public offering, and are subject to transfer restrictions as set forth elsewhere in this prospectus.
Rule 144
Pursuant to Rule 144, a person who has beneficially owned restricted shares of our common stock or warrants for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the twelve months (or such shorter period as we were required to file reports) preceding the sale.
Persons who have beneficially owned restricted shares of our common stock or warrants for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
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1% of the total number of common stock then-issued and outstanding, which will equal 250,000 shares immediately after this offering (or 287,500 shares if the underwriter exercises its over-allotment option in full); or
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the average weekly reported trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
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Sales by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about us.
Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies
Rule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met:
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the issuer of the securities that was formerly a shell company has ceased to be a shell company;
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the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
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the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding twelve months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.
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As a result, our initial stockholders will be able to sell their founder shares and private placement warrants pursuant to Rule 144 without registration one year after we have completed our initial business combination.
Registration and Stockholder Rights
The holders of the founder shares, private placement warrants and any warrants that may be issued upon conversion of working capital loans or extension promissory notes (and any shares of Class A common stock issuable upon the exercise of the private placement warrants and warrants that may be issued upon conversion of working capital loans or extension promissory notes) will be entitled to registration rights pursuant to a registration and stockholder rights agreement to be signed prior to or on the effective date of this offering requiring us to register such securities for resale (in the case of the founder shares, only after conversion to shares of our Class A common stock). The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our initial business combination. However, the registration and stockholder rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period as described under “Principal Stockholders ─ Transfers of Founder Shares and Private Placement Warrants,” which occurs (i) in the case of the founder shares, as described in the following paragraph, and (ii) in the case of the private placement warrants and the respective shares of Class A common stock underlying such warrants, 30 days after the completion of our initial business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
Except as described herein, our initial stockholders and our directors and executive officers have agreed not to transfer, assign or sell their founder shares until the earliest of (A) one year after the completion of our initial business combination and (B) subsequent to our initial business combination, (x) if the closing price of our shares of Class A common stock equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of our public stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property. Any permitted transferees will be subject to the same restrictions and other agreements of our initial stockholders with respect to any founder shares. We refer to such transfer restrictions throughout this prospectus as the lock-up.
Listing of Securities
We have applied to have our units, Class A common stock and warrants listed on the NYSE under the symbols “PACI.U,” “PACI” and “PACI.WS,” respectively. We expect that our units will be listed on the NYSE promptly on or after the effective date of the registration statement of which this prospectus forms a part. Following the date the shares of our Class A common stock and warrants are eligible to trade separately, we anticipate that the shares of our Class A common stock and warrants will be listed separately and as a unit on the NYSE. We cannot guarantee that our securities will be approved for listing on the NYSE. The units will automatically separate into their component parts and will not be traded following the completion of our initial business combination.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain material U.S. federal income tax consequences of the acquisition, ownership and disposition of our units, each consisting of one share of Class A common stock and one-half of one warrant, which we refer to collectively as our securities. Because the components of a unit are separable at the option of the holder no more than 54 days from the date of this prospectus, the holder of a unit generally should be treated, for U.S. federal income tax purposes, as the owner of the underlying share of Class A common stock and one-half of one warrant that are components of the unit. As a result, the discussion below with respect to actual holders of Class A common stock and warrants should also apply to holders of units (as the deemed owners of the underlying Class A common stock and warrants that comprise the units). This discussion applies only to beneficial owners of securities that hold such securities as a capital asset for U.S. federal income tax purposes (generally property held for investment) and is applicable only to holders who purchased units in this offering.
This discussion is based on the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury regulations, administrative rulings and judicial decisions, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. We cannot assure you that a change in law will not significantly alter the tax considerations that we describe in this summary. We have not sought any ruling from the Internal Revenue Service (“IRS”) with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with such statements and conclusions.
This summary does not address the alternative minimum tax, U.S. federal gift tax laws, any state, local or any non-U.S. tax laws. In addition, this discussion does not address all U.S. federal income or estate tax considerations that may be important to a particular holder in light of the holder’s circumstances, or to certain categories of investors that may be subject to special rules, such as:
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banks or other financial institutions;
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dealers in securities or foreign currencies;
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traders in securities subject to a mark-to-market method of accounting for U.S. federal income tax purposes with respect to the securities;
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partnerships or other pass-through entities for U.S. federal income tax purposes or holders of interests therein;
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regulated investment companies or real estate investment trusts;
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persons that acquired our securities through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan;
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U.S. holders (as defined below) whose functional currency is not the U.S. dollar;
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former citizens or residents of the United States;
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persons that hold our securities as part of a straddle, hedge, integrated transaction or similar transaction; or
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persons who actually or constructively own five percent or more (by vote or value) of our stock.
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If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) or other pass-through entity holds our units, shares of Class A common stock or warrants, the U.S. federal income tax treatment of a partner in the partnership or equityholder in the pass-through entity generally will depend upon the status of the partner or equityholder, upon the activities of the partnership or other pass-through entity and upon certain determinations made at the partner or equityholder level.
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PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS (INCLUDING ANY POTENTIAL FUTURE CHANGES THERETO) TO THEIR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR SECURITIES ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL, NON-U.S. OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Personal Holding Company Status
We could be subject to an additional tax on undistributed earnings if we are determined to be a personal holding company, or “PHC,” for U.S. federal income tax purposes. A U.S. corporation generally will be classified as a PHC for U.S. federal income tax purposes in a given taxable year if (i) at least 60% of the corporation’s adjusted ordinary gross income, as determined for U.S. federal income tax purposes, for such taxable year consists of PHC income (which includes, among other things, dividends, interest, certain royalties, annuities and, under certain circumstances, rents) and (ii) at any time during the last half of such taxable year, five or fewer individuals (without regard to their citizenship or residency and including as individuals for this purpose certain entities such as certain tax-exempt organizations, pension funds and charitable trusts) own or are deemed to own (pursuant to certain constructive ownership rules) more than 50% of the stock of the corporation by value.
Depending on the date and size of our initial business combination, depending on the concentration of our stock in the hands of individuals, including the members of our sponsor and certain tax-exempt organizations, pension funds and charitable trusts, more than 50% of our stock may be owned or deemed owned (pursuant to the constructive ownership rules) by such persons during the last half of a taxable year. In addition, at least 60% of our adjusted ordinary gross income may consist of PHC income as defined above. Thus, no assurance can be given that we will not become a PHC following this offering or in the future. If we are or were to become a PHC in a given taxable year, we would be subject to an additional PHC tax, currently 20%, on our undistributed PHC income, which generally includes our taxable income, subject to certain adjustments. The PHC requirements may apply to us in the taxable year of the offering and/or future taxable years.
Allocation of Purchase Price and Characterization of a Unit
No statutory, administrative or judicial authority directly addresses the treatment of a unit or instruments similar to a unit for U.S. federal income tax purposes and, therefore, that treatment is not entirely clear. However, looking to analogous authority in the context of units involving a debt obligation and equity option, because the components of a unit are separable at the option of the holder no more than 54 days from the date of this prospectus, we intend to treat the acquisition of a unit, for U.S. federal income tax purposes, as the acquisition of one share of our Class A common stock and one-half of one warrant to acquire one share of our Class A common stock and, by purchasing a unit, you will agree to adopt such treatment for U.S. federal income tax purposes. For U.S. federal income tax purposes, each holder of a unit must allocate the purchase price paid by such holder for such unit between the one share of Class A common stock and the one-half of one warrant based on the relative fair market values of each at the time of issuance. Under U.S. federal income tax law, each investor must make his or her own determination of such values based on all the relevant facts and circumstances. The price allocated to each share of Class A common stock and the one-half of one warrant should be the stockholder’s tax basis in such share or one-half of one warrant, as the case may be. Any disposition of a unit should be treated for U.S. federal income tax purposes as a disposition of the share of Class A common stock and one-half of one warrant comprising the unit, and the amount realized on the disposition should be allocated between the share of Class A common stock and the one-half of one warrant based on their respective relative fair market values (as determined by each such holder of units based on all the relevant facts and circumstances) at the time of disposition. The separation of the share of Class A common stock and the one-half of one warrant comprising a unit should not be a taxable event for U.S. federal income tax purposes.
The foregoing treatment of the Class A common stock and warrants and a holder’s purchase price allocation are not binding on the IRS or the courts. Because there are no authorities that directly address instruments that are similar to the units, no assurance can be given that the IRS or the courts will agree with the characterization described above. The balance of this discussion assumes that the characterization of the units described above is respected for U.S. federal income tax purposes.
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U.S. Holder and Non-U.S. Holder Defined
A “U.S. holder” is a beneficial owner of our units, shares of Class A common stock or warrants who or that is, for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States, any state thereof or the District of Columbia;
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an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
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a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (B) that has made a valid election under applicable U.S. Treasury regulations to be treated as a United States person.
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A “Non-U.S. holder” is a beneficial owner of our units, shares of Class A common stock or warrants who is or that is, for U.S. federal income tax purposes, an individual, corporation, estate or trust that is not a U.S. holder but generally does not include an individual who is present in the U.S. for 183 days or more in the taxable year of disposition.
Considerations For U.S. Holders
This section applies to you if you are a “U.S. holder” as defined in “— U.S. Holder and Non-U.S. Holder Defined.”
Taxation of Distributions. If we pay cash distributions or distributions of other property (other than certain distributions of our stock or rights to acquire our stock) to U.S. holders of shares of our Class A common stock, such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. holder’s adjusted tax basis in our Class A common stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the Class A common stock and will be treated as described under “— Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock and Warrants” below.
Dividends we pay to a U.S. holder that is a taxable corporation generally will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are met, dividends we pay to a non-corporate U.S. holder generally will constitute “qualified dividends” that will be subject to U.S. federal income tax at the maximum tax rate accorded to long-term capital gains. It is unclear whether the redemption rights prior to our initial business combination with respect to the Class A common stock described in this prospectus result in a diminished risk of loss that may prevent a U.S. holder from satisfying the applicable holding period requirements with respect to the dividends received deduction or the preferential tax rate on qualified dividend income, as the case may be. If the holding period requirements are not satisfied, then a corporation may not be able to qualify for the dividends received deduction and would have taxable income equal to the entire dividend amount, and non-corporate holders may be subject to tax on such dividend at regular ordinary income tax rates instead of the preferential rate that applies to qualified dividend income.
A 3.8% Medicare contribution tax will generally apply to all or some portion of the net investment income of a U.S. holder that is an individual with adjusted gross income that exceeds a threshold amount ($250,000 if married filing jointly or if considered a surviving spouse (as defined in the Code), $125,000 if married filing separately, and $200,000 in other cases). This 3.8% tax will also apply to all or some portion of the undistributed net investment income of certain U.S. holders that are estates and trusts. For these purposes, dividends and gains from the taxable dispositions of the common stock and warrants will generally be taken into account in computing such a U.S. holder’s net investment income.
Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock and Warrants. Upon a sale or other taxable disposition of our Class A common stock or warrants, which, in general,
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would include a redemption of shares of Class A common stock or warrants that is treated as a sale of such securities as described below and a liquidation in the event we do not consummate an initial business combination within the required time period, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. holder’s adjusted tax basis in the Class A common stock or warrants. Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. holder’s holding period for the Class A common stock or warrants so disposed of exceeds one year. Long-term capital gains recognized by non-corporate U.S. holders will be eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations.
Generally, the amount realized by a U.S. holder is the sum of the amount of cash and the fair market value of any property received in exchange for the stock or warrants (or, if the Class A common stock or warrants are held as part of units at the time of the disposition, the portion of the amount realized on such disposition that is allocated to the Class A common stock or the warrants based upon the then fair market values of the Class A common stock and the warrants included in the units). The U.S. holder’s adjusted tax basis in its Class A common stock or warrants generally will equal the U.S. holder’s acquisition cost (that is, as discussed above in – Allocation of Purchase Price and Characterization of a Unit, the portion of the purchase price of a unit allocated to a share of Class A common stock or one-half of one warrant or, as discussed below in – Exercise, Lapse or Redemption of a Warrant, the U.S. holder’s initial basis for Class A common stock received upon exercise of warrants) less, in the case of a share of Class A common stock, any prior distributions treated as a return of capital. See “— Redemption of Class A Common Stock” below for a discussion of redemptions of our Class A common stock that may be treated as a sale or exchange hereunder.
As discussed in “—Taxation of Distributions” above, a 3.8% Medicare contribution tax will generally apply to all or some portion of the net investment income of a U.S. holder that is an individual with adjusted gross income that exceeds a threshold amount. For these purposes, gains from the taxable dispositions of the Shares will generally be taken into account in computing such a U.S. holder’s net investment income.
Redemption of Class A Common Stock. In the event that a U.S. holder’s Class A common stock is redeemed pursuant to the redemption provisions described in this prospectus under “Description of Securities — Common Stock” or if we purchase a U.S. holder’s Class A common stock in an open market transaction (referred to herein as a “redemption”), the treatment of the transaction for U.S. federal income tax purposes will depend on whether the redemption qualifies as a sale of the Class A common stock under Section 302 of the Code. If the redemption qualifies as a sale of common stock, the U.S. holder will be treated as described under “— Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock and Warrants” above. If the redemption does not qualify as a sale of common stock, the U.S. holder will be treated as receiving a corporate distribution with the tax consequences described above under “— Taxation of Distributions.” Whether a redemption qualifies for sale treatment will depend largely on the total number of shares of our stock treated as held by the U.S. holder (including any stock constructively owned by the U.S. holder) relative to all of our shares outstanding both before and after the redemption. The redemption of Class A common stock generally will be treated as a sale of the Class A common stock (rather than as a corporate distribution) if the redemption (i) is “substantially disproportionate” with respect to the U.S. holder, (ii) results in a “complete termination” of the U.S. holder’s interest in us or (iii) is “not essentially equivalent to a dividend” with respect to the U.S. holder. These tests are explained more fully below.
In determining whether any of the foregoing tests are satisfied, a U.S. holder takes into account not only stock actually owned by the U.S. holder, but also shares of our stock that are constructively owned by it. A U.S. holder may constructively own, in addition to stock owned directly, stock owned by certain related individuals and entities in which the U.S. holder has an interest or that have an interest in such U.S. holder, as well as any stock the U.S. holder has a right to acquire by exercise of an option, which would generally include Class A common stock that could be acquired pursuant to the exercise of the warrants.
In order to meet the substantially disproportionate test, the percentage of our outstanding voting stock actually and constructively owned by the U.S. holder immediately following the redemption of Class A common stock must, among other requirements, be less than 80% of the percentage of our outstanding voting stock actually and constructively owned by the U.S. holder immediately before the redemption. Prior to our initial business combination, the Class A common stock may not be treated as voting stock for this purpose and, consequently, this substantially disproportionate test may not be applicable until after our initial business combination.
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There will be a complete termination of a U.S. holder’s interest if all of the shares of our stock actually and constructively owned by the U.S. holder are redeemed. However, if the U.S. holder is precluded from completely terminating its interest as a result of the attribution of stock owned by certain family members, the U.S. holder may waive family attribution provided that certain requirements are met.
The redemption of Class A common stock will not be essentially equivalent to a dividend if a U.S. holder’s redemption results in a “meaningful reduction” of the U.S. holder’s proportionate interest in us. Whether the redemption will result in a meaningful reduction in a U.S. holder’s proportionate interest in us will depend on the particular facts and circumstances. However, the IRS has indicated in a published ruling that even a small reduction in the proportionate interest of a small minority stockholder in a publicly held corporation who exercises no control over corporate affairs may constitute such a “meaningful reduction.”
If none of the foregoing tests is satisfied, then the redemption will be treated as a corporate distribution and the tax effects will be as described under “— Taxation of Distributions,” above. After the application of those rules, any remaining tax basis of the U.S. holder in the redeemed Class A common stock will be added to the U.S. holder’s adjusted tax basis in its remaining stock, or, if it has none, to the U.S. holder’s adjusted tax basis in its warrants or possibly in other stock constructively owned by it.
Exercise, Lapse or Redemption of a Warrant. Except as discussed below with respect to the cashless exercise of a warrant, a U.S. holder generally will not recognize taxable gain or loss as a result of the acquisition of common stock upon exercise of a warrant for cash. The U.S. holder’s tax basis in the share of our Class A common stock received upon exercise of the warrant generally will be an amount equal to the sum of the U.S. holder’s initial investment in the warrant (i.e., the portion of the U.S. holder’s purchase price for a unit that is allocated to the warrant, as described above under “— Allocation of Purchase Price and Characterization of a Unit”) and the exercise price of such warrant. It is unclear whether a U.S. holder’s holding period for the Class A common stock received upon exercise of the warrant will commence on the date of exercise of the warrant or the day following the date of exercise of the warrant; in either case, the holding period will not include the period during which the U.S. holder held the warrant. If a warrant is allowed to lapse unexercised, a U.S. holder generally will recognize a capital loss equal to such holder’s tax basis in the warrant.
The tax consequences of a cashless exercise of a warrant are not clear under current tax law. A cashless exercise may not be taxable, either because the exercise is not a realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either situation, a U.S. holder’s tax basis in the Class A common stock received generally should equal the U.S. holder’s tax basis in the warrants. If the cashless exercise was not a realization event (and not a recapitalization), it is unclear whether a U.S. holder’s holding period for the Class A common stock would be treated as commencing on the date of exercise of the warrant or the day following the date of exercise of the warrant. If the cashless exercise were treated as a recapitalization, the holding period of the Class A common stock received would include the holding period of the warrants.
It is also possible that a cashless exercise may be treated in part as a taxable exchange in which gain or loss would be recognized. In such event, a U.S. holder may be deemed to have surrendered a number of warrants having a value equal to the exercise price for the total number of warrants to be exercised. The U.S. holder would recognize capital gain or loss in an amount equal to the difference between the fair market value of the warrants deemed surrendered and the U.S. holder’s tax basis in the warrants deemed surrendered. In this case, a U.S. holder’s tax basis in the Class A common stock received would equal the sum of the U.S. holder’s initial investment in the warrants exercised (i.e., the portion of the U.S. holder’s purchase price for the units that is allocated to the warrant, as described above under “— Allocation of Purchase Price and Characterization of a Unit”) and the exercise price of such warrants. It is unclear whether a U.S. holder’s holding period for the Class A common stock would commence on the date of exercise of the warrant or the day following the date of exercise of the warrant; in either case, the holding period will not include the period during which the U.S. holder held the warrant.
Due to the absence of authority on the U.S. federal income tax treatment of a cashless exercise, including when a U.S. holder’s holding period would commence with respect to the Class A common stock received, there can be no assurance as to which, if any, of the alternative tax consequences and holding periods described above would be adopted by the IRS or a court of law.
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The U.S. federal income tax consequences of an exercise of a warrant occurring after our giving notice of an intention to redeem the warrant for $0.01 as described in the section of this prospectus entitled “Description of Securities —Warrants — Public Stockholders’ Warrants — Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00” or after our giving notice of an intention to redeem the warrant for $0.10 as described in the section of this prospectus entitled “Description of Securities — Warrants — Public Stockholders’ Warrants — Redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00” are unclear under current law. In the case of a cashless exercise, the exercise may be treated either as if we exchanged such warrant for shares of Class A common stock or as an exercise of the warrant. If the cashless exercise of a warrant for shares of Class A common stock is treated as an exchange, then such exchange generally should be treated as a tax-deferred recapitalization for U.S. federal income tax purposes, in which case a U.S. holder should not recognize any gain or loss on such exchange, and accordingly, a U.S. holder’s tax basis in the shares of Class A common stock received should equal the U.S. holder’s tax basis in the warrant and the holding period of the shares of Class A common stock should include the holding period of the warrant. Alternatively, if the cashless exercise of a warrant is treated as an exercise, the U.S. federal income tax consequences generally should be as described above in the second and third paragraphs under the heading “—Exercise, Lapse or Redemption of a Warrant.” In the case of an exercise of a warrant for cash, the U.S. federal income tax treatment generally should be as described above in the first paragraph under the heading “—Exercise, Lapse or Redemption of a Warrant.” Due to the lack of clarity under current law regarding the treatment described in this paragraph, there can be no assurance as to which, if any, of the alternative tax consequences described above would be adopted by the IRS or a court of law.
If we purchase warrants in an open market transaction from a U.S. holder, such purchase generally will be treated as a taxable disposition to the U.S. holder, taxed as described above under “— Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock and Warrants.”
Possible Constructive Distributions. The terms of each warrant provide for an adjustment to the number of shares of common stock for which the warrant may be exercised or to the exercise price of the warrants in certain events, as discussed in the section of this prospectus entitled “Description of Securities — Warrants — Public Stockholders’ Warrants.” An adjustment that has the effect of preventing dilution generally is not taxable. The U.S. holders of the warrants would, however, be treated as receiving a constructive distribution from us if, for example, the adjustment increases the warrant holders’ proportionate interest in our assets or earnings and profits as a result of a distribution of cash or other property to the holders of shares of our Class A common stock. This could occur, for example, through an increase in the number of shares of Class A common stock that would be obtained upon exercise or, depending on the circumstances, through a decrease to the exercise price, including, for example, where additional shares of our Class A common stock or equity-linked securities are issued in connection with the closing of our initial business combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock, and certain other conditions are met, and the exercise price of the warrants is adjusted to be equal to 115% of the higher of the Market Value and the Newly Issued Price, as described under “Description of Securities — Warrants — Anti-dilution Adjustments.” Such a constructive distribution would be subject to tax as described under “— Taxation of Distributions” above in the same manner as if the U.S. holders of the warrants received a cash distribution from us equal to the fair market value of such increased interest. Any such constructive distribution should increase a U.S. holder’s basis in its warrants to the extent treated as a dividend.
Information Reporting and Backup Withholding. In general, information reporting requirements may apply to dividends paid to a U.S. holder and to the proceeds of the sale or other disposition of our units, shares of Class A common stock and warrants, unless the U.S. holder is an exempt recipient and certifies to such exempt status. Backup withholding may apply to such payments if the U.S. holder fails to provide a taxpayer identification number or a certification of exempt status or has been notified by the IRS that it is subject to backup withholding (and such notification has not been withdrawn).
Backup withholding is not an additional tax. Rather, the U.S. federal income tax liability (if any) of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished to the IRS.
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Considerations for Non-U.S. Holders
This section applies to you if you are a “Non-U.S. holder” as defined above in “—U.S. Holder and Non-U.S. Holder Defined.”
Taxation of Distributions. In general, any distributions (including constructive distributions) we make to a Non-U.S. holder of shares of our Class A common stock will constitute dividends for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Provided such dividends are not effectively connected with the Non-U.S. holder’s conduct of a trade or business within the United States, any such dividends generally will be subject to withholding tax at the rate of 30% of the gross amount of the dividend, unless such Non-U.S. holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN or IRS Form W-8BEN-E). In the case of any constructive dividend, it is possible that this tax would be withheld from any amount owed to a Non-U.S. holder, including cash distributions on other property or sale proceeds from warrants or other property subsequently paid or credited to such holder. Any distribution not constituting a dividend will be treated first as reducing (but not below zero) the Non-U.S. holder’s adjusted tax basis in its shares of our Class A common stock and, to the extent such distribution exceeds the Non-U.S. holder’s adjusted tax basis, as gain realized from the sale or other disposition of the Class A common stock, which will be treated as described under “— Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock and Warrants” below. In addition, if we determine that we are likely to be classified as a “United States real property holding corporation” (see “— Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock and Warrants” below), the applicable withholding agent will withhold 15% of any distribution that exceeds our current and accumulated earnings and profits.
The withholding tax does not apply to dividends paid to a Non-U.S. holder who provides a properly completed and duly executed IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. holder’s conduct of a trade or business within the United States. Instead, the effectively connected dividends will be subject to regular U.S. federal income tax as if the Non-U.S. holder were a U.S. resident, except in the case of an applicable income tax treaty providing otherwise. A non-U.S. corporation receiving effectively-connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower treaty rate).
A 3.8% Medicare contribution tax may apply to the extent that net investment income is treated as distributed to a U.S. beneficiary of a Non-U.S. holder that is an estate or a trust. For these purposes, dividends and gains from the taxable dispositions of the Class A common stock and warrants will generally be taken into account in computing such a U.S. beneficiary’s net investment income.
Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock and Warrants. A Non-U.S. holder generally will not be subject to U.S. federal income or withholding tax in respect of gain recognized on a sale, taxable exchange or other taxable disposition of our Class A common stock, which would include a liquidation in the event we do not complete an initial business combination within 18 months (or up to 24 months, if applicable) from the closing of this offering, or warrants (including an expiration or exchange of our warrants), in each case without regard to whether those securities were held as part of a unit, unless:
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the Non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met;
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the gain is effectively connected with the conduct of a trade or business by the Non-U.S. holder within the United States (and, under an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained in the United States by the Non-U.S. holder); or
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we are or have been a “U.S. real property holding corporation” for U.S. federal income tax purposes (a “USRPHC”) at any time during the shorter of the five-year period ending on the date of disposition or the Non-U.S. holder’s holding period for the applicable security (the “relevant period”).
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A Non-U.S. holder described in the first bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as specified by an applicable income tax treaty) on the amount of such gain, which generally may be offset by U.S. source capital losses.
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A Non-U.S. holder whose gain is described in the second bullet point above or, subject to the exceptions described in the next paragraph, to whom the third bullet point above applies, generally will include such gain with the Non-U.S. holder’s other effectively connected income (if any) and will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons (as defined in the Code) unless an applicable income tax treaty provides otherwise. If the Non-U.S. holder is a corporation for U.S. federal income tax purposes, then such gain would also be included in its effectively connected earnings and profits (as adjusted for certain items), which may be subject to a branch profits tax (at a 30% rate or such lower rate as specified by an applicable income tax treaty). In addition, a buyer of our Class A common stock or warrants from a Non-U.S. holder to whom the third bullet point applies may be required to withhold U.S. income tax at a rate of 15% of the amount realized to the Non-U.S. holder upon such disposition.
Although we do not anticipate being a USRPHC prior to a business combination, we cannot offer any assurance as to whether we will be a USRPHC after an initial business combination. We will be classified as a USRPHC if the fair market value of our “U.S. real property interests” equals or exceeds 50% of the sum of the fair market value of our worldwide real property interests plus our other assets used or held for use in a trade or business, as determined for U.S. federal income tax purposes. If we were to become a USRPHC, then if our stock is considered to be “regularly traded on an established securities market” (within the meaning of the applicable Treasury regulations), a Non-U.S. holder who owns, or owned, actually or constructively, at any time during the relevant period, 5% or less of our stock will be exempt from tax on gain realized on the disposition thereof. It is unclear how warrants are treated for purposes of this exception, including whether warrants are separate from the stock for purposes of determining whether stock is regularly traded on an established securities market and whether ownership of warrants will affect the determination of whether a holder owns more than 5% of our stock. It is possible that a Non-U.S. holder of (i) 5% or less of our Class A common stock, (ii) 5% or less of the units, provided the units are considered to be regularly traded, or (iii) 5% or less of the warrants, provided the warrants are considered to be regularly traded, as applicable, will be exempt from tax on gain realized on the disposition thereof notwithstanding our status as a USRPHC. In addition, special rules may apply in the case of a disposition of the units or warrants if our Class A common stock is considered to be regularly traded, but such other securities are not considered to be regularly traded. We can provide no assurance as to our future status as a USRPHC or as to whether our Class A common stock, units or warrants will be treated as regularly traded on an established securities market. See “— Redemption of Class A Common Stock” below for a discussion of redemptions of our Class A common stock that may be treated as a sale or exchange hereunder.
A 3.8% Medicare contribution tax may apply to the extent that net investment income is treated as distributed to a U.S. beneficiary of a Non-U.S. holder that is an estate or a trust. For these purposes, gains from taxable dispositions of the common stock and warrants will generally be taken into account in computing such a U.S. beneficiary’s net investment income.
Redemption of Class A Common Stock. The characterization for U.S. federal income tax purposes of the redemption of a Non-U.S. holder’s Class A common stock pursuant to the redemption provisions described in this prospectus under “Description of Securities — Common Stock” generally will correspond to the U.S. federal income tax characterization of such a redemption of a U.S. holder’s Class A common stock, as described under “— Considerations for U.S. Holders — Redemption of Class A Common Stock” above, and the consequences of the redemption to the Non-U.S. holder will be as described above under “— Taxation of Distributions” and “— Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock and Warrants,” as applicable. It is possible that because the applicable withholding agent may not be able to determine the proper characterization of a redemption of a Non-U.S. holder’s Class A common stock, the withholding agent might treat the redemption as a distribution subject to withholding tax even if a different characterization would apply.
Exercise, Lapse or Redemption of a Warrant. The U.S. federal income tax treatment of a Non-U.S. holder’s exercise of a warrant, or the lapse of a warrant held by a Non-U.S. holder, generally will correspond to the U.S. federal income tax treatment of the exercise or lapse of a warrant held by a U.S. holder, as described under “— Considerations for U.S. Holders — Exercise, Lapse or Redemption of a Warrant” above, although to the extent a cashless exercise results in a taxable exchange, the consequences would be similar to those described under “— Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock and
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Warrants.” If we purchase warrants in an open market transaction, such purchase generally will be treated as a disposition to the non-U.S. holder, the consequences of which would be similar to those described under “— Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock and Warrants.”
Possible Constructive Distributions. The terms of each warrant provide for an adjustment to the number of shares of Class A common stock for which each warrant may be exercised or to the exercise price of each warrant in certain events, as discussed in the section of this prospectus entitled “Description of Securities — Warrants — Public Stockholders’ Warrants.” An adjustment that has the effect of preventing dilution is generally not a taxable event. A Non-U.S. holder of a warrant would, however, be treated as receiving a constructive distribution from us if, for example, the adjustment increases the warrant holder’s proportionate interest in our assets or earnings and profits as a result of a distribution of cash or other property to the holders of shares of our Class A common stock. This could occur, for example, through an increase in the number of shares of Class A common stock that would be obtained upon exercise or, depending on the circumstances, through a decrease to the exercise price, including, for example, where additional shares of our Class A common stock or equity-linked securities are issued in connection with the closing of our initial business combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock, and certain other conditions are met, and the exercise price of the warrants is adjusted to be equal to 115% of the higher of the Market Value and the Newly Issued Price, as described under “Description of Securities — Warrants — Anti-dilution Adjustments.” Such a constructive distribution would be taxable to the Non-U.S. holders of such shares as described under “— Taxation of Distributions” above. A Non-U.S. holder would be subject to U.S. federal income tax withholding as described under that section in the same manner as if such Non-U.S. holder received a cash distribution from us equal to the fair market value of such increased interest without any corresponding receipt of cash.
Estate Tax. Common stock owned or treated as owned by an individual who is not a citizen or resident (as defined for United States federal estate tax purposes) of the United States at the time of his or her death, or by an entity the property of which is potentially includible in such an individual’s gross estate, will be included in the individual’s gross estate for United States federal estate tax purposes and therefore may be subject to United States federal estate tax unless an applicable estate tax treaty provides otherwise. The foregoing may also apply to warrants.
Information Reporting and Backup Withholding. Any dividends paid to a Non-U.S. holder must be reported annually to the IRS and to the Non-U.S. holder. Copies of these information returns may be made available to the tax authorities in the country in which the Non-U.S. holder resides or is established. Payments of dividends to a Non-U.S. holder generally will not be subject to backup withholding if the Non-U.S. holder establishes an exemption by properly certifying its non-U.S. status on an IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable or successor form).
Payments of the proceeds from a sale or other disposition by a Non-U.S. holder of our units, Class A common stock and warrants effected by or through a U.S. office of a broker generally will be subject to information reporting and backup withholding (at the applicable rate) unless the Non-U.S. holder establishes an exemption by properly certifying its non-U.S. status on an IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable or successor form) and certain other conditions are met. Information reporting and backup withholding generally will not apply to any payment of the proceeds from a sale or other disposition of our units, Class A common stock and warrants effected outside the United States by a non-U.S. office of a broker. However, unless such broker has documentary evidence in its records that the Non-U.S. holder is not a United States person and certain other conditions are met, or the Non-U.S. holder otherwise establishes an exemption, information reporting will apply to a payment of the proceeds of the disposition of our common stock effected outside the United States by such a broker if it has certain relationships within the United States.
Backup withholding is not an additional tax. Rather, the U.S. federal income tax liability (if any) of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished to the IRS.
FATCA Withholding. Sections 1471 through 1474 of the Code and the Treasury Regulations and administrative guidance promulgated thereunder (commonly referred to as “FATCA”) generally impose a withholding tax of 30% on payments of dividends (including constructive dividends) on our Class A common
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stock or warrants and on the gross proceeds from the sale or other disposition of our units, Class A common stock or warrants, in each case if paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code) (including, in some cases, when such foreign financial institution or non-financial foreign entity is acting as an intermediary), unless (i) in the case of a foreign financial institution, such institution enters into an agreement with the U.S. government to withhold on certain payments, and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are non-U.S. entities with U.S. owners), (ii) in the case of a non-financial foreign entity, such entity certifies that it does not have any “substantial United States owners” (as defined in the Code) or provides the applicable withholding agent with a certification identifying the direct and indirect substantial United States owners of the entity (in either case, generally on an IRS Form W-8BEN-E), or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules and provides appropriate documentation (such as an IRS Form W-8BEN-E). The IRS has issued proposed Treasury Regulations (on which taxpayers may rely until final Treasury Regulations are issued) that would generally not apply these withholding requirements to gross proceeds from sales or other disposition proceeds from our units, Class A common stock and warrants. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Under certain circumstances, a holder might be eligible for refunds or credits of such taxes if it timely files a tax return in the United States. U.S. holders and Non-U.S. holders are encouraged to consult their tax advisors regarding the effects of FATCA on an investment in our Class A common stock or warrants.
INVESTORS CONSIDERING THE PURCHASE OF OUR SECURITIES ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AND THE APPLICABILITY AND EFFECT OF U.S. FEDERAL ESTATE AND GIFT TAX LAWS AND ANY STATE, LOCAL OR NON-U.S. TAX LAWS AND TAX TREATIES.
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Under the terms and subject to the conditions contained in an underwriting agreement among us and the underwriter, we have agreed to sell to the underwriter named below the following numbers of units:
BofA Securities, Inc.
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20,000,000
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20,000,000
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Subject to the terms and conditions set forth in the underwriting agreement, the underwriter is obligated to purchase all of the units sold under the underwriting agreement if any of these units are purchased, other than those units covered by the option described below.
We have agreed to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriter may be required to make in respect of those liabilities.
The underwriter is offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriter of officer’s certificates and legal opinions. The underwriter reserves the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Commissions and Discounts
The underwriter has advised us that it proposes initially to offer the units to the public at the public offering price set forth on the cover page of this prospectus and to dealers at that price less a concession not in excess of $ per share. After the initial offering, the public offering price, concession or any other term of the offering may be changed.
The following table shows the public offering price, underwriting discount and proceeds before expenses to us. The information assumes either no exercise or full exercise by the underwriter of their option to purchase additional shares.
Public offering price
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$10.00
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$10.00
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$200,000,000
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$230,000,000
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Underwriting Discounts and Commissions
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$0.55
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$0.55
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$11,000,000
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$12,650,000
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Proceeds, before expenses, to us
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$9.45
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$9.45
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$189,000,000
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$217,350,000
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Includes $0.35 per unit, or $7,000,000 in the aggregate (or $8,050,000 in the aggregate if the underwriter’s over- allotment option is exercised in full), payable to the underwriter for deferred underwriting commissions to be placed in a trust account located in the United States as described herein and released to the underwriter only upon the consummation of an initial business combination.
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We estimate that our non-reimbursed out-of-pocket expenses for this offering will be approximately $550,000. We have agreed to pay for the FINRA-related fees and expenses of the underwriter’s legal counsel, not to exceed $25,000.
Option to Purchase Additional Shares
We have granted an option to the underwriter, exercisable for 45 days after the date of this prospectus, to purchase up to 3,000,000 additional units at the public offering price, less the underwriting discount.
No Sales of Similar Securities
We, our sponsor and our officers and directors have agreed that we and they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, without the prior written consent of BofA Securities, Inc. for a period of 180 days after the date of this prospectus, any units, warrants, common stock or any other
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securities convertible into, or exercisable, or exchangeable for, shares of Class A common stock; provided, however, that we may (1) issue and sell the private placement warrants; (2) issue and sell the additional units to cover our underwriter’s over-allotment option (if any); (3) register with the SEC pursuant to an agreement to be entered into on or prior to the closing of this offering, the resale of the private placement warrants and the shares of Class A common stock issuable upon exercise of the warrants and the founder shares; and (4) issue securities in connection with our initial business combination. However, the foregoing shall not apply to the forfeiture by our sponsor of any founder shares pursuant to their terms or any transfer of founder shares to any current or future independent director of the company (as long as such current or future independent director is subject to the terms of the letter agreement, filed herewith, at the time of such transfer; and as long as, to the extent any Section 16 reporting obligation is triggered as a result of such transfer, any related Section 16 filing includes a practical explanation as to the nature of the transfer). BofA Securities, Inc. in its sole discretion may release any of the securities subject to these lock-up agreements at any time without notice.
We and BlackRock have agreed that during the period commencing on the effective date of this prospectus and ending 180 days after such date, BlackRock shall not, without our prior written consent, (i) directly or indirectly offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of any common stock, founder shares, warrants or private placement warrants, or any securities convertible into, or exercisable, or exchangeable for, common stock, founder shares, warrants or private placement warrants or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of common stock, founder shares, warrants or private placement warrants, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of common stock, founder shares, warrants or private placement warrants or other securities, in cash or otherwise; provided, however, that the foregoing shall not apply (i) to the forfeiture by BlackRock of any founder shares pursuant to their terms or (ii) to any public units (or the public shares and public warrants comprising such public units) that may be acquired by BlackRock in this offering or in the open market following this offering. We have agreed that we will not release such restrictions with respect to BlackRock without the prior written consent of BofA Securities, Inc.
Pursuant to a letter agreement with us and our agreements with BlackRock, our sponsor and our directors and officers have agreed not to transfer, assign or sell any of their founder shares until the earliest of (A) one year after the completion of our initial business combination and (B) subsequent to our initial business combination, (x) if the closing price of our shares of Class A common stock equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of our public stockholders having the right to exchange their common stock for cash, securities or other property (except pursuant to limited exceptions as described under “Principal Stockholders — Transfers of Founder Shares and Private Placement Warrants”). Any permitted transferees would be subject to the same restrictions and other agreements of our initial stockholders and our directors and executive officers with respect to any founder shares.
The private placement warrants (including the shares of Class A common stock issuable upon exercise of the private placement warrants) will not be transferable, assignable or salable until 30 days after the completion of our initial business combination (except pursuant to limited exceptions as described under “Principal Stockholders — Transfers of Founder Shares and Private Placement Warrants”).
New York Stock Exchange Listing
We have applied to have our units listed on the NYSE, under the symbol “PACI.U” on or after the effective date of the registration statement of which this prospectus forms a part and, once the shares of our Class A common stock and warrants begin separate trading, to have the shares of our Class A common stock and warrants listed on the NYSE under the symbols “PACI” and “PACI.WS,” respectively.
Prior to this offering, there has been no public market for our securities. Consequently, the initial public offering price for the units was determined by negotiations between us and the underwriter.
The determination of our per unit offering price was more arbitrary than would typically be the case if we were an operating company. Among the factors considered in determining the initial public offering price were:
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the history and prospects of companies whose principal business is the acquisition of other companies;
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prior offerings of those companies;
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our capital structure; and
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currently prevailing general conditions in equity securities markets, including current market valuations of publicly traded companies considered comparable to our company.
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We cannot assure you, however, that the price at which the units, shares of Class A common stock or warrants will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our units, shares of Class A common stock or warrants will develop and continue after this offering.
The underwriter does not expect to sell more than 5% of the units in the aggregate to accounts over which they exercise discretionary authority.
If we do not complete our initial business combination within the prescribed timeframe, the trustee and the underwriter have agreed that: (1) they will forfeit any rights or claims to their deferred underwriting discounts and commissions, including any accrued interest thereon, then in the trust account; and (2) the deferred underwriter’s discounts and commissions will be distributed on a pro rata basis, together with any accrued interest thereon (which interest shall be net of taxes payable) to the public stockholders.
Price Stabilization and Short positions
Until the distribution of the units is completed, SEC rules may limit the underwriter and selling group members from bidding for and purchasing our securities. However, the underwriter may engage in transactions that stabilize the price of the units, such as bids or purchases to peg, fix or maintain that price.
In connection with the offering, the underwriter may purchase and sell our units in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriter of a greater number of units than it is required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriter’s option to purchase additional units described above. The underwriter may close out any covered short position by either exercising its option to purchase additional units or purchasing units in the open market. In determining the source of units to close out the covered short position, the underwriter will consider, among other things, the price of units available for purchase in the open market as compared to the price at which it may purchase units through the option granted to it. “Naked” short sales are sales in excess of such option. The underwriter must close out any naked short position by purchasing units in the open market. A naked short position is more likely to be created if the underwriter is concerned that there may be downward pressure on the price of the units in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of units made by the underwriter in the open market prior to the completion of the offering.
Similar to other purchase transactions, the underwriter’s purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of the units or preventing or retarding a decline in the market price of the units. As a result, the price of the units may be higher than the price that might otherwise exist in the open market. The underwriter may conduct these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise.
Neither we nor the underwriter make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the units. In addition, neither we nor the underwriter make any representation that the underwriter will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
Electronic Distribution
In connection with the offering, certain of the underwriter or securities dealers may distribute prospectuses by electronic means, such as e-mail.
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Other Relationships
We are not under any contractual obligation to engage the underwriter to provide any services for us after this offering and have no present intent to do so, but we may do so at our discretion. However, the underwriter (or its affiliates) may introduce us to potential target businesses, act as sell-side financial advisor for any of them, provide financial advisory services to us in connection with a business combination or assist us in raising additional capital in the future, including by acting as a placement agent in a private offering or underwriting, or arranging debt financing. If the underwriter or its affiliates provides services to us after this offering, we may pay the underwriter fair and reasonable fees or other compensation that would be determined at that time in an arm’s length negotiation; provided that no agreement will be entered into with the underwriter or its affiliates and no fees for such services will be paid to the underwriter or its affiliates prior to the date that is 60 days from the date of this prospectus, unless FINRA determines that such payment would not be deemed underwriter’s compensation, or such payment is otherwise excluded from such characterization under applicable FINRA rules, in connection with this offering, and we may pay the underwriter of this offering or any entity with which it is affiliated, a finder’s fee or other compensation for services rendered to us in connection with the completion of a business combination. Any fees we may pay the underwriter or its affiliates for services rendered to us after this offering may be contingent on the completion of a business combination and may be paid in consideration other than cash. The underwriter or its affiliates that provide these services to us may have a potential conflict of interest given that the underwriter is entitled to the deferred portion of its underwriting compensation for this offering only if an initial business combination is completed within the specified timeframe.
The underwriter and its affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. The underwriter and its affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. The underwriter has received, or may in the future receive, customary fees and commissions for these transactions.
In addition, in the ordinary course of their business activities, the underwriter and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for its own account and for the accounts of its customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriter and its affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that it acquires, long and/or short positions in such securities and instruments.
Notice to Prospective Investors in Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (“ASIC”), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the units may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the units without disclosure to investors under Chapter 6D of the Corporations Act.
The units applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring units must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities
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recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Notice to Prospective Investors in the Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (“DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The units to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the units offered should conduct their own due diligence on the units. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area (each a “Member State”), no units have been offered or will be offered pursuant to this offering to the public in that Member State prior to the publication of a prospectus in relation to the units which has been approved by the competent authority in that Member State or, where appropriate, approved in another Member State and notified to the competent authority in that Member State, all in accordance with the Prospectus Regulation, except that offers of units may be made to the public in that Member State at any time under the following exemptions under the Prospectus Regulation:
(a)
|
to any legal entity which is a qualified investor as defined under the Prospectus Regulation;
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(b)
|
to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the underwriter for any such offer; or
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(c)
|
in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
|
provided that no such offer of units shall require the issuer or the underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
Each person in a Relevant State who initially acquires any units or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with us and the underwriter that it is a qualified investor within the meaning of the Prospectus Regulation.
In the case of any units being offered to a financial intermediary as that term is used in Article 5(1) of the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the units acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer to the public other than their offer or resale in a Relevant State to qualified investors, in circumstances in which the prior consent of the underwriter has been obtained to each such proposed offer or resale.
The company, the sponsor, the underwriter and its affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements.
For the purposes of this provision, the expression an “offer to the public” in relation to any securities in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any securities to be offered so as to enable an investor to decide to purchase any securities and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
The above selling restriction is in addition to any other selling restrictions set out below.
In connection with the offering, BofA Securities, Inc. is not acting for anyone other than the company and will not be responsible to anyone other than the company for providing the protections afforded to its clients nor for providing advice in relation to the offering.
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Notice to Prospective Investors in the United Kingdom
No units have been offered or will be offered pursuant to the offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the units which has been approved by the Financial Conduct Authority or is to be treated as if it had been approved by the Financial Conduct Authority in accordance with the transitional provisions in Article 74 (transitional provisions) of the Prospectus Amendment etc (EU Exit) Regulations 2019/1234, except that the units may be offered to the public in the United Kingdom at any time:
•
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to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus Regulation;
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•
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to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of the underwriter for any such offer; or
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•
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in any other circumstances falling within Section 86 of the Financial Services and Markets Act 2000 (“FSMA”),
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provided that no such offer of the units shall require the company, sponsor or the underwriter to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation.
Notwithstanding the above, each person in the UK who initially acquires any units or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with the Company and the underwriter that it is a qualified investor within the meaning of the UK Prospectus Regulation.
In the case of any units being offered to a financial intermediary as that term is used in Article 5(1) of the UK Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the units acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer to the public other than their offer or resale in the UK to qualified investors, in circumstances in which the prior consent of the underwriter has been obtained to each such proposed offer or resale.
The company, the underwriter and their affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements.
For the purposes of this provision, the expression an “offer to the public” in relation to the units in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and any units to be offered so as to enable an investor to decide to purchase or subscribe for any units and the expression “UK Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.
In connection with the offering, BofA Securities, Inc. is not acting for anyone other than the company and will not be responsible to anyone other than the company for providing the protections afforded to its clients nor for providing advice in relation to the offering.
This document is for distribution only to persons who (i) have professional experience in matters relating to investments and who qualify as investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Financial Promotion Order”), (ii) are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of the Financial Promotion Order, (iii) are outside the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This document is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons.
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Notice to Prospective Investors in Japan
The units have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, “Japanese Person” shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
Notice to Prospective Investors in Hong Kong
The units have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the units has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to units which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, the units were not offered or sold or caused to be made the subject of an invitation for subscription or purchase and will not be offered or sold or caused to be made the subject of an invitation for subscription or purchase, and this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the units, has not been circulated or distributed, nor will it be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time (the “SFA”)) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the units are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
•
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a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
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•
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a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
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securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the units pursuant to an offer made under Section 275 of the SFA except:
•
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to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
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•
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where no consideration is or will be given for the transfer;
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•
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where the transfer is by operation of law; or
|
•
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as specified in Section 276(7) of the SFA.
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Notice to Prospective Investors in Germany
Each person who is in possession of this prospectus is aware that no German sales prospectus (Verkaufsprospekt) within the meaning of the Securities Sales Prospectus Act (Wertpapier-Verkaufsprospektgesetz, the “Act”) of the Federal Republic of Germany has been or will be published with respect to our units. In particular, the underwriter has represented that it has not engaged and has agreed that it will not engage in a public offering (offentliches Angebot) within the meaning of the Act with respect to any of our units otherwise then in accordance with the Act and all other applicable legal and regulatory requirements.
Notice to Prospective Investors in France
The units are being issued and sold outside the Republic of France and that, in connection with their initial distribution, it has not offered or sold and will not offer or sell, directly or indirectly, any units to the public in the Republic of France, and that it has not distributed and will not distribute or cause to be distributed to the public in the Republic of France this prospectus or any other offering material relating to the units, and that such offers, sales and distributions have been and will be made in the Republic of France only to qualified investors (investisseurs qualifiés) in accordance with Article L.411-2 of the Monetary and Financial Code and decrét no. 98-880 dated October 1, 1998.
Notice to Prospective Investors in the Netherlands
Our units may not be offered, sold, transferred or delivered in or from the Netherlands as part of their initial distribution or at any time thereafter, directly or indirectly, other than to, individuals or legal entities situated in The Netherlands who or which trade or invest in securities in the conduct of a business or profession (which includes banks, securities intermediaries (including dealers and brokers), insurance companies, pension funds, collective investment institution, central governments, large international and supranational organizations, other institutional investors and other parties, including treasury departments of commercial enterprises, which as an ancillary activity regularly invest in securities; hereinafter, “Professional Investors”); provided that in the offer, prospectus and in any other documents or advertisements in which a forthcoming offering of our units is publicly announced (whether electronically or otherwise) in The Netherlands it is stated that such offer is and will be exclusively made to such Professional Investors. Individual or legal entities who are not Professional Investors may not participate in the offering of our units, and this prospectus or any other offering material relating to our units may not be considered an offer or the prospect of an offer to sell or exchange our units.
Notice to Prospective Investors in Switzerland
The units may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the units or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, the Company, the units have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of units will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of units has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of units.
Notice to Prospective Investors in the Cayman Islands
No offer or invitation, whether directly or indirectly, may be made to the public in the Cayman Islands to subscribe for our securities.
Notice to Prospective Investors in Canada
The units may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of
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the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the units must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriter is not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Steptoe & Johnson LLP, New York, New York, is acting as counsel in connection with the registration of our securities under the Securities Act and, as such, will pass upon the validity of the securities offered in this prospectus. In connection with this offering, Freshfields Bruckhaus Deringer US LLP, Menlo Park, California, is acting as counsel to the underwriter.
The financial statements of PROOF Acquisition Corp I as of March 31, 2021, and for the period from March 16, 2021 (inception) through March 31, 2021, appearing in this prospectus have been audited by Marcum LLP, independent registered public accounting firm, as set forth in their report thereon (which contains an explanatory paragraph relating to substantial doubt about the ability of PROOF Acquisition Corp I to continue as a going concern as described in Note 1 to the financial statements), appearing elsewhere in this prospectus, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the securities we are offering by this prospectus. This prospectus does not contain all of the information included in the registration statement. For further information about us and our securities, you should refer to the registration statement of which this prospectus forms a part and the exhibits and schedules filed with the registration statement. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are materially complete but may not include a description of all aspects of such contracts, agreements or other documents, and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document.
Upon completion of this offering, we will be subject to the information requirements of the Exchange Act and will file annual, quarterly and current event reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at www.sec.gov.
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INDEX TO FINANCIAL STATEMENTS
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholder and Board of Directors of
PROOF Acquisition Corp I
Opinion on the Financial Statements
We have audited the accompanying balance sheet of PROOF Acquisition Corp I (the “Company”) as of March 31, 2021, the related statements of operations, changes in stockholder’s equity and cash flows for the period from March 16, 2021 (commencement of operations) through March 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2021, and the results of its operations and its cash flows for the period from March 16, 2021 (commencement of operations) through March 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements, the Company’s business plan is dependent upon its completion of the proposed initial public offering described in Note 3 to the financial statements. The Company has a working capital deficiency as of March 31, 2021 and lacks the financial resources it needs to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are also described in Notes 1 and 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting 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.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2021.
Hartford, CT
May 28, 2021, except for Note 4 and the second paragraph of Note 8 as to which the date is October 15, 2021
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BALANCE SHEETS
ASSETS
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Current assets – cash
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$24,070
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|
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$—
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Due from Sponsor
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|
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—
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|
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25,000
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Deferred offering costs
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|
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340,869
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194,401
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Total Assets
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$364,939
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$219,401
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current Liabilities:
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|
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Advances from related party
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$716
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$716
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Accrued offering costs
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|
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230,120
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|
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194,401
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Note Payable – Sponsor
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|
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110,000
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|
|
—
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Total Current Liabilities
|
|
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340,836
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195,117
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Commitments and contingencies (Note 5)
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Shareholder’s Equity:
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
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|
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—
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—
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Class A common stock, $0.0001 par value; 70,000,000 shares authorized; none issued and outstanding
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|
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—
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|
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—
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Class B common stock, $0.0001 par value; 12,500,000 shares authorized; 5,750,000 shares issued and outstanding(1)
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575
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|
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575
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Additional paid-in capital
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24,425
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|
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24,425
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Accumulated deficit
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|
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(897)
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|
|
(716)
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Total Shareholder’s Equity
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24,103
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|
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24,284
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Total Liabilities and Shareholder’s Equity
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|
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$364,939
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|
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$219,401
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(1)
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Includes an aggregate of up to 750,000 shares of Class B common stock subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters (see Note 5).
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The accompanying notes are an integral part of these financial statements.
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STATEMENTS OF OPERATIONS
Formation and operating costs
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$ 897
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$716
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Net loss
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$(897)
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$(716)
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Weighted average shares outstanding, basic and diluted (1)
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5,000,000
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5,000,000
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Basic and diluted net loss per ordinary share
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$(0.00)
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$(0.00)
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(1)
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Excludes an aggregate of up to 750,000 shares of Class B common stock subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters (see Note 5).
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The accompanying notes are an integral part of these financial statements.
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STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY
Balance, March 16, 2021 (inception)
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—
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$—
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|
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$—
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|
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$—
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|
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$—
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Issuance of Class B common stock to Sponsor(1)
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5,750,000
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|
|
575
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|
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24,425
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|
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—
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|
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25,000
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Net loss
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|
|
—
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|
|
—
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|
|
—
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|
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(716)
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|
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(716)
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Balance, March 31, 2021 (audited)
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|
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5,750,000
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|
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$575
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|
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$24,425
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|
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$(716)
|
|
|
$24,284
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Net loss
|
|
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—
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|
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—
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|
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—
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|
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(181)
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|
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(181)
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Balance, September 30, 2021 (unaudited)
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|
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5,750,000
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|
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$575
|
|
|
$24,425
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|
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$(897)
|
|
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$24,103
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(1)Includes an aggregate of up to 750,000 shares of Class B common stock subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters (see Note 5).
The accompanying notes are an integral part of these financial statements.
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STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
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Net loss
|
|
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$(897)
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|
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$(716)
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Formation and organization costs paid by related party
|
|
|
716
|
|
|
716
|
Changes in deferred offering costs
|
|
|
(146,468)
|
|
|
—
|
Changes in accrued formation and offering costs
|
|
|
35,719
|
|
|
—
|
Net cash used in operating activities
|
|
|
(110,930)
|
|
|
—
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Proceeds from issuance of Class B ordinary shares to Sponsor
|
|
|
25,000
|
|
|
—
|
Proceeds from sponsor note
|
|
|
110,000
|
|
|
—
|
Net cash provided by financing activities
|
|
|
135,000
|
|
|
—
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
24,187
|
|
|
—
|
Cash at beginning of period
|
|
|
—
|
|
|
—
|
Cash at end of period
|
|
|
$24,070
|
|
|
$—
|
|
|
|
|
|
|
|
Non-cash financing activities:
|
|
|
|
|
|
|
Class B common stock issued for due from Sponsor
|
|
|
$—
|
|
|
$25,000
|
Deferred offering costs included in accrued offering costs
|
|
|
$340,869
|
|
|
$194,401
|
The accompanying notes are an integral part of these financial statements.
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FOR THE PERIOD FROM MARCH 16, 2021 (INCEPTION) THROUGH SEPTEMBER 30, 2021
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
PROOF Acquisition Corp I (the “Company”) was incorporated in Delaware on March 16, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2021, the Company had not commenced any operations. All activity for the period from March 16, 2021 (inception) through September 30, 2021 relates to the Company’s formation and the proposed initial public offering (“Proposed Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Proposed Public Offering. The Company has selected December 31 as its fiscal year end.
The Company’s ability to commence operations is contingent upon obtaining adequate financial resources through a Proposed Public Offering of 20,000,000 Units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”) at $10.00 per Unit (or 23,000,000 Units if the underwriters’ over-allotment option is exercised in full), which is discussed in Note 3, and the sale of 11,500,000 warrants (or 13,225,000 warrants if the underwriters’ over-allotment option is exercised on full) (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in private placements to PROOF Acquisition Sponsor I, LLC (the “Sponsor”) that will close simultaneously with the Proposed Public Offering.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Proposed Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (as defined below) (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Upon the closing of the Proposed Public Offering, management has agreed that an amount equal to at least $10.20 per Unit sold (or $10.30 or $10.40 per Unit sold in case we extend the period of time available for us to complete a business combination to 21 months or 24 months, respectively) in the Proposed Public Offering, including proceeds of the Private Placement Warrants, will be held in a trust account (“Trust Account”), located in the United States and invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.
The Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer in connection with the Business Combination. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.20 per Public Share, and such amount will be increased by $0.10 per public share for any three-month extension of our time to consummate our initial business combination, as described herein, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion
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of a Business Combination with respect to the Company’s warrants. The Public Shares subject to redemption will be recorded at a redemption value and classified as temporary equity upon the completion of the Proposed Public Offering in accordance with the Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
If the Company seeks stockholder approval of the Business Combination, the Company will proceed with a Business Combination if a majority of the outstanding shares voted are voted in favor of the Business Combination, or such other vote as required by law or stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its amended and restated certificate of incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Proposed Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate of Incorporation will provide that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares, without the prior consent of the Company.
The holders of the Founder Shares have agreed (a) to waive their redemption rights with respect to the Founder Shares and Public Shares held by them in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If the Company has not completed a Business Combination within 18 months (or up to 24 months, if applicable) from the closing of the Proposed Public Offering (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The holders of the Founders Shares have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the holders of Founder Shares acquire Public Shares in or after the Proposed Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a
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Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Proposed Public Offering price per Unit ($10.20 or $10.30 or $10.40 in case of one or both extensions of the time period to complete our initial business combination have been effectuated).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i)(x) $10.20 per Public Share following the closing of this offering, (y) $10.30 per public share after 18 months from the closing of this offering, or (z) $10.40 per public share after 21 months from the closing of this offering, as applicable; or (ii) such lesser amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.20, $10.30 or $10.40 per public Share (as applicable) due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Proposed Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Going Concern Consideration
At September 30, 2021, the Company had cash and a working capital deficit of $24,070 and $316,766, respectively. Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. The Company lacks the financial resources it needs to sustain operations for a reasonable period of time, which is considered to be one year from the date of the issuance of the financial statements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management plans to address this uncertainty through the Proposed Public Offering. There is no assurance that the Company’s plans to raise capital will be successful. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, close of the Proposed Public Offering and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying audited financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the SEC.
In the opinion of the Company’s management, the unaudited financial statements as of September 30, 2021 and for the period from March 16, 2021 (inception) through September 30, 2021 include all adjustments, which are only of a normal and recurring nature, necessary for a fair statement of the financial position of the Company as of September 30, 2021 and its results of operations and cash flows for the period from March 16, 2021 (inception) through September 30, 2021. The results of operations for the period from March 16, 2021 (inception) through September 30, 2021 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2021.
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Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires the Company’s 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 expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Deferred Offering Costs
Deferred offering costs consist of costs incurred in connection with preparation for the Proposed Public Offering. These costs, together with the underwriting discounts and commissions, will be charged to additional paid in capital upon completion of the Proposed Public Offering or charged to operations if the Proposed Public Offering is not completed. As of September 30, 2021 and March 31, 2021, the Company had deferred offering costs of $340,869 and $194,401, respectively.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to
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be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2021 or March 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
The provision for income taxes was deemed to be de minimis for the period from March 16, 2021 (inception) through September 30, 2021 and for the period from March 16, 2021 (inception) through March 31, 2021. The Company’s deferred tax assets were deemed to be de minimis as of September 30, 2021 and March 31, 2021.
Net Loss per Common Share
Net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period, excluding shares of common stock subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of 750,000 shares of Class B common stock that are subject to forfeiture if the over-allotment option is not exercised by the underwriters (see Note 5). At September 30, 2021, and March 31, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into shares of common stock and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3 — PROPOSED PUBLIC OFFERING
Pursuant to the Proposed Public Offering, the Company intends to offer for sale 20,000,000 Units (or 23,000,000 Units if the underwriters’ over-allotment option is exercised in full) at a price of $10.00 per Unit. Each Unit will consist of one share of Class A common stock and one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant will entitle the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
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NOTE 4 — PRIVATE PLACEMENTS
The Sponsor and certain funds and accounts managed by subsidiaries of BlackRock, Inc. have agreed to purchase an aggregate of 11,500,000 Private Placement Warrants (or 13,225,000 Private Placement Warrants if the underwriters’ over-allotment is exercised in full) at a price of $1.00 per Private Placement Warrant ($11,500,000, or an aggregate of $13,225,000 if the underwriters’ over-allotment is exercised in full) from the Company in private placements that will occur simultaneously with the closing of the Proposed Public Offering. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7). The proceeds from the sale of the Private Placement Warrants will be added to the net proceeds from the Proposed Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. The Private Placement Warrants (including the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of an Initial Business Combination, subject to certain exceptions.
NOTE 5 — RELATED PARTIES
Founder Shares
On March 31, 2021, the Sponsor received 5,750,000 of the Company’s Class B common stock (the “Founder Shares”) for a May 4, 2021 payment of $25,000. The Founder Shares include an aggregate of up to 750,000 shares subject to forfeiture to the extent that the underwriters’ over-allotment is not exercised in full or in part, so that the number of Founder Shares will equal, on an as-converted basis, approximately 20% of the Company’s issued and outstanding shares of common stock after the Proposed Public Offering.
The holders of the Founder Shares have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Promissory Note — Related Party
On March 31, 2021, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company may borrow up to an aggregate principal amount of $300,000. The Promissory Note is non-interest bearing and payable on the earlier of (i) March 31, 2022 or (ii) the consummation of the Proposed Public Offering. As of September 30, 2021 and March 31, 2021, the amounts outstanding under the Promissory Note were $110,000 and $0, respectively.
General and Administrative Services
Commencing on the date the Units are first listed on the NYSE, the Company has agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support for up to 24 months. Upon completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a Business Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the
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Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of September 30, 2021 and March 31, 2021, there were no amounts outstanding under the Working Capital Loans.
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Registration Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of Proposed Public Offering requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A common stock). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until the securities covered thereby are released from their lock-up restrictions. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company will grant the underwriters a 45-day option from the date of Proposed Public Offering to purchase up to 3,000,000 additional Units to cover over-allotments, if any, at the Proposed Public Offering price less the underwriting discounts and commissions.
The underwriters will be entitled to a cash underwriting discount of $0.20 per Unit, or $4,000,000 in the aggregate (or $4,600,000 in the aggregate if the underwriters’ over-allotment option is exercised in full), payable upon the closing of the Proposed Public Offering. In addition, the underwriters will be entitled to a deferred fee of $0.35 per Unit, or $7,000,000 in the aggregate (or $8,050,000 in the aggregate if the underwriters’ over-allotment option is exercised in full). The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
NOTE 7 — STOCKHOLDER’S EQUITY
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. As of September 30, 2021 and March 31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock — The Company is authorized to issue 70,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. As of September 30, 2021 and March 31, 2021, there were no shares of Class A common stock issued or outstanding.
Class B Common Stock — The Company is authorized to issue 12,500,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. As of September 30, 2021 and March 31, 2021, there were 5,750,000 shares of Class B common stock issued and outstanding, of which an aggregate of up to 750,000 shares of Class B common stock are subject to forfeiture to the extent that the underwriters’ over-allotment option is not exercised in full or in part so that the number of Founder Shares will equal 20% of the Company’s issued and outstanding common stock after the Proposed Public Offering.
Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise required by
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law. In connection with our initial business combination, we may enter into a stockholders agreement or other arrangements with the stockholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of this offering.
The shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Proposed Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of Proposed Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (net of the number of shares of Class A common stock redeemed in connection with a Business Combination), excluding any shares or equity-linked securities issued or issuable to any seller of an interest in the target to us in a Business Combination.
Warrants — As of September 30, 2021 and March 31, 2021 there are no warrants outstanding. Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Proposed Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of residence of the exercising holder, or an exemption from registration is available.
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00 — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
•
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in whole and not in part;
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•
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at a price of $0.01 per Public Warrant;
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•
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upon a minimum of 30 days’ prior written notice of redemption, or the 30-day redemption period to each warrant holder; and
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•
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if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganization, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to warrant holders.
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Redemption of Warrants When the Price per Class A Common Stock Equals or Exceeds $10.00 — Once the warrants become exercisable, the Company may redeem the outstanding warrants:
•
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in whole and not in part;
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•
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at a price of $0.10 per warrant provided that the holder will be able to exercise their warrants on cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the Class A common stock;
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•
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upon a minimum of 30 days’ prior written notice of redemption;
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•
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if, and only if, the last reported sale price of our Class A common stock equals or exceeds $10.00 per public share (as adjusted per stock subdivisions, stock dividends, reorganizations, recapitalizations and the like) on the trading day before the Company sends the notice of redemption to the warrant holders; and
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•
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if, and only if, the private placement warrants are also concurrently exchanged at the same price (equal to a number of Class A common stock) as the outstanding public warrants, as described above.
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If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
The Private Placement Warrants will be identical to the Public Warrants underlying the Units being sold in the Proposed Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.
NOTE 8 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through October 15, 2021, the date that the financial statements were available to be issued. Based upon this review, except as noted below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
On October 13, 2021, upon further review of the proposed form of warrant agreement, management concluded that the Public and Private warrants to be issued pursuant to the warrant agreement qualify for equity accounting treatment in accordance with the guidance contained in ASC 815-40.
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Through and including , 2021, (the 25th day after the date of this prospectus), all dealers effecting transactions in the units, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
20,000,000 Units
PROOF Acquisition Corp I
PRELIMINARY PROSPECTUS
BofA Securities
, 2021
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
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Other Expenses of Issuance and Distribution.
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The estimated expenses payable by us in connection with the offering described in this registration statement (other than the underwriting discount and commissions) will be as follows:
SEC expenses
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$21,000
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FINRA expenses
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$35,000
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Accounting fees and expenses
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$75,000
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Printing and engraving expenses
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$30,000
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Travel and road show expenses
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$25,000
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Legal fees and expenses
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$200,000
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NYSE listing and filing fees
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$85,000
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Miscellaneous
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$79,000
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Total
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$550,000
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Item 14.
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Indemnification of Directors and Officers.
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Our amended and restated certificate of incorporation provides that all of our directors, officers, employees and agents shall be entitled to be indemnified by us to the fullest extent permitted by Section 145 of the Delaware General Corporation Law (“DGCL”). Section 145 of the DGCL concerning indemnification of officers, directors, employees and agents is set forth below.
Section 145. Indemnification of officers, directors, employees and agents; insurance.
(a)
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A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.
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(b)
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A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
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(c)
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To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.
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(d)
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Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made, with respect to a person who is a director or officer of the corporation at the time of such determination (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum; or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum; or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion; or (4) by the stockholders.
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(e)
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Expenses (including attorneys’ fees) incurred by an officer or director of the corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents of the corporation or by persons serving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.
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(f)
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The indemnification and advancement of expenses provided by, or granted pursuant to, the other — subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. A right to indemnification or to advancement of expenses arising under a provision of the amended and restated certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to the amended and restated certificate of incorporation or the bylaws after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.
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(g)
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A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under this section.
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(h)
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For purposes of this section, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
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(i)
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For purposes of this section, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this section.
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(j)
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The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
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(k)
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The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation’s obligation to advance expenses (including attorneys’ fees).
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In connection with this registration statement, we have undertaken that insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
In accordance with Section 102(b)(7) of the DGCL, our amended and restated certificate of incorporation will provide that no director shall be personally liable to us or any of our stockholders for monetary damages resulting from breaches of his or her fiduciary duty as a director, except to the extent such limitation on or exemption from liability is not permitted under the DGCL or unless he or she violated his or her duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived improper personal benefit from his or her action as a director. The effect of this provision of our amended and restated certificate of incorporation is to eliminate our rights and those of our stockholders (through stockholders’ derivative suits on our behalf) to recover monetary damages against a director for breach of the fiduciary duty of care as a director, including breaches resulting from negligent or grossly negligent behavior, except as restricted by Section 102(b) of the DGCL. However, this provision does not limit or eliminate our rights or the rights of any stockholder to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director’s duty of care.
If the DGCL is amended to authorize corporate action further eliminating or limiting the liability of directors, then, in accordance with our amended and restated certificate of incorporation, the liability of our directors to us or our stockholders will be eliminated or limited to the fullest extent authorized by the DGCL, as so amended. Any repeal or amendment of provisions of our amended and restated certificate of incorporation limiting or eliminating the liability of directors, whether by our stockholders or by changes in law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to further limit or eliminate the liability of directors on a retroactive basis.
Our amended and restated certificate of incorporation will also provide that we will, to the fullest extent authorized or permitted by applicable law, indemnify our current and former officers and directors, as well as those persons who, while directors or officers of our corporation, are or were serving as directors, officers, employees or agents of another entity, trust or other enterprise, including service with respect to an employee
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benefit plan, in connection with any threatened, pending or completed proceeding, whether civil, criminal, administrative or investigative, against all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred or suffered by any such person in connection with any such proceeding. Notwithstanding the foregoing, a person eligible for indemnification pursuant to our amended and restated certificate of incorporation will be indemnified by us in connection with a proceeding initiated by such person only if such proceeding was authorized by our board of directors, except for proceedings to enforce rights to indemnification and advancement of expenses.
The right to indemnification conferred by our amended and restated certificate of incorporation is a contract right that includes the right to be paid by us the expenses incurred in defending or otherwise participating in any proceeding referenced above in advance of its final disposition, provided, however, that if the DGCL requires, an advancement of expenses incurred by our officer or director (solely in the capacity as an officer or director of our corporation) will be made only upon delivery to us of an undertaking, by or on behalf of such officer or director, to repay all amounts so advanced if it is ultimately determined that such person is not entitled to be indemnified for such expenses under our amended and restated certificate of incorporation or otherwise.
The rights to indemnification and advancement of expenses will not be deemed exclusive of any other rights which any person covered by our amended and restated certificate of incorporation may have or hereafter acquire under law, our amended and restated certificate of incorporation, our bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise.
Any repeal or amendment of provisions of our amended and restated certificate of incorporation affecting indemnification rights, whether by our stockholders or by changes in law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to provide broader indemnification rights on a retroactive basis, and will not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision with respect to any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision. Our amended and restated certificate of incorporation will also permit us, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other that those specifically covered by our amended and restated certificate of incorporation.
Our bylaws include the provisions relating to advancement of expenses and indemnification rights consistent with those set forth in our amended and restated certificate of incorporation. In addition, our bylaws provide for a right of indemnitee to bring a suit in the event a claim for indemnification or advancement of expenses is not paid in full by us within a specified period of time. Our bylaws also permit us to purchase and maintain insurance, at our expense, to protect us and/or any director, officer, employee or agent of our corporation or another entity, trust or other enterprise against any expense, liability or loss, whether or not we would have the power to indemnify such person against such expense, liability or loss under the DGCL.
Any repeal or amendment of provisions of our bylaws affecting indemnification rights, whether by our board of directors, stockholders or by changes in applicable law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to provide broader indemnification rights on a retroactive basis, and will not in any way diminish or adversely affect any right or protection existing thereunder with respect to any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.
We will enter into indemnification agreements with each of our officers and directors, a form of which is filed as an exhibit to this Registration Statement. These agreements will require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.
Pursuant to the Underwriting Agreement to be filed as Exhibit 1.1 to this Registration Statement, we have agreed to indemnify the underwriter and the underwriter has agreed to indemnify us against certain civil liabilities that may be incurred in connection with this offering, including certain liabilities under the Securities Act.
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Item 15.
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Recent Sales of Unregistered Securities.
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On March 31, 2021, the sponsor received 5,750,000 shares of Class B common stock, par value $0.0001 to cover certain of our offering costs. The consideration of $25,000, or approximately $0.004 per share, has been funded on May 4, 2021. Such securities were issued in connection with our organization pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. We have also agreed to issue to BlackRock an aggregate of 400,000 shares of our Class B common stock (or 460,000 shares if the underwriter’s over-allotment option is exercised in full) in connection with the closing of this offering, which shares of Class B common stock will be repurchased from our sponsor at cost and reissued to BlackRock for the same per share consideration paid by our sponsor. The total number of shares of Class B common stock outstanding after this offering and the expiration of the underwriter’s option to purchase additional units will equal 20% of the total number of shares of Class A common stock and shares of Class B common stock outstanding at such time. The shares of Class B common stock will automatically convert into our shares of Class A common stock at the time of our initial business combination, subject to adjustment, as described in this prospectus. If we increase or decrease the size of this offering, we will effect a share capitalization or a share repurchase or redemption or other appropriate mechanism, as applicable, with respect to our shares of Class B common stock prior to the consummation of this offering in such amount as to maintain the number of founder shares at 20% of the total number of shares of Class A common stock and shares of Class B common stock outstanding at such time (assuming the underwriter exercises its option to purchase additional units in full).
Our initial stockholders are accredited investors for purposes of Rule 501 of Regulation D. Each of the equity holders in our sponsor is an accredited investor under Rule 501 of Regulation D. The sole business of our sponsor is to act as the company’s sponsor in connection with this offering.
Our sponsor and BlackRock have committed, pursuant to written agreements, to purchase an aggregate of 11,500,000 private placement warrants (or 13,225,000 private placement warrants if the underwriter’s over-allotment option is exercised in full), each exercisable to purchase one share of common stock at $11.50 per share, subject to adjustment, at a price of $1.00 per warrant ($11,500,000 in the aggregate or $13,225,000 if the underwriter’s over-allotment option is exercised in full), in a private placement that will close simultaneously with the closing of this offering. This issuance will be made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
No underwriting discounts or commissions were paid with respect to such sales.
Item 16.
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Exhibits and Financial Statement Schedules.
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(a)
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The Exhibit Index preceding the signature page of this registration statement is incorporated herein by reference.
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(b)
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See page F- 1 for an index to the financial statements and schedules included in the registration statement.
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(i)
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The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
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(ii)
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Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
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(iii)
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The undersigned registrant hereby undertakes that:
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1.
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For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424 (b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
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2.
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For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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3.
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For the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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4.
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For the purpose of determining liability of a registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of an undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
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a.
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Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
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b.
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Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by an undersigned registrant;
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c.
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The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
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d.
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Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
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EXHIBIT INDEX
1.1
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Form of Underwriting Agreement.*
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Certificate of Incorporation of the Registrant.
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Form of Amended and Restated Certificate of Incorporation of the Registrant.
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Bylaws of the Registrant.
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Form of Amended and Restated Bylaws of the Registrant.
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Specimen Unit Certificate.
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Specimen Class A Common Stock Certificate.
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Specimen Warrant Certificate.
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4.4
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Form of Warrant Agreement between Continental Stock Transfer & Trust Company and the Registrant.*
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Form of Opinion of Steptoe & Johnson LLP.
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10.1
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Form of Investment Management Trust Agreement between Continental Stock Transfer & Trust Company and the Registrant.*
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Form of Registration and Stockholder Rights Agreement among the Registrant, the Sponsor and the Holders signatory thereto.
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Form of Private Placement Warrants Purchase Agreement between the Registrant and the Sponsor.
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Form of Indemnity Agreement.
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Form of Administrative Services Agreement between the Registrant and the Sponsor.
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Promissory Note, dated as of March 31, 2021, between the Registrant and the Sponsor.
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Securities Subscription Agreement, dated as of March 31, 2021, between the Registrant and the Sponsor.
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10.8
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Form of Letter Agreement between the Registrant, the Sponsor and each director and executive officer of the Registrant.*
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Form of Subscription Agreement, dated October 14, 2021, among Registrant, Sponsor and certain funds and accounts managed by subsidiaries of BlackRock, Inc.
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Consent of Marcum LLP.
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Consent of Steptoe & Johnson LLP (included on Exhibit 5.1).
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Power of Attorney (included on signature page).
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*
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To be filed by amendment.
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Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Reston, Virginia, on the 12th day of November, 2021.
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PROOF ACQUISITION CORP I
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By:
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/s/ John C. Backus, Jr.
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Name:
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John C. Backus, Jr.
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Title:
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Chief Executive Officer & Director
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KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes and appoints John C. Backus, Jr. and Michael W. Zarlenga, and each of them, the true and lawful attorneys-in-fact and agents of the undersigned, with full power of substitution and resubstitution, for and in the name, place and stead of the undersigned, to sign in any and all capacities (including, without limitation, the capacities listed below), this registration statement on Form S-1 (including all pre-effective and post-effective amendments and registration statements filed pursuant to Rule 462 under the Securities Act of 1933), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that any such attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
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/s/ John C. Backus, Jr.
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Chief Executive Officer & Director
(Principal Executive Officer)
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November 12, 2021
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John C. Backus, Jr.
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/s/ Steven P. Mullins
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Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
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November 12, 2021
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Steven P. Mullins
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/s/ Peter C. Harrison
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Director
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November 12, 2021
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Peter C. Harrison
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/s/ Coleman Andrews
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Director
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November 12, 2021
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Coleman Andrews
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/s/ Mark Lerdal
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Director
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November 12, 2021
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Mark Lerdal
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/s/ Lisa Suennen
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Director
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November 12, 2021
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Lisa Suennen
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Exhibit 3.1
Delaware
The
First State
Page 1
I, JEFFREY W.
BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE
OF INCORPORATION OF “PROOF ACQUISITION CORP I”, FILED IN THIS OFFICE ON THE SIXTEENTH DAY OF MARCH, A.D. 2021, AT
4:47 O’CLOCK P.M.
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Jeffrey W. Bullock, Secretary
of State
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5527927 8100
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Authentication: 202750707
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SR# 20210927596
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Date: 03-17-21
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You
may verify this certificate online at corp.delaware.gov/authver.shtml
State
of Delaware
Secretary
of State
Division
of Corporations
Delivered 04:47
PM 03/16/2021
FILED 04:47 PM
03/16/2021
SR
20210927596 - File
Number 5527927
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CERTIFICATE
OF INCORPORATION
OF
PROOF ACQUISITION
CORP I
Pursuant
to Section 102 of the
Delaware General Corporation Law
I,
the undersigned, in order to form a corporation for the purposes hereinafter stated, under and pursuant to theprovisions of the
General Corporation Law of the State of Delaware (the “DGCL”), do hereby certify as follows:
FIRST:
The name of the corporation is PROOF Acquisition Corp I (hereinafter sometimes referred to as the “Corporation”).
SECOND:
The registered office of the Corporation in the State of Delaware is located at 1209 Orange Street, in the City of Wilmington,
Zip Code 19801. The name of the Registered Agent at such address upon whom process against this corporation may be served is The
Corporation Trust Company.
THIRD:
The purpose of the Corporation shall be to engage in any lawful act or activity for which corporations
may be organized under the DGCL.
FOURTH:
The total number of shares of all classes of capital stock which the Corporation shall have
authority to issue is 83,500,000 of which 82,500,000 shares shall be Common Stock of
the par value of $.0001 per share (“Common
Stock”), representing (a) 70,000,000 shares of
Class A Common Stock (“Class A Common Stock”) and (b) 12,500,000 shares of Class B Common Stock (“Class B
Common Stock”), and 1,000,000 shares shall be Preferred Stock of the par value of $.0001 per share. The
relative rights, preferences, and privileges of the Common Stock
and Preferred Stock are as follows:
A. Preferred Stock. The Board of Directors is expressly granted
authority to issue shares
of the Preferred Stock, in one or more series, and
to fix for each series the voting
powers, full or limited, and the
designations, preferences,
and relative, participating, optional,
or other special rights and the qualifications, limitations,
or restrictions thereof as shall be stated and expressed
in the resolution or
resolutions adopted by the Board of Directors providing for the
issue of the series
(a “Preferred Stock Designation”) and as may be permitted
by the DGCL. The number of authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the
voting power of all of the then outstanding shares of the capital
stock of the Corporation entitled to vote
generally in the election of directors, voting together
as a single class, without a separate vote of the holders
of the Preferred Stock, or any series
thereof, unless a vote
of any the holders is required pursuant to any Preferred Stock Designation.
(a) Except as otherwise required by law or this Certificate of Incorporation (the “Certificate”), the holders of the
Common Stock shall exclusively possess all voting power with respect to the Corporation.
(b) Except as otherwise required by law or this Certificate, the holders of shares of Common Stock shall be entitled to one
vote for each share of Common Stock held.
(c) Except as otherwise required by law or this Certificate, at any annual or special meeting of the stockholders of the Corporation,
holders of the Class A Common Stock and holders of the Class B Common Stock, voting together as a single class, shall have the
exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders.
Notwithstanding the foregoing, except as otherwise required by law or this Certificate, holders of shares of any series of Common
Stock shall not be entitled to vote on any amendment to this Certificate that relates solely to the terms of one or more outstanding
series of Preferred Stock or other series of Common Stock if the holders of the affected series of Preferred Stock or Common Stock,
as applicable, are entitled, either separately or together with the holders of one or more other series, to vote thereon pursuant
to this Certificate or the DDGCL.
(d) Except as otherwise required by law or this Certificate, for so long as any shares of Class B Common Stock shall remain
outstanding, the Corporation shall not, without the prior vote of the holders of a majority of the shares of Class B Common Stock
then outstanding, voting separately as a single class, amend, alter, or repeal any provision of this Certificate, whether by merger,
consolidation, or otherwise, if the amendment, alteration, or repeal would alter or change the powers, preferences, or relative,
participating, optional, or other special rights of the Class B Common Stock. Any action required or permitted to be taken at any
meeting of the holders of Class B Common Stock may be taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be signed by the holders of the outstanding Class B Common Stock
having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which
all shares of Class B Common Stock were present and voted and shall be delivered to the Corporation by delivery to its registered
office in the State of Delaware, its principal place of business, or the Secretary of the Corporation. Delivery made to the Corporation’s
registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt written notice of the taking
of corporate action without a meeting by less than unanimous written consent of the holders of Class B Common Stock shall, to the
extent required by law, be given to those holders of Class B Common Stock who have not consented in writing and who, if the action
had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of the meeting had
been the date that written consents signed by a sufficient number ofholders of Class B Common Stock to take the action were delivered
to the Corporation.
(e) Until the Corporation consummates an initial public offering (“Offering”), any action required to be taken at
any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of the stockholders,
may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock entitled to vote thereon having not less than the minimum number of votes that
would be necessary to authorize or take the action at a meeting at which all shares entitled to vote thereon were present and voted.
Upon the consummation of an Offering, no action that is required or permitted to be taken by the stockholders of the Corporation
at any annual or special meeting of stockholders may be taken by written consent of stockholders in lieu of a meeting.
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(2)
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Class B Common Stock.
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(a) Shares of Class B Common Stock shall be convertible into shares of Class A Common Stock on a one-for-one basis (the “Initial
Conversion Ratio”) (i) at any time and from time to time at the option of the holder thereof, (ii) automatically on the business
day following the closing of the Business Combination (as defined below), and (iii) automatically on the business day immediately
to the liquidation, dissolution, or winding up of the Corporation.
(b) Notwithstanding the Initial Conversion Ratio, in the case that additional shares of Class A Common Stock, or equity-linked
securities, are issued or deemed issued in excess of the amounts sold in the Corporation’s initial public offering of securities
and related to the closing of the initial Business Combination, all issued and outstanding shares of Class B Common Stock shall
automatically convert into shares of Class A Common Stock at the time of the closing of the Corporation’s initial merger, capital
stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses
or entities (the “Business Combination”) at a ratio (the “Adjusted Conversion Ratio”) for which:
(i) the numerator shall be equal to the sum of (A) 25% of all shares of Class A Common Stock issued or issuable (upon the conversion
or exercise of any equity linked securities or otherwise) by the Corporation (net of redemptions), related to or in connection
with the consummation of the initial Business Combination (excluding any securities issued or issuable to any seller in the initial
Business Combination) plus (B) the number of shares of Class B Common Stock issued and outstanding prior to the closing of the
initial Business Combination; and
(ii) the denominator shall be the number of shares of Class B Common Stock issued and outstanding prior to the closing of the
initial Business Combination.
(c) The foregoing adjustment to the Initial Conversion Ratio may be waived as to any particular issuance or deemed issuance
of additional shares of Class A Common Stock or equity-linked securities by the written consent or agreement of holders of a majority
of the shares of Class B Common Stock then outstanding consenting or agreeing separately as a single class; provided, however,
that in no event shall the Class B Common Stock convert into Class A Common Stock at a ratio that is less than one-for-one.
(d) The Initial Conversion Ratio and the Adjusted Conversion Ratio, as applicable, shall also be adjusted to account for any
subdivision (by stock split, subdivision, exchange, stock dividend, reclassification, recapitalization or otherwise) or combination
(by reverse stock split, exchange, reclassification, recapitalization or otherwise) or similar reclassification or recapitalization
of the outstanding shares of Class A Common Stock into a greater or lesser number of shares occurring after the original filing
of this Certificate without a proportionate and corresponding subdivision, combination or similar reclassification or recapitalization
of the outstanding shares of Class B Common Stock.
(e) Each share of Class B Common Stock shall convert into its pro rata number of shares of Class A Common Stock pursuant
to this section. The pro rata share for each holder of Class B Common Stock will be determined as follows: Each share of
Class B Common
Stock shall convert into such number of shares of Class A Common Stock as is equal to the product of one (I) multiplied by a fraction,
the numerator of which shall be the total number of shares of Class A Common Stock into which all of the issued and outstanding
shares of Class B Common Stock shall be converted pursuant to this section and the denominator of which shall be the total number
of issued and outstanding shares of Class B Common Stock at the time of conversion.
(3) Dividends. Subject to applicable law and the rights of the holders of any outstanding series of the Preferred Stock,
if any, the holders of shares of Common Stock shall be entitled to receive dividends and other distributions when, as and if declared
thereon by the Board from time to time out of any assets or funds of the Corporation legally available therefor and shall share
equally on a per share basis in any dividends and distributions. Dividends or distributions, if declared, may be paid in cash,
property, or capital stock of the Corporation.
(4) Liquidation. Dissolution or Winding Up of the Corporation. Subject to applicable law, the rights, if any, of the
holders of any outstanding series of the Preferred Stock, in the event of any voluntary or involuntary liquidation, dissolution,
or winding up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation,
the holders of shares of Class A Common Stock shall be entitled to receive all the remaining assets of the Corporation available
for distribution to its stockholders, ratably in proportion to the number of shares of Class A Common Stock held by them, on an
as converted and adjusted basis.
C. Rights. Warrant, and Options. The Corporation has the authority to create and issue rights, warrants, and options
entitling the holders thereof to acquire from the Corporation any shares of its capital stock of any class or classes, with such
rights, warrants, and options to be evidenced by or in instruments approved by the Board. The Board is empowered to set the exercise
price, duration, times for exercise, and other terms and conditions of the rights, warrants, or options; provided. however,
that the consideration to be received for any shares of capital stock issuable upon exercise thereof may not be less than the
par value thereof.
FIFTH: The name and mailing
address of the sole incorporator of the Corporation is as follows:
Name
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Address
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Brendan George, Esq.
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c/o Steptoe & Johnson LLP
1114 Avenue of the Americas
New York, NY 10036
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SIXTH: The Board of Directors shall be
divided into three classes: Class A, Class B, and Class C. The number of directors in each class shall be as nearly equal as possible.
At the first election of directors by the incorporator, the incorporator shall elect a Class C director for a term expiring at
the Corporation’s third Annual Meeting of Stockholders. The Class C director shall then appoint additional Class A, Class B, and
Class C directors, as necessary. The directors in Class A shall be elected for a term expiring at the first Annual Meeting of
Stockholders, the directors in Class B shall be elected for a term expiring at the second Annual Meeting of Stockholders, and
the directors in Class C shall be elected for a term expiring at the third Annual Meeting of Stockholders. Commencing at the first
Annual Meeting of Stockholders, and at each annual meeting thereafter, directors elected to succeed those directors whose terms
expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election.
Except as the DGCL may otherwise require, in the interim between annual meetings of stockholders or special meetings of stockholders
called for the election of directors or the removal of one or more directors, newly created directorships and any vacancies in
the Board of Directors, including unfilled vacancies resulting from the removal of directors, may be filled by the vote of a majority
of the remaining directors then in office, although less than a quorum, or by the sole remaining director. All directors shall
hold office until the expiration of their respective terms of office and until their successors shall have been elected and qualified.
A director elected to fill a vacancy resulting from the death, resignation, or removal of a director shall serve for the remainder
of the full term of the director whose death, resignation, or removal created the vacancy and until his successor shall have been
elected and qualified.
SEVENTH:
The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation,
and for further definition, limitation, and regulation of the powers of the Corporation and of its directors and stockholders:
A.
Election of directors need not be by ballot unless the bylaws of the Corporation so provide.
B. The Board of Directors shall have the power, without the assent or vote of the stockholders, to make, alter, amend, change,
add to, or repeal the bylaws of the Corporation as provided in the bylaws of the Corporation.
C. The Board of Director, in their discretion, may submit any contract or act for approval or ratification at any annual meeting
of the stockholders or at any meeting of the stockholders called for the purpose of considering any contract or act. Any contract
or act that shall be approved or be ratified by the vote of the holders of a majority of the stock of the Corporation which is
represented and entitled to vote in person or by proxy at the meeting in which a quorum is present shall be as valid and binding
upon the Corporation and upon all the stockholders as though it had been approved or ratified by every stockholder of the Corporation,
whether or not the contract or act would otherwise be open to legal challenge because of directors’ interests, or for any other
reason.
D. In addition to the powers and authorities hereinbefore or by statute expressly conferred upon the members of the Board of
Directors, the directors are hereby empowered to exercise all powers and do all acts and things as may be exercised or done by
the Corporation; subject, nevertheless, to the provisions of the statutes of Delaware, of this Certificate of Incorporation, and
to any bylaws from time to time made by the stockholders; provided, however, that no bylaw so made shall invalidate any prior act
of the directors which would have been valid if the bylaw had not been made.
EIGHTH:
The following provisions are inserted to limit liability of directors and provide indemnification to the fullest extent permitted
by law.
A. No director or officer of the Corporation shall be personally liable to the Corporation or to any stockholder of the Corporation
for monetary damages for breach of fiduciary duty as a director or officer; provided. however, that this paragraph A of
Article EIGHTH shall not limit the liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit. If the DGCL is amended
to authorize corporate action further eliminating or limiting the personal liability of directors and officers, then the liability
of a director or officer of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
Any repeal or modification of this paragraph A of Article EIGTH by the stockholders of the Corporation shall not adversely affect
any right or protection of a director or officer of the Corporation with respect to events occurring prior to the time of the repeal
or modification.
B. The Corporation, to the full extent permitted by Section 145 of the DGCL, as amended from time to time, shall indemnify
all persons whom it may indemnify pursuant thereto (each, an “Indemnified Person”). Expenses (including attorneys’ fees)
incurred by an Indemnified Person in defending any civil, criminal, administrative, or investigative action, suit, or proceeding
for which the Indemnified Person may be entitled to indemnification hereunder shall be paid by the Corporation in advance of the
final disposition of the action, suit, or proceeding upon receipt of an undertaking by or on behalf of the Indemnified Person to
repay such amount if it shall ultimately be determined that the Indemnified Person is not entitled to be indemnified by the Corporation
as authorized hereby.
NINTH:
Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between
this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may,
on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any
receiver or receivers appointed for this Corporation under § 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this Corporation under § 279 of Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation,
as the case may be, to be summoned in such manner as the said court directs. If
a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders
or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization
of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors,
and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.
TENTH:
The following provisions are inserted for the governance of derivative actions or proceedings brought on behalf of the Corporation.
A. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State
of Delaware shall be the sole and exclusive forum for any stockholder (including any beneficial owner of any stockholder of record)
to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach
of a fiduciary duty owed by any director, officer, or other employee of the Corporation to the Corporation or the Corporation’s
stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers, or employees arising pursuant
to any provision of the DGCL or this Certificate or the bylaws, or (iv) any action asserting a claim against the Corporation, its
directors, officers, or employees governed by the internal affairs doctrine. If
brought outside of the State of Delaware, the stockholder bringing the suit will be deemed
to have consented
to service of process on the stockholder’s counsel except any action (A) as to which the Court of Chancery in the State of Delaware
determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery and the indispensable
party does not consent to the personal jurisdiction of the Court of Chancery within ten (I 0) days following such determination,
(B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery or (C) for which the Court
of Chancery does not have subject matter jurisdiction. Notwithstanding the foregoing, (i) the provisions of this Section A of Article
TENTH will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which
the Federal courts have exclusive jurisdiction; and (ii) unless the Corporation consents in writing to the selection of an alternative
forum, the Federal district courts of the United States of America shall, to the fullest extent permitted by law, be the exclusive
forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, or
the rules and regulations promulgated thereunder.
B. If any action the subject
matter of which is within the scope of paragraph A of Article TENTH immediately above is filed in a court other than a court located
within the State of Delaware (a “Foreign Action”) in the name of any stockholder, the stockholder shall be deemed to
have consented to (i) the personal jurisdiction of the state and Federal courts located within the State ofDelaware in connection
with any action brought to enforce paragraph A of Article TENTH (a “Foreign Enforcement Action”) and (ii) having service
of process made upon the stockholder in any Foreign Enforcement Action by service upon the stockholder’s counsel in the Foreign
Action as agent for the stockholder.
C. If any provision or
provisions of this Article TENTH shall be held to be invalid, illegal, or unenforceable as applied to any person or entity or circumstance
for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality, and enforceability of these provisions
in any other circumstance and of the remaining provisions of this Article TENTH (including, without limitation, each portion of
any sentence of this Article TENTH containing any provision held to be invalid, illegal or unenforceable that is not itself held
to be invalid, illegal, or unenforceable) and the application of such provision to other persons or entities and circumstances
shall not in any way be affected or impaired thereby. Any person or entity purchasing or otherwise acquiring any interest in shares
of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article TENTH.
ELEVENTH: The Corporation
reserves the right to amend, alter, change, add, or repeal any provision contained in this Certificate (including any Preferred
Stock Designation), in the manner now or hereafter prescribed by this Certificate and the DGCL; and except as set forth in Article
ELEVENTH, all rights, preferences and privileges herein conferred upon stockholders, directors, or any other persons by and pursuant
to this Certificate in its present form or as hereafter amended are granted subject to the right reserved in this Article.
IN WITNESS WHEREOF, I have signed this Certificate of Incorporation this 16th
day of March, 2021.
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Brendan George, Esq.
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Sole Incorporator
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7
Exhibit 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PROOF ACQUISITION CORP I
______________________________
Pursuant to Sections 242 and 245 of the
Delaware General Corporation Law
______________________________
PROOF Acquisition Corp I, a corporation organized and existing
under the laws of the State of Delaware (the “Corporation”), by its Chief Executive Officer, hereby certifies as follows:
1. The name of the Corporation is “PROOF Acquisition Corp
I”
2. The Corporation’s Certificate of Incorporation was
filed in the office of the Secretary of State of the State of Delaware on March 16, 2021 (the “Certificate of Incorporation”).
3. This Amended and Restated Certificate of Incorporation (the
“Amended and Restated Certificate of Incorporation”) restates, integrates and amends the Certificate of Incorporation.
4. This Amended and Restated Certificate of Incorporation was
duly adopted by joint written consent of the directors and stockholders of the Corporation in accordance with the applicable provisions
of Sections 141(f), 228, 242 and 245 of the General Corporation Law of the State of Delaware, as amended from time to time (“DGCL”).
5. The text of the Certificate of Incorporation is hereby amended
and restated to read in full as follows:
FIRST: The name of the corporation is PROOF Acquisition Corp
I (hereinafter sometimes referred to as the “Corporation”).
SECOND: The registered office of the Corporation in the State
of Delaware is located at 1209 Orange Street, in the City of Wilmington, Zip Code 19801. The name of the Registered Agent at such
address upon whom process against this corporation may be served is The Corporation Trust Company.
THIRD: The purpose of the Corporation shall be to engage in
any lawful act or activity for which corporations may be organized under the DGCL. In addition to the powers and privileges conferred
upon the Corporation by law and those incidental thereto, the Corporation shall possess and may exercise all the powers and privileges
that are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Corporation including,
but not limited to, effecting a Business Combination (as defined below).
FOURTH: The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is 83,500,000 of which 82,500,000 shares shall be Common Stock of the
par value of $0.0001 per share (“Common Stock”), representing (a) 70,000,000 shares of Class A Common Stock (“Class
A Common Stock”) and (b) 12,500,000 shares of Class B Common Stock (“Class B Common Stock”), and 1,000,000 shares
shall be Preferred Stock of the par value of $0.0001 per share.
A. Preferred
Stock. Subject to paragraph I of Article FIFTH, the Board of Directors is expressly
granted authority to issue shares of the Preferred Stock, in one or more series, and to fix for each series the voting powers,
full or limited, and the designations, preferences, and relative, participating, optional, or other special rights and the qualifications,
limitations, or restrictions thereof as shall be stated and expressed in the resolution or resolutions adopted by the Board of
Directors providing for the issue of the series (a “Preferred Stock Designation”) and as may be permitted by the DGCL.
The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then outstanding shares of
the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class,
without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any the holders is required
pursuant to any Preferred Stock Designation.
B. Common
Stock.
(1) Voting.
(a) Except as otherwise required by law or this Amended and Restated Certificate of Incorporation (including any Preferred Stock
Designation), the holders of the Common Stock shall exclusively possess all voting power with respect to the Corporation.
(b) Except as otherwise required by law or this Amended and Restated Certificate of Incorporation (including any Preferred Stock
Designation), the holders of shares of Common Stock shall be entitled to one vote for each such share on each matter properly submitted
to the stockholders on which the holders of the Common Stock are entitled to vote.
(c) Except as otherwise required by law or this Amended and Restated Certificate of Incorporation (including any Preferred Stock
Designation and paragraph J of Article FIFTH), at any annual or special meeting
of the stockholders of the Corporation, holders of the Class A Common Stock and holders of the Class B Common Stock, voting together
as a single class, shall have the exclusive right to vote for the election of directors and on all other matters properly submitted
to a vote of the stockholders. Notwithstanding the foregoing, except as otherwise required by law or this Amended and Restated
Certificate of Incorporation (including any Preferred Stock Designation), holders of shares of any series of Common Stock shall
not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any amendment to
any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of Preferred Stock or other
series of Common Stock if the holders of the affected series of Preferred Stock or Common Stock, as applicable, are entitled, either
separately or together with the holders of one or more other series, to vote thereon pursuant to this Amended and Restated Certificate
of Incorporation (including any Preferred Stock Designation) or the DGCL.
(2) Class
B Common Stock.
(a) Shares of Class B Common Stock shall be convertible into shares of Class A Common Stock on a one-for-one basis (the “Initial
Conversion Ratio”) (i) at any time and from time to time at the option of the holder thereof, and (ii) automatically
at the time of the closing of the Business Combination (as defined below).
(b) Notwithstanding
the Initial Conversion Ratio, in the case that additional shares of Class A Common Stock, or securities convertible into or exercisable
or exchangeable for shares of Class A Common Stock (“equity-linked securities”), are issued or deemed issued in excess
of the amounts issued in the Corporation’s initial public offering of securities (the “IPO”) and related to
the closing of the initial Business Combination, the ratio at which shares of Class B common stock will convert into shares of
Class A common stock will be adjusted so that the number of shares of Class A common stock issuable upon conversion of all shares
of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the shares outstanding upon
the consummation of the IPO plus the number of shares of Class A common stock and equity-linked securities issued or deemed issued
in connection with the initial Business Combination, excluding any shares of Class A common stock or equity-linked securities
issued, or to be issued, to any seller in the initial Business Combination and any securities issued privately concurrently with
the IPO or upon conversion of working capital loans made to the Corporation.
(c) Notwithstanding anything to the contrary contained herein, (i) the foregoing adjustment to the Initial Conversion Ratio
may be waived as to any particular issuance or deemed issuance of additional shares of Class A Common Stock or equity-linked securities
by the written consent or agreement of holders of a majority of the shares of Class B Common Stock then outstanding consenting
or agreeing separately as a single class, and (ii) in no event shall the Class B Common Stock convert into Class A Common Stock
at a ratio that is less than one-for-one.
(d) The foregoing conversion ratio shall also be adjusted to account for any subdivision (by stock split, subdivision, exchange,
stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, exchange, reclassification,
recapitalization or otherwise) or similar reclassification or recapitalization of the outstanding shares of Class A Common Stock
into a greater or lesser number of shares occurring after the original filing of this Amended and Restated Certificate of Incorporation
without a proportionate and corresponding subdivision, combination or similar reclassification or recapitalization of the outstanding
shares of Class B Common Stock.
(e) Each share of Class B Common Stock shall convert into its pro rata number of shares of Class A Common Stock pursuant
to this section. The pro rata share for each holder of Class B Common Stock will be determined as follows: Each share of
Class B Common Stock shall convert into such number of shares of Class A Common Stock as is equal to the product of one (1) multiplied
by a fraction, the numerator of which shall be the total number of shares of Class A Common Stock into which all of the issued
and outstanding shares of Class B Common Stock shall be converted pursuant to this section and the denominator of which shall be
the total number of issued and outstanding shares of Class B Common Stock at the time of conversion.
(f) Except as otherwise required by law or this Amended and Restated Certificate of Incorporation (including any Preferred Stock
Designation), for so long as any shares of Class B Common Stock shall remain outstanding, the Corporation shall not, without the
prior vote or written consent of the holders of a majority of the shares of Class B Common Stock then outstanding, voting separately
as a single class, amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation, whether by merger,
consolidation or otherwise, if such amendment, alteration or repeal would alter or change the powers, preferences or relative,
participating, optional or other or special rights of the Class B Common Stock. Any action required or permitted to be taken at
any meeting of the holders of Class B Common Stock may be taken without a meeting, without prior notice and without a vote, if
a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of the outstanding Class B
Common Stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting
at which all shares of Class B Common Stock were present and voted and shall be delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody
of the book in which minutes of proceedings of stockholders are recorded. Delivery made to the Corporation’s registered office
shall be by hand or by certified or registered mail, return receipt requested. Prompt written notice of the taking of corporate
action without a meeting by less than unanimous written consent of the holders of Class B Common Stock shall, to the extent required
by law, be given to those holders of Class B Common Stock who have not consented in writing and who, if the action had been taken
at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date
that written consents signed by a sufficient number of holders of Class B Common Stock to take the action were delivered to the
Corporation.
(3) Dividends.
Subject to applicable law, the rights, if any, of the holders of any outstanding series of the Preferred Stock and the provisions
of Article FIFTH, the holders of shares of Common Stock shall be entitled to receive
dividends and other distributions when, as and if declared thereon by the Board of Directors from time to time out of any assets
or funds of the Corporation legally available therefor and shall share equally on a per share basis in any dividends and distributions.
Dividends or distributions, if declared, may be paid in cash, property, or capital stock of the Corporation.
(4) Liquidation,
Dissolution or Winding Up of the Corporation. Subject to applicable law, the rights, if any, of the holders of any outstanding
series of the Preferred Stock and the provisions of Article FIFTH, in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after payment or provision for payment
of the debts and other liabilities of the Corporation, the holders of shares of Common Stock shall be entitled to receive all the
remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares
of Class A Common Stock (on an as converted basis with respect to the Class B Common Stock) held by them.
C. Rights,
Warrants, and Options. Subject to the provisions of Article FIFTH, the Corporation has the authority to create and issue rights,
warrants and options entitling the holders thereof to acquire from the Corporation any shares of its capital stock of any class
or classes, with such rights, warrants and options to be evidenced by or in instruments approved by the Board of Directors. The
Board of Directors is empowered to set the exercise price, duration, times for exercise, and other terms and conditions of such
rights, warrants or options; provided, however, that the consideration to be received for any shares of capital stock
issuable upon exercise thereof may not be less than the par value thereof.
FIFTH: The introduction and the following provisions (A) through
(J) of this Article FIFTH shall apply during the period commencing upon the filing
of this Amended and Restated Certificate of Incorporation and terminating upon the consummation of any Business Combination (as
defined below) and no amendment to this Article FIFTH shall be effective during
the Target Business Acquisition Period (as defined below) unless approved by the affirmative vote of the holders of at least sixty-five
percent (65%) of all then outstanding shares of Common Stock; provided, however, that the provisions of paragraph J below
may only be amended by approval of a majority of at least ninety percent (90%) of the shares of all then outstanding Common Stock.
The “Target Business Acquisition Period” shall mean
the period from the effectiveness of the Registration Statement on Form S-1 (“Registration Statement”) filed with the
Securities and Exchange Commission (“Commission”) in connection with the IPO up to and including the first to occur
of (a) a Business Combination and (b) the end of the Completion Window (as defined below).
A “Business Combination” shall mean any merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination involving the Corporation
and one or more businesses or entities (“Target Business” or “Target Businesses”). So long as the Corporation’s
securities are listed on the New York Stock Exchange, the Target Business or Target Businesses acquired in the Business Combination
must together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (excluding
the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the signing of
the definitive agreement governing the terms of the initial Business Combination. If the Corporation acquires less than 100% of
the equity interests or assets of a Target Business, the portion of such Target Business that the Corporation acquires is what
will be valued for purposes of the 80% fair market value test.
The “Completion Window” shall mean the period of
time commencing on, and including, the closing date of the IPO and ending on the date that is the later of (i) 18 months after
such closing date of the IPO and (ii) if the Corporation’s sponsor, or its affiliates or designees, has given five days advance
notice prior to the expiry of such 18 month period, and deposited into the Trust Account US$2,000,000, or up to US$2,300,000 if
the underwriter’s over-allotment option is exercised in full (US$0.10 per issued and outstanding share of Class A Common
Stock in either case) on or prior to the expiry of such 18 month period, but has not completed the initial Business Combination
within such 18 month period, the date that is 21 months after such closing date of the IPO and (iii) if the Corporation’s
sponsor, or its affiliates or designees, has given five days advance notice prior to the expiry of such 21 month period referred
to in paragraph (ii), and deposited into the Trust Account an additional US$2,000,000, or up to US$2,300,000 if the underwriters’
over-allotment option is exercised in full (US$0.10 per issued and outstanding share of Class A Common Stock in either case) on
or prior to the expiry of such 21 month period, but has not completed the initial Business Combination within such 21 month period,
the date that is 24 months after such closing date of the IPO.
“Trust Account” shall mean the trust account established
by the Corporation at the consummation of the IPO and into which a certain amount of the net proceeds of the IPO and simultaneous
private placement is deposited, all as described in the Registration Statement. Except for the withdrawal of interest to pay franchise
and income taxes, none of the funds held in the Trust Account (including the interest earned on the funds held in the Trust Account)
will be released from the Trust Account except as described herein.
A. Prior
to the consummation of any Business Combination, the Corporation shall either (i) submit such Business Combination to its stockholders
for approval (“Proxy Solicitation”) pursuant to the proxy rules promulgated under the Securities Exchange Act of 1934,
as amended (“Exchange Act”), or (ii) provide all holders of its Common Stock with the opportunity to sell their shares
to the Corporation, effective upon consummation of such Business Combination, for cash through a tender offer (“Tender Offer”)
pursuant to the tender offer rules promulgated under the Exchange Act.
B.
If the Corporation engages in a Proxy Solicitation in connection with any proposed Business Combination, the Corporation will consummate
such Business Combination only if a majority of the then outstanding shares of Common Stock present and entitled to vote at the
meeting to approve the Business Combination are voted for the approval of such Business Combination (subject to the limitation
set forth in paragraph E(a) below). A quorum for such meeting will consist of the holders present in person or by proxy of shares
of outstanding Common Stock representing a majority of the voting power of the Corporation entitled to vote at such meeting.
C. In
the event of a Proxy Solicitation in connection with any proposed Business Combination, the Corporation will provide any holder
of shares of Common Stock sold in the IPO (whether such are purchased in connection with the IPO or in the secondary market following
the IPO) (the “IPO Shares”) the right to redeem their IPO Shares for cash, subject to the consummation of such Business
Combination. The Corporation shall, promptly after consummation of the Business Combination, redeem such shares properly submitted
for redemption for cash at a per share price equal to the quotient determined by dividing (i) the amount then held in the Trust
Account net of taxes payable, calculated as of two business days prior to the consummation of the Business Combination, by (ii)
the total number of IPO Shares then outstanding (such price being referred to as the “Redemption Price”).
The Corporation may require any holder of
IPO Shares who demands that the Corporation redeem such IPO Shares for cash to either tender such holder’s certificates to
the Corporation’s transfer agent at any time prior to the vote taken at the stockholder meeting relating to such Business
Combination or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s DWAC (Deposit/Withdrawal
At Custodian) System up to two business days prior to the vote taken at the stockholder meeting relating to such Business Combination,
with the exact requirements for delivery of the IPO Shares, including whether a beneficial holder must identify itself in order
to validly redeem its shares, to be set forth in the proxy materials relating to such Business Combination.
If the Corporation offers to redeem the
IPO Shares in conjunction with a stockholder vote on an initial Business Combination pursuant to a Proxy Solicitation, a stockholder,
together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group”
(as defined under Section 13(d)(3) of the Exchange Act), shall be restricted from redeeming IPO Shares with respect to more than
an aggregate of 15% of the IPO Shares without the consent of the Corporation.
If the Corporation seeks to amend this Amended
and Restated Certificate of Incorporation (A) to modify the substance or timing of the Corporation’s obligation to allow
redemption in connection with its initial Business Combination or an amendment described in this clause (A) or in clause (B) or
to redeem 100% of the IPO Shares if the Corporation does not complete its initial Business Combination within the Completion Window,
or (B) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity,
then the Corporation shall provide holders of IPO Shares with the opportunity to redeem their IPO Shares upon the approval of any
such amendment, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, divided
by the number of then outstanding IPO Shares. The Corporation’s ability to provide such redemption opportunity is subject
to the limitation set forth in paragraph E(a) below.
D. If
the Corporation engages in a Tender Offer, the Corporation shall file tender offer documents with the Commission prior to the consummation
of the initial Business Combination which will contain substantially the same financial and other information about the Business
Combination as is required under the proxy rules promulgated under the Exchange Act and that would have been included in any proxy
statement filed with the Commission in connection with a Proxy Solicitation, even if such information is not required under the
tender offer rules promulgated under the Exchange Act. The per-share price at which the Corporation will repurchase the IPO Shares
in any such Tender Offer shall be equal to the Redemption Price. The Corporation shall not purchase any shares of Common Stock
other than IPO Shares in any such Tender Offer.
E. The
Corporation will not consummate any Business Combination (a) unless it has net tangible assets (as determined in accordance with
Rule 3a51-1(g)(1) of the Exchange Act, or any successor rule) of at least $5,000,001 or any greater net tangible asset or cash
requirement which may be contained in the agreement relating to the initial Business Combination either immediately prior to or
upon consummation of such Business Combination and (b) solely with another blank check company or similar company with nominal
operations.
F. In
the event that the Corporation does not consummate a Business Combination within the Completion Window, the Corporation shall (i)
cease all operations except for the purposes of winding up, (ii) as promptly as reasonably possible but not more than ten (10)
business days thereafter, redeem 100% of the IPO Shares for cash for a redemption price per share equal to the aggregate amount
then held in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to
the Corporation to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the total number of IPO
Shares then outstanding (which redemption will completely extinguish such holders’ rights as stockholders, including the
right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption,
subject to approval of the Corporation’s then stockholders and subject to the requirements of the DGCL, including the adoption
of a resolution by the Board of Directors pursuant to Section 275(a) of the DGCL finding the dissolution of the Corporation advisable
and the provision of such notices as are required by said Section 275(a) of the DGCL, dissolve and liquidate, subject (in the case
of clauses (ii) and (iii) above) to the Corporation’s obligations under the DGCL to provide for claims of creditors and other
requirements of applicable law.
G. A
holder of IPO Shares shall be entitled to receive distributions from the Trust Account only in the event (i) he or she validly
demands redemption of his or her shares in accordance with paragraph C above in connection with any Proxy Solicitation, (ii) he
or she validly sells his or her shares to the Corporation in accordance with paragraph D above in connection with any Tender Offer,
(iii) that the Corporation has not consummated a Business Combination within the Completion Window or (iv) the Corporation seeks
to amend the provisions of this Article FIFTH or any other provision herein relating
to stockholders’ rights and pre-initial Business Combination activity prior to the consummation of a Business Combination.
In no other circumstances shall a holder of IPO Shares have any right or interest of any kind in or to the Trust Account, and no
stockholder other than a holder of IPO Shares shall have any interest in or to the Trust Account.
H. The
Corporation shall not consummate a Business Combination with an entity that is affiliated with any of the Corporation’s pre-IPO
stockholders, officers, directors or sponsor or any of their affiliates unless the Corporation, or a committee of the Corporation’s
independent directors, has obtained an opinion from an independent investment banking firm that is a member of FINRA or an independent
accounting firm that such a Business Combination is fair to the Corporation from a financial point of view and a majority of the
Corporation’s disinterested independent directors approve such Business Combination.
I. Prior
to the consummation of a Business Combination, the Board of Directors may not issue any securities which would entitle the holder
thereof to (1) participate in or otherwise be entitled in any manner to any of the proceeds in the Trust Account or (2) vote as
a class with the Common Stock (a) on any initial Business Combination or (b) to approve any amendment to this Amended and Restated
Certificate of Incorporation.
J. Prior
to the consummation of a Business Combination, only holders of the Class B Common Stock then outstanding shall have the right to
vote on the appointment of directors. Holders of the Class A Common Stock held by the public shall not be entitled to vote on the
appointment of directors during such time. In addition, prior to the consummation of a Business Combination, holders of a majority
of the Class B Common Stock then outstanding may remove a member of the Board of Directors for any reason.
SIXTH: The following provisions are inserted for the governance
of stockholder meetings, notice thereof and action by written consent:
A. Subject
to the rights, if any, of the holders of any outstanding series of the Preferred Stock, and to the requirements of applicable law,
special meetings of stockholders of the Corporation may be called only by the Chairman of the Board, Chief Executive Officer of
the Corporation, or the Board pursuant to a resolution adopted by a majority of the Board, and the ability of the stockholders
to call a special meeting is hereby specifically denied. Except as provided in the foregoing sentence, special meetings of stockholders
may not be called by another person or persons.
B. Advance
notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting
of the stockholders of the Corporation shall be given in the manner provided in the Amended and Restated Bylaws of the Corporation
(the “Bylaws”).
C. Except
as may be otherwise provided for or fixed pursuant to this Amended and Restated Certificate of Incorporation (including any Preferred
Stock Designation) relating to the rights of the holders of any outstanding series of Preferred Stock, subsequent to the consummation
of a Business Combination, any action required or permitted to be taken by the stockholders of the Corporation must be effected
by a duly called annual or special meeting of such stockholders and may not be effected by written consent of the stockholders
other than with respect to our Class B Common Stock with respect to which action may be taken by written consent.
SEVENTH: The following provisions are inserted for the management
of the business and for the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of
the powers of the Corporation and of its directors and stockholders:
A. In furtherance and
not in limitation of the powers conferred by law, the Board of Directors is expressly authorized to make, alter and repeal the
Bylaws, subject to the power of the stockholders of the Corporation to alter or repeal any bylaw whether adopted by them or otherwise.
B. The business and
affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors. In addition to the powers and
authority expressly conferred upon the Board of Directors by statute, this Amended and Restated Certificate of Incorporation or
the Bylaws, the Board of Directors is hereby empowered to exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Amended and Restated Certificate of Incorporation,
and any bylaws adopted by the stockholders; provided, however, that no bylaws hereafter adopted by the stockholders shall
invalidate any prior act of the Board of Directors that would have been valid if such bylaws had not been adopted.
C. The number of directors
of the Corporation shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Board of Directors. The Board of Directors shall be divided into three classes, as nearly equal in number as possible
and designated Class I, Class II and Class III. The Board of Directors is authorized to assign members of the Board of Directors
already in office to Class I, Class II or Class III. The term of the initial Class I directors shall expire at the first annual
meeting of the stockholders of the Corporation following the effectiveness of this Amended and Restated Certificate of Incorporation; the term of the initial Class II directors shall expire at the second annual meeting of the stockholders of the Corporation following
the effectiveness of this Amended and Restated Certificate of Incorporation; and the term of the initial Class III directors
shall expire at the third annual meeting of the stockholders of the Corporation following the effectiveness of this Amended and
Restated Certificate of Incorporation. At each succeeding annual meeting of the stockholders of the Corporation, beginning with
the first annual meeting of the stockholders of the Corporation following the effectiveness of this Amended and Restated Certificate
of Incorporation, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year
term or until the election and qualification of their respective successors in office, subject to their earlier death, resignation
or removal. If the number of directors is changed, any increase or decrease shall be apportioned by the Board of Directors among
the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease
in the number of directors shorten the term of any incumbent director. Except as otherwise required by law or this Amended and
Restated Certificate of Incorporation (including any Preferred Stock Designation and paragraph J of Article FIFTH),
the election of directors shall be determined by a plurality of the votes cast by the stockholders present in person or represented
by proxy at the meeting and entitled to vote thereon. The Board of Directors is hereby expressly authorized, by resolution or resolutions
thereof, to assign members of the Board of Directors already in office to the aforesaid classes at the time this Amended and Restated
Certificate of Incorporation and therefore such classification becomes effective in accordance with the DGCL.
D. A director shall
hold office until the annual meeting for the year in which his or her term expires and until his or her successor has been elected
and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.
Unless and except to the extent that the Bylaws shall so require, the election of directors need not be by written ballot.
E. Except as otherwise
required by law or this Amended and Restated Certificate of Incorporation (including any Preferred Stock Designation and paragraph
J of Article FIFTH), newly created directorships resulting from an increase in the
number of directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or
other cause may be filled solely and exclusively by a majority vote of the remaining directors then in office, even if less than
a quorum, or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office for the remainder
of the full term of the class of directors to which the new directorship was added or in which the vacancy occurred and until his
or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement,
disqualification or removal.
F. Except as otherwise
required by law or this Amended and Restated Certificate of Incorporation (including any Preferred Stock Designation and paragraph
J of Article FIFTH), any or all of the directors may be removed from office at any
time, but only for cause and only by the affirmative vote of holders of a majority of the voting power of all then outstanding
shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single
class.
G. The directors in
their discretion may submit any contract or act for approval or ratification at any annual meeting of the stockholders or at any
special meeting of the stockholders called for the purpose of considering any such contract or act, and any contract or act that
shall be approved or be ratified by the vote of the holders of a majority of the stock of the Corporation which is represented
in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders be there
represented in person or by proxy), unless a higher vote is required by applicable law, shall be as valid and binding upon the
Corporation and upon all the stockholders as though it had been approved or ratified by every stockholder of the Corporation, whether
or not the contract or act would otherwise be open to legal attack because of directors’ interests, or for any other reason.
EIGHTH: The following provisions are inserted
to limit liability of directors and provide indemnification to the fullest extent permitted by law.
A. A
director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under
the DGCL as the same exists or may hereafter be amended unless they violated their duty of loyalty to the Corporation or its stockholders,
acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases
or unlawful redemptions, or derived improper personal benefit from their actions as directors. Any amendment, modification or repeal
of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation hereunder in respect
of any act or omission occurring prior to the time of such amendment, modification or repeal.
B. To
the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, the Corporation shall indemnify
and hold harmless each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”)
by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee
benefit plan (an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against
all liability and loss suffered and expenses (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise
taxes and penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with such proceeding.
The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees)
incurred by an indemnitee in defending or otherwise participating in any proceeding in advance of its final disposition; provided,
however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking, by or on behalf of the indemnitee, to repay all amounts so advanced if it shall
ultimately be determined that the indemnitee is not entitled to be indemnified under this Article EIGHTH or otherwise. The rights
to indemnification and advancement of expenses conferred by this Article EIGHTH shall be contract rights and such rights shall
continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his
or her heirs, executors and administrators. Notwithstanding the foregoing, except for proceedings to enforce rights to indemnification
and advancement of expenses, the Corporation shall indemnify and advance expenses to an indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors.
C. The rights to indemnification
and advancement of expenses conferred on any indemnitee by this Article EIGHTH shall not be exclusive of any other rights that
any indemnitee may have or hereafter acquire under law, this Amended and Restated Certificate of Incorporation, the Bylaws, an
agreement, vote of stockholders or disinterested directors, or otherwise.
D. Any repeal or amendment
of this Article EIGHTH by the stockholders of the Corporation or by changes in law with regard to indemnification and advancement
of expenses, or the adoption of any other provision of this Amended and Restated Certificate of Incorporation inconsistent with
this Article EIGHTH in this regard, shall, unless otherwise required by law, be prospective only (except to the extent such amendment
or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior
thereto), and shall not in any way diminish or adversely affect any right or protection existing at the time of such repeal or
amendment or adoption of such inconsistent provision in respect of any proceeding (regardless of when such proceeding is first
threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to such repeal or amendment
or adoption of such inconsistent provision.
E. This Article EIGHTH
shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and
to advance expenses to persons other than indemnitees.
NINTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them,
any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or
of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement
and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may
be, and also on this Corporation.
TENTH: The following provisions are inserted
for the governance of derivative actions or proceedings brought on behalf of the Corporation.
A. Unless
the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall,
to the fullest extent permitted by law, be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring
(i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a
fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s
stockholders, or any claim for aiding and abetting any such alleged breach, (iii) any action asserting a claim against the Corporation,
its directors, officers or employees arising pursuant to any provision of the DGCL or this Amended and Restated Certificate of
Incorporation or the Bylaws, or (iv) any action asserting a claim against the Corporation, its directors, officers, or employees
governed by the internal affairs doctrine except for, as to each of (i) through (iv) above, any claim (A) as to which
the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery
(and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such
determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or (C)
arising under the federal securities laws, including the Securities Act of 1933, as amended, as to which the Court of Chancery
and the federal district court for the District of Delaware shall concurrently be the sole and exclusive forums. Notwithstanding
the foregoing, the provisions of this paragraph A will not apply to suits brought to enforce any liability or duty created by the
Exchange Act or any other claim for which the federal district courts of the United States of America shall be the sole and exclusive
forum. If an action is brought outside Delaware, the stockholder bringing the suit will be deemed to have consented to service
of process on such stockholder’s counsel.
B. If
any action the subject matter of which is within the scope of paragraph A above is filed in a court other than a court located
within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed
to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection
with any action brought in any such court to enforce paragraph A above (an “Enforcement Action”) and (ii) having service
of process made upon such stockholder in any such Enforcement Action by service upon such stockholder’s counsel in the Foreign
Action as agent for such stockholder.
C. If
any provision or provisions of this Article TENTH shall be held to be invalid, illegal or unenforceable as applied to any person
or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability
of such provisions in any other circumstance and of the remaining provisions of this Article TENTH (including, without limitation,
each portion of any sentence of this Article TENTH containing any such provision held to be invalid, illegal or unenforceable that
is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities
and circumstances shall not in any way be affected or impaired thereby. Any person or entity purchasing or otherwise acquiring
any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of
this Article TENTH.
ELEVENTH: The
Corporation reserves the right to amend, alter, change, add, or repeal any provision contained in this Amended and Restated Certificate
of Incorporation (including any Preferred Stock Designation), in the manner now or hereafter prescribed by this Amended and Restated
Certificate of Incorporation and the DGCL; and, except as set forth in Article EIGHT, all rights, preferences and privileges herein
conferred upon stockholders, directors, or any other persons by and pursuant to this Amended and Restated Certificate of Incorporation
in its present form or as hereafter amended are granted subject to the right reserved in this article ELEVENTH; provided,
however, that Article FIFTH of this Amended and Restated Certificate of Incorporation may be amended only as provided therein.
TWELFTH: The doctrine of corporate opportunity, or any other
analogous doctrine, shall not apply with respect to the Corporation or any of its officers or directors in circumstances where
the application of any such doctrine would conflict with any fiduciary duties or contractual obligations they may have as of the
date of this Amended and Restated Certificate of Incorporation or in the future, and the Corporation renounces any expectancy that
any of the directors or officers of the Corporation will offer any such corporate opportunity of which he or she may become aware
to the Corporation. In addition to the foregoing, the doctrine of corporate opportunity shall not apply to any other corporate
opportunity with respect to any of the directors or officers of the Corporation unless such corporate opportunity is expressly
offered to such person solely in his or her capacity as a director or officer of the Corporation and such opportunity is one the
Corporation is legally and contractually permitted to undertake and would otherwise be reasonable for the Corporation to pursue.
THIRTEENTH: The following provisions are inserted for the governance
of the limitation on business combinations:
A. The Corporation
hereby expressly elects not to be governed by Section 203 of the DGCL. Notwithstanding the foregoing, the Corporation shall not
engage in any business combination (as defined below), at any point in time at which the Corporation’s Common Stock is registered
under Section 12(b) or 12(g) of the Exchange Act with any interested stockholder (as defined below) for a period of three (3) years
following the time that such stockholder became an interested stockholder, unless:
(a) prior to such time, the Board of Directors approved either
the business combination or the transaction which resulted in the stockholder becoming an interested stockholder, or
(b) upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned at least eighty-five percent (85%) of the voting
stock outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but
not the outstanding voting stock owned by the interested stockholder) those shares owned by (i) persons who are directors and also
officers of the Corporation and (ii) employee stock plans in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange offer, or
(c) at or subsequent to that time, the business combination
is approved by the Board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative
vote of at least 66-2/3% of the outstanding voting stock that is not owned by the interested stockholder.
B. Solely for purposes
of this Article THIRTEENTH, references to:
(a) “affiliate” means a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another person.
(b) “associate,” when used to indicate a relationship
with any person, means: (i) any corporation, partnership, unincorporated association or other entity of which such person is a
director, officer or partner or is, directly or indirectly, the owner of twenty percent (20%) or more of any class of voting stock; (ii) any trust or other estate in which such person has at least a twenty percent (20%) beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative
of such spouse, who has the same residence as such person.
(c) “business combination,” when used in reference
to the Corporation and any interested stockholder of the Corporation, means:
(i) any merger or consolidation of the Corporation
or any direct or indirect majority-owned subsidiary of the Corporation (a) with the interested stockholder, or (b) with any other
corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the interested
stockholder and as a result of such merger or consolidation paragraph A above is not applicable to the surviving entity;
(ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder
of the Corporation, to or with the interested stockholder, whether as part of a dissolution or otherwise, of assets of the Corporation
or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to
ten percent (10%) or more of either the aggregate market value of all the assets of the Corporation determined on a consolidated
basis or the aggregate market value of all the outstanding stock of the Corporation;
(iii) any transaction which results in the
issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any stock
of the Corporation or of such subsidiary to the interested stockholder, except: (a) pursuant to the exercise, exchange or conversion
of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which securities
were outstanding prior to the time that the interested stockholder became such; (b) pursuant to a merger under Section 251(g)
of the DGCL; (c) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities
exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which security is distributed,
pro rata to all stockholders of a class or series of stock of the Corporation subsequent to the time the interested stockholder
became such; (d) pursuant to an exchange offer by the Corporation to purchase stock made on the same terms to all stockholders
of said stock; or (e) any issuance or transfer of stock by the Corporation; provided, however, that in no case under
items (c)-(e) of this subsection (iii) shall there be an increase in the interested stockholder’s proportionate share of
the stock of any class or series of the Corporation or of the voting stock of the Corporation (except as a result of immaterial
changes due to fractional share adjustments); or
(iv) any transaction involving the Corporation
or any direct or indirect majority-owned subsidiary of the Corporation which has the effect, directly or indirectly, of increasing
the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of
the Corporation or of any such subsidiary which is owned by the interested stockholder, except as a result of immaterial changes
due to fractional share adjustments or as a result of any purchase or redemption of any shares of stock not caused, directly or
indirectly, by the interested stockholder.
(d) “control,” including the terms “controlling,”
“controlled by” and “under common control with,” means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by
contract, or otherwise. A person who is the owner of twenty percent (20%) or more of the voting power of the outstanding voting
stock of the Corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity,
in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control
shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this Article THIRHTEENTH,
as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control
of such entity.
(e) “Exempted Person” means PROOF Acquisition Sponsor
I, LLC, and its affiliates, any of its respective direct or indirect transferees of at least 20% of the Corporation’s outstanding
common stock and any “group” (as defined under Section 13(d)(3) of the Exchange Act) of which any such person is a
part under Rule 13d-5 of the Exchange Act.
(f) “interested stockholder” means any person (other
than the Corporation or any direct or indirect majority-owned subsidiary of the Corporation) that (i) is the owner of twenty percent
(20%) or more of the voting stock of the Corporation, or (ii) is an affiliate or associate of the Corporation and was the owner
of twenty percent (20%) or more of the voting stock of the Corporation at any time within the three (3) year period immediately
prior to the date on which it is sought to be determined whether such person is an interested stockholder; and the affiliates
and associates of such person; but “interested stockholder” shall not include (a) any Exempted Person, or (b)
any person whose ownership of shares in excess of the twenty percent (20%) limitation set forth herein is the result of any action
taken solely by the Corporation; provided that with respect to clause (b) such person shall be an interested stockholder if
thereafter such person acquires additional shares of voting stock of the Corporation, except as a result of further corporate action
not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an interested stockholder,
the voting stock of the Corporation deemed to be outstanding shall include stock deemed to be owned by the person through application
of the definition of “owner” below but shall not include any other unissued stock of the Corporation which may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
(g) “owner,” including the terms “own”
and “owned,” when used with respect to any stock, means a person that individually or with or through any of its affiliates
or associates:
(1) beneficially owns such stock, directly
or indirectly; or
(2) has (a) the right to acquire such stock
(whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding,
or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, however, that a person
shall not be deemed the owner of stock tendered pursuant to a tender or exchange offer made by such person or any of such person’s
affiliates or associates until such tendered stock is accepted for purchase or exchange; or (b) the right to vote such stock
pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of
any stock because of such person’s right to vote such stock if the agreement, arrangement or understanding to vote such stock
arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to ten (10) or more persons; or
(3) has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (b)
of subsection (2) above), or disposing of such stock with any other person that beneficially owns, or whose affiliates or associates
beneficially own, directly or indirectly, such stock.
(h) “person” means any individual, corporation,
partnership, unincorporated association or other entity.
(i) “stock” means, with respect to any corporation,
capital stock and, with respect to any other entity, any equity interest.
(j) “voting stock” means stock of any class or series
entitled to vote generally in the election of directors.
IN WITNESS WHEREOF, the Corporation has caused this Amended
and Restated Certificate of Incorporation to be signed by its Chief Executive Officer, as of the____ day of ____________, 2021.
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John C. Backus, Jr.
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Chief Executive Officer
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17
Exhibit 3.3
BYLAWS
OF
PROOF
ACQUISITION CORP I
ARTICLE
I
OFFICES
1.1 Registered
Office. The registered office of the Corporation within the State of Delaware shall be located at either (a) the principal
place of business of the Corporation in the State of Delaware, if any, or (b) the office of the corporation or individual acting
as the Corporation’s registered agent in Delaware.
1.2 Additional
Offices. The Corporation may also have offices in such other places, both within and without the State of Delaware, as the
board of directors of the Corporation (the “Board of Directors”) may from time to time determine or the business of
the Corporation may require.
ARTICLE
II
MEETINGS OF STOCKHOLDERS
2.1 Place
of Meetings. All meetings of the stockholders shall be held at a time and place, either within or without the State of Delaware,
as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
2.2 Annual
Meetings. The annual meeting of stockholders shall be held on such date and at such time as may be fixed by the Board of Directors
and stated in the notice of the meeting, for the purpose of electing directors and for the transaction of only such other business
as is properly brought before the meeting in accordance with these Bylaws (the “Bylaws”).
2.3 Special
Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by
the Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), may only be called by a
majority of the entire Board of Directors, or the President or the Chairman, and shall be called by the Secretary at the request
in writing of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding and
entitled to vote. A request from the stockholders shall be delivered to the Secretary of the Corporation, signed by each stockholder
of record requesting the special meeting, and shall state the purpose or purposes of the proposed special meeting.
2.4 Notice
of the Meeting. Written notice of an annual meeting stating the place, date, and hour of the meeting, shall be given to each
stockholder entitled to vote at the annual meeting not less than ten (10) nor more than sixty (60) days before the date of the
annual meeting. Unless otherwise required by law, written notice of a special meeting of stockholders, stating the time, place,
hour, and purpose or purposes thereof, shall be given to each stockholder entitled to vote at the special meeting not less than
ten (10) or more than sixty (60) days before the date fixed for the special meeting. Business transacted at any special meeting
of stockholders shall be limited to the purposes stated in the notice.
2.5 Business
to be Conducted at an Annual Meeting.
(a) To
be properly brought before the annual meeting, must be either (i) specified in the notice of annual meeting (or any supplement
or amendment thereto) given by or at the direction of the Board of Directors, (ii) brought before the annual meeting by or at
the direction of the Board of Directors, or (iii) properly brought before the annual meeting by a stockholder.
(b) In
addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation and the business
must otherwise be a proper matter for stockholder action.
(i) To
be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the
Corporation addressed to the Secretary of the Corporation no later than the close of business ninety (90) days prior to and no
earlier than the opening of business one-hundred and twenty (120) days before the anniversary date of the immediately preceding
annual meeting of stockholders; provided, however, that in the event that there has been no prior annual meeting or the
annual meeting is more than thirty (30) days before or more than sixty (60) days after the anniversary date, notice by the stockholder
to be timely must be delivered no earlier than the close of business one-hundred and twenty (120) days before the meeting and
not later than the later of (x) the close of business ninety (90) days prior to the meeting or (y) the close of business ten (10)
days following the day on which public announcement of the date of the annual meeting is first made by the Corporation. The public
announcement of an adjournment or postponement of an annual meeting shall not commence a new time period or extend any time period
for the giving of a stockholder’s notice as described in this Section.
(ii) To
be in proper written form, a stockholder’s notice to the Secretary shall set forth (a) as to each matter the stockholder
proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting
and the reasons for conducting the business at the annual meeting, and (ii) any material interest of the stockholder in the business
sought to be brought before the meeting, and (b) as to the stockholder giving the notice (i) the name and record address of the
stockholder and (ii) the class, series, and number of shares of capital stock of the Corporation which are beneficially owned
by the stockholder.
(c) Other
then as set forth in Section 3.3 and notwithstanding other provision of these Bylaws to the contrary, no business shall be conducted
at the annual meeting except in accordance with the procedures set forth in this Section 2.5. The officer of the Corporation presiding
at an annual meeting shall, if the facts warrant, determine and declare to the annual meeting that business was not properly brought
before the annual meeting in accordance with the provisions of this Section 2.5, and if the presiding officer should so determine,
the presiding officer shall so declare to the annual meeting and any business not properly brought before the meeting shall not
be transacted.
(d) Public
Announcement. For purposes of these By Laws, “public announcement” shall mean disclosure in a press release reported
by the Dow Jones News Service, Associated Press, or comparable national news service or in a document publicly filed with or furnished
to the Securities and Exchange Commission pursuant to Sections 13, 14, or 15(d) of the Exchange Act by the Corporation.
2.6 Quorum.
The holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided
by law or by the Certificate of Incorporation. If, however, a quorum shall not be present or represented at any meeting of the
stockholders, the holders of a majority of the votes entitled to be cast by the stockholders entitled to vote thereat, present
in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present or represented. At the adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment
is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting.
2.6 Conduct
of a Meeting.
(a) The
Chairman of the Board of Directors shall act as chairman of all annual or special meeting of the stockholders. The Board of Directors
may designate any other officer or director of the Corporation to act as chairman of any meeting in the absence of the Chairman
of the Board of Directors, and the Board of Directors may further provide for determining who shall act as chairman of any stockholders
meeting in the absence of the Chairman of the Board of Directors and a Board of Director designee.
(b) The
Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary,
the presiding officer may appoint any other person to act as secretary of any meeting.
(c) The
Board of Directors may adopt rules and regulations for the conduct of a meeting of stockholders as it shall deem appropriate.
Except to the extent inconsistent with these Bylaws or the rules and regulations as adopted by the Board of Directors, the chairman
of any meeting of stockholders shall have the right and authority to convene and to adjourn the meeting, to prescribe rules, regulations,
and procedures and to do all acts as, in the judgment of the chairman of the meeting, are appropriate for the proper conduct of
the meeting. The rules, regulations, or procedures, whether adopted by the Board or prescribed by the chairman of the meeting,
may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules
and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation
in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies, or such other persons
as the chairman of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement
thereof; and (e) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined
by the Board or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the
rules of parliamentary procedure.
2.6 Voting.
Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, any question (other than the election of directors)
brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented
and entitled to vote thereat. At all meetings of stockholders for the election of directors, a plurality of the votes cast shall
be sufficient to elect. Each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each
share of the capital stock entitled to vote thereat held by such stockholder, unless otherwise provided by the Certificate of
Incorporation. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action
in writing without a meeting may authorize any person or persons to act for him by proxy. All proxies shall be executed in writing
and shall be filed with the Secretary of the Corporation not later than the day on which exercised. No proxy shall be voted or
acted upon after three (3) years from its date, unless the proxy provides for a longer period. The Board of Directors, in its
discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any
votes cast at such meeting shall be cast by written ballot.
2.7 Stockholder
Action by Written Consent.
(a) Unless
otherwise provided by the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders,
or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock entitled to vote thereon having not less than the minimum number of votes that would be necessary to authorize
or take the action at a meeting at which all shares entitled to vote thereon were present and voted, and shall be delivered to
the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or the Secretary
of the Corporation. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered
mail, return receipt requested.
(b) Every
written consent permitted by the Certificate of Incorporation and these Bylaws shall bear the date of signature of each stockholder
who signs the consent, and no written consent shall be effective to take the corporate action referred to therein unless, within
sixty (60) days of the earliest dated consent delivered in the manner required by this Section 2.7 and the Delaware General Corporation
Law (”DGCL”) to the Corporation, written consents signed by a sufficient number of holders entitled to vote to take
action are delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business or an
officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.
Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt
requested.
2.8 Voting
List. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in the name of each stockholder. The voting list shall
be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days prior to the meeting during ordinary business hours, at the principal place of business of the corporation.
If the meeting is to be held at a place, then the voting list shall be produced and kept at the time and place of the meeting
during the whole time thereof and may be examined by any stockholder who is present. If the meeting is to be held solely by means
of remote communication, then the voting list shall also be open to the examination of any stockholder during the whole time of
the meeting on a reasonably accessible electronic network, and the information required to access the voting list shall be provided
with the notice of the meeting.
2.9 Stock
Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 2.8 or the books of the Corporation, or to vote in person or by proxy at any meeting
of stockholders.
2.10 Adjournment.
Any meeting of the stockholders, including one at which directors are to be elected, may be adjourned for such periods as the
presiding officer of the meeting or the stockholders present in person or by proxy and entitled to vote shall direct.
2.11 Ratification.
Any transaction questioned in any stockholders’ derivative suit, or any other suit to enforce alleged rights of the Corporation
or any of its stockholders, on the ground of lack of authority, defective or irregular execution, adverse interest of any director,
officer or stockholder, nondisclosure, miscomputation or the application of improper principles or practices of accounting may
be approved, ratified and confirmed before or after judgment by the Board of Directors or by the holders of Common Stock and,
if so approved, ratified or confirmed, shall have the same force and effect as if the questioned transaction had been originally
duly authorized, and said approval, ratification or confirmation shall be binding upon the Corporation and all of its stockholders
and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction.
ARTICLE
III
DIRECTORS
3.1 Powers;
Number; Qualifications. The business and affairs of the Corporation shall be managed by or under the direction of the Board
of Directors, except as may be otherwise provided by law or in the Certificate of Incorporation. The number of directors which
shall constitute the Board of Directors shall be not less than one (1) nor more than nine (9). The exact number of directors shall
be fixed from time to time, within the limits specified in this Article III Section 1 or in the Certificate of Incorporation,
by the Board of Directors. Directors need not be stockholders of the Corporation. The Board may be divided into Classes as more
fully described in the Certificate of Incorporation.
3.2 Term
of Office. Each director shall hold office until the next annual meeting of stockholders at which the director’s class
stands for election or until the director’s earlier resignation, removal from office, death, or incapacity.
3.3 Nominations
of Directors.
(a) Nominations
of persons for election to the Board of Directors of the Corporation at a meeting of stockholders of the Corporation may be made
at the meeting by or at the direction of the Board of Directors, by any committee or persons appointed by the Board of Directors,
or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice
procedures set forth in this Article III, Section 3. Nominations by any stockholder shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. No person shall be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth herein.
(b) To
be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the
Corporation no earlier than the close of business one-hundred and twenty (120) days before the meeting and not later than the
later of (i) the close of business ninety (90) days prior to the meeting or (y) the close of business ten (10) days following
the day on which public announcement of the date of the meeting is first made by the Corporation. The public announcement of an
adjournment or postponement of the meeting shall not commence a new time period (or extend any time period) for the giving of
a stockholder’s notice as described in this Section.
(c)
The stockholder’s notice to the Secretary shall set forth (i) as to each person whom the stockholder proposes to
nominate for election or reelection as a director, (A) the name, age, business address, and residence address of the person,
(B) the principal occupation or employment of the person, (C) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the person, and (D) any other information relating to the person that is required
to be disclosed in solicitations for proxies for election of directors pursuant to the Rules and Regulations of the
Securities and Exchange Commission under Section 14 of the Securities Exchange Act of 1934, as amended, and (ii) as to the
stockholder giving the notice (X) the name and record address of the stockholder and (Y) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the stockholder. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of
any proposed nominee to serve as a director of the Corporation.
(d) The
officer of the Corporation presiding at a meeting in which one or more directors are to be elected shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if so determined,
the defective nomination shall be disregarded.
3.4 Meetings.
The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware.
The first meeting of each newly elected Board of Directors shall be held immediately after and at the same place as the meeting
of the stockholders at which it is elected and no notice of such meeting shall be necessary to the newly elected directors in
order to legally constitute the meeting, provided a quorum shall be present. Regular meetings of the Board of Directors may be
held without notice at such time and place as shall from time to time be determined by the Board of Directors. Special meetings
of the Board of Directors may be called by the President or a majority of the entire Board of Directors. Notice thereof stating
the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before
the date of the meeting, by telephone, facsimile, telegram, electronic mail, or other electronic transmission on twenty-four (24)
hours’ notice, or on such shorter notice as the person or persons calling the meeting may deem necessary or appropriate
in the circumstances.
3.5 Quorum.
Except as may be otherwise specifically provided by law, the Certificate of Incorporation, or these Bylaws, at all meetings of
the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of Directors, a majority of the directors present thereat
may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
3.6 Conduct
of Meetings of the Board. The Board of Directors shall elect one of its members to be Chairman of the Board of Directors.
The Chairman of the Board of Directors shall lead the Board of Directors in fulfilling its responsibilities as set forth in these
Bylaws, including its responsibility to oversee the performance of the Corporation, and shall determine the agenda and perform
all other duties and exercise all other powers which are or from time to time may be delegated to the Chairman by the Board of
Directors.
Meetings
of the Board of Directors shall be presided over by the Chairman of the Board of Directors, or in his or her absence, by the President,
or in the absence of the Chairman of the Board of Directors and the President by such other person as the Board of Directors may
designate or the members present may select.
3.7 Actions
of Board of Directors Without Meeting. Unless otherwise restricted by the Certificate of Incorporation, these Bylaws, or the
resolution creating a committee, any action required or permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board of Directors or of the committee, as the case may
be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions
are filed with the minutes of proceedings of the Board of Directors or the committee., as applicable.
3.8 Removal
of Directors by Stockholders. The entire Board of Directors or any individual Director may be removed from office with or
without cause by a majority vote of the holders of the outstanding shares then entitled to vote at an election of directors. Notwithstanding
the foregoing, if the Corporation’s board is classified, stockholders may affect the removal only for cause.
3.9 Resignations.
Any Director may resign at any time by submitting a written resignation to the Board of Directors or Secretary of the Corporation.
The resignation shall take effect at the time of its receipt by the Corporation unless another time be fixed in the resignation,
in which case it shall become effective at the time so fixed. The acceptance of a resignation shall not be required to make it
effective.
3.10. Vacancies.
Unless otherwise provided in the Certificate of Incorporation, vacancies from newly created directorships resulting from an increase
in the authorized number of directors or from any other cause may be filled by a majority of the directors then in office, although
less than a quorum, or by a sole remaining director and each director so chosen shall hold office until the next election of the
class for which a director shall have been chosen, and until the director’s successor shall be elected and qualified, or
until a director’s earlier resignation, removal from office, death, or incapacity. Notwithstanding the foregoing, in case
the Board of Directors or any one or more directors is removed from office by the stockholders, new directors may be elected by
the stockholders at the same time for the unexpired portion of the full term of the Director or Directors so removed in compliance
with the nomination procedures set forth in Section 3.3.
3.11 Committees.
(a) The
Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation.
The Board of Director may designate one or more directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member
or members present at any meeting and not disqualified from voting, whether or not the member or members constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified
member. Any committee, to the extent provided in the resolution of the Board of Directors, or in these Bylaws, shall have and
may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation,
and may authorize the seal of the Corporation to be affixed to all papers which may require it.
(b) Notwithstanding
Section 3.11(a), no committee designated by the Board of Directors pursuant to Section 3.11(a) shall have the power or authority
in reference to the following matter: (i) approving or adopting, or recommending to the stockholders, any action or matter (other
than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval or (ii)
adopting, amending, or repealing any Bylaw of the corporation. Furthermore, unless the resolution creating the committee expressly
so provides, no committee shall have the power or authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger.
(c) A
majority of the directors serving on a committee of the Board of Directors or on a subcommittee of a committee shall constitute
a quorum for the transaction of business by the committee or subcommittee unless the Certificate of Incorporation, the Bylaws,
or the resolution of the Board of Directors or a resolution of a committee that created the subcommittee requires a greater or
lesser number; provided, however, that in no case shall a quorum be less than one-third (1/3) of the directors then serving
on the committee or subcommittee. The vote of the majority of the members of a committee or subcommittee present at a meeting
at which a quorum is present shall be the act of the committee or subcommittee, unless the Certificate of Incorporation, the Bylaws,
or the resolution of the Board of Directors or a resolution of a committee that created the subcommittee requires a greater number.
Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.
3.12 Compensation.
The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed
amount, in cash or other form of consideration, for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
3.13 Meetings
by Means of Conference Telephone. Members of the Board of Directors or any committee designed by the Board of Directors may
participate in a meeting of the Board of Directors or of a committee of the Board of Directors by means of conference telephone
or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation
in a meeting pursuant to this subsection shall constitute presence in person at such meeting.
ARTICLE
IV
OFFICERS
4.1 General.
The officers of the Corporation shall be elected by the Board of Directors and may consist of a Chief Executive Officer, President,
Chief Financial Officer, Secretary and Treasurer. The Board of Directors, in its discretion, may also elect one or more other
officers, including: Vice Presidents, Assistant Secretaries, Assistant Treasurers, a Controller, and such other officers as in
the judgment of the Board of Directors may be necessary or desirable. Any number of offices may be held by the same person and
more than one person may hold the same office, unless otherwise prohibited by law, the Certificate of Incorporation, or these
Bylaws. The officers of the Corporation need not be stockholders of the Corporation, nor need the officers be directors of the
Corporation. Subject to the provisions of these Bylaws and to the direction of the Board of Directors, the officers of the Company
shall be:
(a) Chief
Executive Officer. The Chief Executive Officer shall have ultimate authority for decisions relating to the general management
and control of the affairs and business of the Corporation and shall perform such other duties and exercise such other powers
which are or from time to time may be delegated to him or her by the Board of Directors or these Bylaws, all in accordance with
basic policies as established by and subject to the oversight of the Board of Directors.
(b) President.
At the request of the Chief Executive Officer, or in the absence of the Chief Executive Officer, or in the event of the Chief
Executive Officer’s inability or refusal to act, the President shall perform the duties of the Chief Executive Officer,
and when so acting, shall have all the powers of and be subject to all the restrictions upon such office. The President shall
perform such other duties and have such other powers as the Board of Directors from time to time may prescribe and that are traditional
for a person acting in the capacity as President.
(c) Chief
Financial Officer. The Chief Financial Officer shall have general supervision, direction, and control of the financial affairs
of the Corporation and shall perform such other duties and exercise such other powers which are or from time to time may be delegated
to the Chief Financial Offer by the Board of Directors or these Bylaws, all in accordance with basic policies as established by
and subject to the oversight of the Board of Directors. In the absence of a named Treasurer, the Chief Financial Officer shall
also have the powers and duties of the Treasurer as hereinafter set forth and shall be authorized and empowered to sign as Treasurer
in any case where the Treasurer’s signature is required.
(d) Secretary.
The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose. The Secretary shall also perform like duties for the standing committees
when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings
of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the President,
under whose supervision the Secretary shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of
all meetings of the stockholders and special meetings of the Board of Directors shall perform such actions. If there be no Assistant
Secretary, then the Board of Directors or the President may choose another officer to cause the notice to be given. The Secretary
shall have custody of the seal of the Corporation and the Secretary or Assistant Secretary, if any, shall have authority to affix
the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or Assistant
Secretary, as applicable. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation
and to attest the affixing by the officer’s signature. The Secretary shall see that all books, reports, statements, certificates,
and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be.
(e) Treasurer.
The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and
to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for the disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account
of all transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the
Treasurer shall give the Corporation a bond in an amount and with a surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the office of Treasurer and for the restoration to the Corporation of
all books, papers, vouchers, money, and other property of whatever kind in the possession or under the control of the Treasurer
belonging to the Corporation in case of the death, resignation, retirement, or removal from office of the Treasurer.
(f) Other
Officers. Other officers as appointed by the Board of Directors shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation
the power to choose other officers and to prescribe their respective duties and powers.
4.2 Election.
The Board of Directors at its first meeting shall elect the officers of the Corporation who shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of Directors. All officers of the Corporation shall hold office
until their successors are chosen and qualified, or until their earlier resignation or removal. Except as otherwise provided in
this Article IV, any officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority
of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The
salaries of all officers who are directors of the Corporation shall be fixed by the Board of Directors.
4.3 Voting
Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President
or any Vice President, and any such officer may, in the name and on behalf of the Corporation, take all such action as any such
officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation
may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership
of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any other person or persons.
4.4 Vacancies.
The Board of Directors shall have the power to fill any vacancies in any office occurring from whatever reason.
4.5 Resignations.
Any officer may resign at any time by submitting a written resignation to the Corporation. The resignation shall take effect at
the time of its receipt by the Corporation, unless another time be fixed in the resignation, in which case it shall become effective
at the time so fixed. The acceptance of a resignation shall not be required to make it effective.
4.6 Removal.
Subject to the provisions of any employment agreement approved by the Board of Directors, any officer of the Corporation may be
removed at any time, with or without cause, by the Board of Directors.
ARTICLE
V
CAPITAL STOCK
5.1 Form
of Certificates. The shares of stock in the Corporation shall be represented by certificates, provided that the Board of Directors
may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall
be in uncertificated form. Stock certificates shall be in such forms as the Board of Directors may prescribe and signed by the
Chairman of the Board, President or a Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation.
5.2 Signatures.
Any or all of the signatures on a stock certificate may be a facsimile, including, but not limited to, signatures of officers
of the Corporation and countersignatures of a transfer agent or registrar. In case an officer, transfer agent or registrar who
has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were
such officer, transfer agent or registrar at the date of issue.
5.3 Lost
Certificates. The Board of Directors may direct a new stock certificate or certificates to be issued in place of any stock
certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing
such issue of a new stock certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in
such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
5.4 Transfers.
(a) Stock
of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of certificated stock
shall be made on the books of the Corporation only by the person named in the certificate or by such person’s attorney lawfully
constituted in writing and upon the surrender of the certificate therefor, which shall be canceled before a new certificate shall
be issued. Transfers of uncertificated stock shall be made on the books of the Corporation only by the person then registered
on the books of the Corporation as the owner of the shares or by the person’s attorney lawfully constituted in writing and written
instruction to the Corporation containing such information as the Corporation or its agents may prescribe.
(b) No
transfer of uncertificated stock shall be valid as against the Corporation for any purpose until it shall have been entered in
the stock records of the Corporation by an entry showing from and to whom transferred. The Corporation shall have no duty to inquire
into adverse claims with respect to any stock transfer unless:
(i)
The Corporation has received a written notification of an adverse claim at a time and in a manner which
affords the Corporation a reasonable opportunity to act on it prior to the issuance of a new, reissued, or re-registered
share certificate, in the case of certificated stock, or entry in the stock record books of the Corporation, in the case of
uncertificated stock, and the notification identifies the claimant, the registered owner and the issue of which the share or
shares is a part and provides an address for communications directed to the claimant; or
(ii) The
Corporation has required and obtained, with respect to a fiduciary, a copy of a will, trust, indenture, articles of co-partnership,
Bylaws, or other controlling instruments (for a purpose other than to obtain appropriate evidence of the appointment or incumbency
of the fiduciary), and the documents indicate, upon reasonable inspection, the existence of an adverse claim.
(c) The
Corporation may discharge any duty of inquiry by any reasonable means, including notifying an adverse claimant by registered or
certified mail at the address furnished by him or, if there be no such address, at the claimant’s residence or regular place
of business that the security has been presented for registration of transfer by a named person, and that the transfer will be
registered unless within thirty (30) days from the date of mailing the notification, either:
(i) An
appropriate restraining order, injunction or other process issues from a court of competent jurisdiction; or
(ii) An
indemnity bond, sufficient in the Corporation’s judgment to protect the Corporation and any transfer agent, registrar, or
other agent of the Corporation involved from any loss which it or they may suffer by complying with the adverse claim, is filed
with the Corporation.
5.5 Record
Date.
(a) The
Board of Directors shall fix a record date for the determination of the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof. The record date shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors, and the record date shall not be more than sixty (60) nor less than ten (10) days before
the date of the meeting to which the record date applies. If the Board of Directors shall fail to fix a record date, the record
date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business
on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at
a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall
also fix as the record date for stockholders entitled to notice of the adjourned meeting the same or an earlier date as that fixed
for determination of stockholders entitled to vote in accordance with the foregoing provisions of this Section 5.5(a) at the adjourned
meeting
(b) The
Board of Directors shall fix a record date for the determination of the stockholders entitled to consent to corporate action without
a meeting. The record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board
of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date
is adopted by the Board of Directors. If no record date has been fixed by the board of directors, the record date for determining
stockholders entitled to consent to corporate action without a meeting, when no prior action by the Board of Directors is required
by the DGCL, shall be the first date on which a signed consent setting forth the action taken or proposed to be taken is delivered
to the Corporation in accordance with §228(d) of the DGCL. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by the DGCL, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors
adopts the resolution taking the prior action.
(c) The
Board of Directors shall fix a record date for the determination of the stockholders entitled to receive payment of any dividend
or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action. The record date shall not precede the date upon
which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to
such action. If the Board of Directors fails to fix a record date, the record date for determining stockholders for any purpose
set forth in this Section 5.5(c) shall be at the close of business on the day on which the Board of Directors adopts the resolution
relating thereto.
5.6 Registered
Stockholders. Prior to due presentment for transfer of any share or shares, the Corporation shall treat the registered owner
thereof as the person exclusively entitled to vote, to receive notifications, and to all other benefits of ownership with respect
to the share or shares, and shall not be bound to recognize any equitable or other claim to or interest in the share or shares
on the part of any other person, whether or not the Corporation shall have express or other notice thereof, except as otherwise
provided by the laws of the State Delaware.
ARTICLE
VI
NOTICES
6.1 Form
of Notice. Notices to stockholders may be delivered in any manner and by any means permitted by §232 of the DGCL and
shall be deemed given as set forth therein.
6.2 Waiver
of Notice. Whenever any notice is required to be given under the provisions of law or the Certificate of Incorporation or
by these Bylaws of the Corporation, a written waiver, signed by the person or persons entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of
notice of the meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully called or convened. Voting at the meeting shall
constitute a waiver of notice of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders, need be specified in any written waiver of notice unless so required by the Certificate of Incorporation.
ARTICLE
VII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
7.1 The
Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that person is or was a director, officer, employee, or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise (each, an “Indemnified Person”), against expenses (including attorneys’
fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by the Indemnified Person in connection
with the action, suit, or proceeding if the Indemnified Person acted in good faith and in a manner the Indemnified Person reasonably
believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe the conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which the Indemnified Person reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that
the conduct was unlawful.
7.2 The
Corporation shall indemnify any Indemnified Person who was or is a party, or is threatened to be made a party to any threatened,
pending, or completed action or suit by or in the right of the Corporation to procure a judgment in the Corporation’s favor
against expenses (including attorneys’ fees) actually and reasonably incurred by the Indemnified Person in connection with
the defense or settlement of the action or suit if Indemnified Peson acted in good faith and in a manner the Indemnified Person
reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall
be made in respect of any claim, issue, or matter as to which the Indemnified Person shall have been adjudged to be liable to
the Corporation unless and only to the extent that the Court of Chancery or the court in which the action or suit was brought
shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case,
the Indemnified Person is fairly and reasonably entitled to indemnity for the expenses which the Court of Chancery or other court
shall deem proper.
7.3 To
the extent that an Indemnified Persona has been successful on the merits or otherwise in defense of any action, suit, or proceeding
referred to in Section 7.1 or 7.2, or in defense of any claim, issue, or matter therein, the Indemnified Person shall be indemnified
against expenses (including attorneys’ fees) actually and reasonably incurred by the Indemnified person in connection therewith.
7.4 Any
indemnification under Section 7.1 or 7.2 (unless ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the Indemnified Person is proper in the circumstances because the Indemnified
Person has met the applicable standard of conduct set forth in such section. The determination shall be made:
(a) By
the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding,
or
(b) If
a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or
(c) By
the stockholders.
7.5 Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit, or proceeding may be paid by the Corporation in advance of the final
disposition of the action, suit, or proceeding upon receipt of an undertaking by or on behalf of the director or officer to
repay any amount advanced if it shall ultimately be determined that the officer or director is not entitled to be indemnified
by the Corporation as authorized in this Section. Expenses (including attorneys’ fees) incurred by other Indemnified
Persons may be so paid upon terms and conditions, if any, as the Board of Directors deems appropriate.
7.6 The
indemnification and advancement of expenses provided by, or granted pursuant to, the other provisions of this Article VII shall
not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, vote of stockholders, or disinterested directors or otherwise, both as to action in an official capacity
and as to action in another capacity while holding an office.
7.7 The
Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was an Indemnified Person, whether
or not the Corporation would have the power to indemnify the Indemnified Person against liability pursuant to the provisions of
this Article VII.
7.8 For
purposes of this Article VII, references to “the Corporation” shall include, in addition to the resulting Corporation,
any constituent Corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its Indemnified Persons, who shall stand in the same
position under this Article VII with respect to the resulting or surviving Corporation as the Indemnified Person would have with
respect to the constituent Corporation of its separate existence had continued.
7.9 For
purposes of this Article VII, references to “other enterprises” shall include employee benefit plans; references to
“fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references
to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, the director, officer, employee, or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner the person reasonably
believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner “not opposed to the best interests of the Corporation” as referred to in this Article VII.
7.10 The
rights provided to Indemnified Persons pursuant to this Article VII shall be contract rights and the indemnification and advancement
of expenses provided by, or granted pursuant to, this Article VII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE
VIII
INTERESTED TRANSACTION
8.1 Interested
Transactions.
(a) No
contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any
other corporation, partnership, association, or other entity or organization in which one or more of its directors or officers,
are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the
director or officer is present at or participates in the meeting of the Board of Directors or committee which authorizes the contract
or transaction, or solely because of any director’s or officer’s votes are counted for such purpose, if:
(i) The
material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(ii) The
material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved
in good faith by vote of the stockholders; or
(iii) The
contract or transaction is fair as to the Corporation as of the time it is authorized, approved, or ratified, by the Board of
Directors, a committee, or the stockholders.
(b) Common
or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
ARTICLE
IX
GENERAL PROVISIONS
9.1 Reliance
on Books and Records. Each Director, each member of any committee designated by the Board of Directors, and each officer of
the Corporation, shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account
or other records of the Corporation, including reports made to the Corporation by any of its officers, by an independent certified
public accountant, or by an appraiser selected with reasonable care.
9.2 Maintenance
and Inspection of Records.
(a) The
Corporation shall, either at its principal executive office or at a place or places designated by the Board of Directors, keep
a record of the Corporation’s stockholders listing their names and addresses and the number and class of shares held by
each stockholder, a copy of the Certificate of Incorporation, as may be amended to date, a copy of these Bylaws, as may be amended
to date, minute books, accounting books, and other records.
(b) Any
books and records maintained by the Corporation may be kept on, or by means of, or be in the form of, any information storage
device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time.
The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the records pursuant to
the provisions of the DGCL. When records are kept in electronic or digital format, a clearly legible paper form produced from
or by means of the information storage device or method shall be admissible in evidence, and accepted for all other purposes,
to the same extent as an original paper form accurately portrays the record.
(c) Any
stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof,
have the right during the usual hours for business to inspect for any proper purpose the Corporation’s stock ledger, a list
of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to the person’s interest as a stockholder. In every instance where an attorney or other agent is the
person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or other writing that
authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal executive office.
9.3 Inspection
by Directors. Any director shall have the right to examine the Corporation’s stock ledger, a list of its stockholders,
and its other books and records for a purpose reasonably related to the director’s position as a director.
9.4 Dividends.
Subject to the provisions of the Certificate of Incorporation, if any, dividends upon the capital stock of the Corporation may
be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend,
there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Directors from time
to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends,
or for repairing or maintaining any property of the Corporation, or for any other purpose as the Directors shall think conducive
to the interest of the Corporation, and the Directors may modify or abolish any reserve in the manner in which it was created.
9.5 Checks.
All checks or demands for money and notes of the Corporation shall be signed by an officer or officers or other persons as the
Board of Directors may from time to time designate.
9.6 Fiscal
Year. The fiscal year of the Corporation shall be as determined by the Board of Directors. If the Board of Directors shall
fail to do so, the President shall fix the fiscal year.
9.7 Seal.
The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate
Seal, Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.
9.8 Amendments.
The Board of Directors shall have the power to adopt, amend, alter or repeal the Bylaws. The affirmative vote of a majority of
the Board of Directors shall be required to adopt, amend, alter, or repeal the Bylaws. The Bylaws also may be adopted, amended,
altered, or repealed by the stockholders; provided, however, that in addition to any vote of the holders of any class or
series of capital stock of the Corporation required by applicable law or the Certificate of Incorporation, the affirmative vote
of the holders of at least a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt,
amend, alter or repeal the By Laws.
9.9 Interpretation
of Bylaws. All words, terms and provisions of these Bylaws shall be interpreted and defined by and in accordance with the
DGCL, as amended, and as amended from time to time hereafter.
Exhibit 3.4
AMENDED
AND RESTATED
BYLAWS
OF
PROOF
ACQUISITION CORP I
ARTICLE
I
OFFICES
1.1 Registered
Office. The registered office of the Corporation within the State of Delaware shall be located at either (a) the principal
place of business of the Corporation in the State of Delaware, if any, or (b) the office of the corporation or individual acting
as the Corporation’s registered agent in Delaware.
1.2 Additional
Offices. The Corporation may also have offices in such other places, both within and without the State of Delaware, as the
board of directors of the Corporation (the “Board of Directors”) may from time to time determine or the business of
the Corporation may require.
ARTICLE
II
MEETINGS OF STOCKHOLDERS
2.1 Place
and Time of Meetings. An annual meeting of the stockholders shall be held each year for the purpose of electing directors
and conducting such other proper business as may come before the meeting. The date, time and place of the annual meeting shall
be determined by resolution of the Board of Directors. Only stockholders entitled to vote at an annual meeting shall have the
right to attend such annual meeting.
2.2 Special
Meetings. Special meetings of the stockholders may be called for any purpose (including, without limitation, the filling of
Board of Directors vacancies and newly created directorships), and may be held at such time and place, within or without the State
of Delaware, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Such meetings may only
be called by a majority of the entire Board of Directors, or the Chief Executive Officer or the Chairman of the Board. Only stockholders
entitled to vote at a special meeting shall have the right to attend such special meeting.
2.3 Place
of Meetings. The Board of Directors may designate any place, either within or without the State of Delaware, as the place
of meeting for any annual meeting or for any special meeting called by the Board of Directors. If no designation is made, or if
a special meeting be otherwise called, the meeting shall be held telephonically or at the principal executive office of the Corporation.
2.4 Notice
of the Meeting. Written notice of an annual meeting stating the place, date, and hour of the meeting, shall be given to each
stockholder entitled to vote at the annual meeting not less than ten (10) nor more than sixty (60) days before the date of the
annual meeting. Unless otherwise required by law, written notice of a special meeting of stockholders, stating the time, place,
hour, and purpose or purposes thereof, shall be given to each stockholder entitled to vote at the special meeting not less than
ten (10) or more than sixty (60) days before the date fixed for the special meeting. Business transacted at any special meeting
of stockholders shall be limited to the purposes stated in the notice.
2.5 Business
to be Conducted at an Annual Meeting.
(a) To
be properly brought before the annual meeting, business must be either (i) specified in the notice of annual meeting (or any supplement
or amendment thereto) given by or at the direction of the Board of Directors, (ii) brought before the annual meeting by or at
the direction of the Board of Directors, or (iii) properly brought before the annual meeting by a stockholder.
(b) In
addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation and the business
must otherwise be a proper matter for stockholder action.
(i) To
be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the
Corporation addressed to the Secretary of the Corporation no later than the close of business ninety (90) days prior to and no
earlier than the opening of business one-hundred and twenty (120) days before the anniversary date of the immediately preceding
annual meeting of stockholders; provided, however, that in the event that there has been no prior annual meeting or the
annual meeting is more than thirty (30) days before or more than sixty (60) days after the anniversary date, notice by the stockholder
to be timely must be delivered no earlier than the close of business one-hundred and twenty (120) days before the meeting and
not later than the later of (x) the close of business ninety (90) days prior to the meeting or (y) the close of business ten (10)
days following the day on which public announcement of the date of the annual meeting is first made by the Corporation. The public
announcement of an adjournment or postponement of an annual meeting shall not commence a new time period or extend any time period
for the giving of a stockholder’s notice as described in this Section 2.5.
(ii) To
be in proper written form, a stockholder’s notice to the Secretary shall set forth (a) as to each matter the stockholder
proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting
and the reasons for conducting the business at the annual meeting, and (ii) any material interest of the stockholder in the business
sought to be brought before the meeting, and (b) as to the stockholder giving the notice (i) the name and record address of the
stockholder and (ii) the class, series ,and number of shares of capital stock of the Corporation which are beneficially owned
by the stockholder.
(c) Other
then as set forth in Section 3.3 and notwithstanding other provision of these Amended and Restated Bylaws (the “Bylaws”)
to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this
Section 2.5. The officer of the Corporation presiding at an annual meeting shall, if the facts warrant, determine and declare
to the annual meeting that business was not properly brought before the annual meeting in accordance with the provisions of this
Section 2.5, and if the presiding officer should so determine, the presiding officer shall so declare to the annual meeting and
any business not properly brought before the meeting shall not be transacted.
(d) Public
Announcement. For purposes of these Bylaws, “public announcement” shall mean disclosure in a press release reported
by the Dow Jones News Service, Associated Press, or comparable national news service or in a document publicly filed with or furnished
to the Securities and Exchange Commission pursuant to Sections 13, 14, or 15(d) of the Exchange Act by the Corporation.
2.6 Quorum.
Except as otherwise provided by applicable law or by the Corporation’s Amended and Restated Certificate of Incorporation
(the “Amended and Restated Certificate of Incorporation”), a majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority
of the outstanding shares is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time
to time in accordance with Section 2.7, until a quorum shall be present or represented.
2.7
Adjourned Meetings. When a meeting is adjourned to another time and place, notice need
not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original
meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.8
Conduct of a Meeting.
(a) The
Chairman of the Board of Directors shall act as chairman of all annual or special meeting of the stockholders. The Board of Directors
may designate any other officer or director of the Corporation to act as chairman of any meeting in the absence of the Chairman
of the Board of Directors, and the Board of Directors may further provide for determining who shall act as chairman of any stockholders
meeting in the absence of the Chairman of the Board of Directors and a Board of Directors’ designee.
(b) The
Secretary of the Corporation shall act as secretary of all meetings of the stockholders, but in the absence of the Secretary,
the presiding officer may appoint any other person to act as secretary of any meeting.
(c) The
Board of Directors may adopt rules and regulations for the conduct of a meeting of stockholders as it shall deem appropriate.
Except to the extent inconsistent with these Bylaws or the rules and regulations as adopted by the Board of Directors, the chairman
of any meeting of stockholders shall have the right and authority to convene and to adjourn the meeting, to prescribe rules, regulations,
and procedures and to do all acts as, in the judgment of the chairman of the meeting, are appropriate for the proper conduct of
the meeting. The rules, regulations, or procedures, whether adopted by the Board or prescribed by the chairman of the meeting,
may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules
and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation
in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies, or such other persons
as the chairman of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement
thereof; and (e) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined
by the Board or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the
rules of parliamentary procedure.
2.9 Vote
Required. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy
at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the question is one upon
which by express provisions of an applicable law or of the Amended and Restated Certificate of Incorporation a different vote
is required, in which case such express provision shall govern and control the decision of such question. Where a separate vote
by class is required, the affirmative vote of the majority of shares of such class present in person or represented by proxy at
the meeting shall be the act of such class, unless the question is one upon which by express provisions of an applicable law or
of the Amended and Restated Certificate of Incorporation a different vote is required, in which case such express provision shall
govern and control the decision of such question. Except as otherwise provided by the Delaware General Corporation Law (”DGCL”)
or by the Amended and Restated Certificate of Incorporation, every stockholder shall at every meeting of the stockholders be entitled
to one vote in person or by proxy for each share of stock entitled to vote held by such stockholder.
2.10 Class
B Common Stock Action by Written Consent. Unless otherwise provided in the Amended and Restated Certificate of Incorporation,
any action required to be taken at any annual or special meeting of the holders of Class B Common Stock (as defined in the Amended
and Restated Certificate of Incorporation), or any action which may be taken at any annual or special meeting of such stockholders,
may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the
action so taken and bearing the dates of signature of the stockholders who signed the consent or consents, shall be signed by
the holders of outstanding Class B Common Stock having not less than a majority of the shares entitled to vote, or, if greater,
not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office
in the State of Delaware, or the Corporation’s principal place of business, or an officer or agent of the Corporation having
custody of the book or books in which proceedings of meetings of the holders of Class B Common Stock are recorded. Delivery made
to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested; provided
that no consent or consents delivered by certified or registered mail shall be deemed delivered until such consent or consents
are actually received at the registered office. All consents properly delivered in accordance with this Section 2.10 shall be
deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein
unless, within sixty (60) days of the earliest dated consent delivered to the Corporation as required by this Section 2.10, written
consents signed by the Class B Common Stock holders of a sufficient number of shares to take such corporate action are so recorded.
Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to
those holders of Class B Common Stock who have not consented in writing. Any action taken pursuant to such written consent or
consents of the holders of Class B Common Stock shall have the same force and effect as if taken by such stockholders at a meeting
thereof.
2.11
No Stockholder Action by Written Consent. Except as provided in Section 2.10,
no action that is required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of
stockholders may be effected by written consent of stockholders in lieu of a meeting.
2.12 Voting
List. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days prior to the meeting during ordinary business hours, at the principal place of business of the Corporation.
If the meeting is to be held at a place, then the voting list shall be produced and kept at the time and place of the meeting
during the whole time thereof and may be examined by any stockholder of the Corporation who is present. If the meeting is to be
held solely by means of remote communication, then the voting list shall also be open to the examination of any stockholder during
the whole time of the meeting on a reasonably accessible electronic network, and the information required to access the voting
list shall be provided with the notice of the meeting.
2.13 Stock
Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 2.12 or the books of the Corporation, or to vote in person or by proxy at any meeting
of stockholders.
2.14 Ratification.
Any transaction questioned in any stockholders’ derivative suit, or any other suit to enforce alleged rights of the Corporation
or any of its stockholders, on the ground of lack of authority, defective or irregular execution, adverse interest of any director,
officer or stockholder, nondisclosure, miscomputation or the application of improper principles or practices of accounting may
be approved, ratified and confirmed before or after judgment by the Board of Directors or by the stockholders and, if so approved,
ratified or confirmed, shall have the same force and effect as if the questioned transaction had been originally duly authorized,
and said approval, ratification or confirmation shall be binding upon the Corporation and all of its stockholders and shall constitute
a bar to any claim or execution of any judgment in respect of such questioned transaction.
ARTICLE
III
DIRECTORS
3.1 Powers;
Number; Qualifications. The business and affairs of the Corporation shall be managed by or under the direction of the Board
of Directors, except as may be otherwise provided by law or in the Amended and Restated Certificate of Incorporation. The number
of directors which shall constitute the Board of Directors shall be not less than one (1) nor more than nine (9). The exact number
of directors shall be fixed from time to time, within the limits specified in this Section 3.1 or in the Amended and Restated
Certificate of Incorporation, by the Board of Directors. Directors need not be stockholders of the Corporation. The Board of Directors
may be divided into classes as more fully described in the Amended and Restated Certificate of Incorporation.
3.2 Election;
Term of Office; Resignation; Removal; Vacancies. Each director shall hold office until the next annual meeting of stockholders
at which the director’s class stands for election or until such director’s earlier resignation, removal from office,
death or incapacity. Unless otherwise provided in the Amended and Restated Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized number of directors or from any other cause may be filled by a majority
of the directors then in office, although less than a quorum, or by a sole remaining director and each director so chosen shall
hold office until the next election of the class for which such director shall have been chosen, and until his or her successor
shall be elected and qualified, or until such director’s earlier resignation, removal from office, death or incapacity.
3.3
Nominations. Nominations of persons for election to the Board of Directors of
the Corporation at a meeting of stockholders of the Corporation may be made at such meeting by or at the direction of the Board
of Directors, by any committee or persons appointed by the Board of Directors or by any stockholder of the Corporation entitled
to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 3.3. Such
nominations by any stockholder shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely,
a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation
not less than sixty (60) days nor more than ninety (90) days prior to the meeting; provided however, that in the event that less
than seventy (70) days’ notice or prior public announcement of the date of the meeting is given or made to the stockholders,
notice by the stockholder, to be timely, must be received no later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the meeting was mailed or such public announcement was made, whichever first occurs.
Such stockholder’s notice to the Secretary shall set forth (i) as to each person whom the stockholder proposes to nominate
for election or reelection as a director, (a) the name, age, business address and residence address of the person, (b) the principal
occupation or employment of the person, (c) the class and number of shares of capital stock of the Corporation which are beneficially
owned by the person, and (d) any other information relating to the person that is required to be disclosed in solicitations for
proxies for election of directors pursuant to the Rules and Regulations of the Securities and Exchange Commission under Section
14 of the Securities Exchange Act of 1934, as amended, and (ii) as to the stockholder giving the notice (a) the name and record
address of the stockholder and (b) the class and number of shares of capital stock of the Corporation which are beneficially owned
by the stockholder. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required
by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person
shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein.
The officer of the Corporation presiding at an annual meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the foregoing procedure, and if so determined, he or she shall so declare to
the meeting and the defective nomination shall be disregarded.
3.4 Meetings.
The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware.
The first meeting of each newly elected Board of Directors shall be held immediately after and at the same place as the meeting
of the stockholders at which it is elected and no notice of such meeting shall be necessary to the newly elected directors in
order to legally constitute the meeting, provided a quorum shall be present. Regular meetings of the Board of Directors may be
held without notice at such time and place as shall from time to time be determined by the Board of Directors. Special meetings
of the Board of Directors may be called by the President or a majority of the entire Board of Directors. Notice thereof stating
the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before
the date of the meeting, by telephone, facsimile, telegram or e-mail on twenty-four (24) hours’ notice, or on such shorter
notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances.
3.5 Quorum.
Except as may be otherwise specifically provided by law, the Amended and Restated Certificate of Incorporation or these Bylaws,
at all meetings of the Board of Directors or any committee thereof, a majority of the entire Board of Directors or such committee,
as the case may be, shall constitute a quorum for the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any
meeting of the Board of Directors or of any committee thereof, a majority of the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
3.6 Organization
of Meetings. The Board of Directors shall elect one of its members to be Chairman of the Board of Directors. The Chairman
of the Board of Directors shall lead the Board of Directors in fulfilling its responsibilities as set forth in these Bylaws, including
its responsibility to oversee the performance of the Corporation, and shall determine the agenda and perform all other duties
and exercise all other powers which are or from time to time may be delegated to the Chairman by the Board of Directors. Meetings
of the Board of Directors shall be presided over by the Chairman of the Board of Directors, or in his or her absence, by the President,
or in the absence of the Chairman of the Board of Directors and the President by such other person as the Board of Directors may
designate or the members present may select.
3.7 Actions
of Board of Directors Without Meeting. Unless otherwise restricted by the Amended and Restated Certificate of Incorporation
or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or of such committee, as the case may be, consent thereto
in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with
the minutes of proceedings of the Board of Directors or the committee, as applicable.
3.8
Removal of Directors by Stockholders. The entire Board of Directors or any individual director may be removed from office
with or without cause by a majority vote of the holders of the outstanding shares then entitled to vote at an election of directors.
Notwithstanding the foregoing, if the Board of Directors is classified, stockholders may effect such removal only for cause. In
case the Board of Directors or any one or more directors be so removed, new directors may be elected at the same time for the
unexpired portion of the full term of the director or directors so removed.
3.9 Resignations.
Any director may resign at any time by submitting a written resignation to the Board of Directors or Secretary of the Corporation.
Such resignation shall take effect at the time of its receipt by the Corporation unless another time be fixed in the resignation,
in which case it shall become effective at the time so fixed. The acceptance of a resignation shall not be required to make it
effective.
3.10. Vacancies.
Unless otherwise provided in the Amended and Restated Certificate of Incorporation, vacancies from newly created directorships
resulting from an increase in the authorized number of directors or from any other cause may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director and each director so chosen shall hold office until
the next election of the class for which a director shall have been chosen, and until the director’s successor shall be
elected and qualified, or until a director’s earlier resignation, removal from office, death, or incapacity. Notwithstanding
the foregoing, in case the Board of Directors or any one or more directors is removed from office by the stockholders, new directors
may be elected by the stockholders at the same time for the unexpired portion of the full term of the director or directors so
removed in compliance with the nomination procedures set forth in Section 3.3.
3.11 Committees.
The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the
Corporation. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not the member or members constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to
the extent provided in the resolution of the Board of Directors, or in these Bylaws, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority
in reference to amending the Amended and Restated Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and
assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution or amending the Bylaws;
and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or
to authorize the issuance of stock or to adopt a certificate of ownership and merger. Each committee shall keep regular minutes
of its meetings and report the same to the Board of Directors when require.
3.12. Compensation.
The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed
amount, in cash or other form of consideration, for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
3.13 Interested
Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his/her or their votes are counted for such purpose, if (i) the material
facts as to his/her or their relationship or interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to his/her or their relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
3.14 Resignations.
Any director may resign at any time by submitting a written resignation to the Board of Directors or Secretary of the Corporation.
The resignation shall take effect at the time of its receipt by the Corporation unless another time be fixed in the resignation,
in which case it shall become effective at the time so fixed. The acceptance of a resignation shall not be required to make it
effective.
3.13 Meetings
by Means of Conference Telephone. Members of the Board of Directors or any committee designed by the Board of Directors may
participate in a meeting of the Board of Directors or of a committee of the Board of Directors by means of conference telephone
or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation
in a meeting pursuant to this Section 3.13 shall constitute presence in person at such meeting.
ARTICLE
IV
OFFICERS
4.1 General.
The officers of the Corporation shall be elected by the Board of Directors and may consist of a Chairman of the Board, Vice Chairman
of the Board, Chief Executive Officer, President, Chief Financial Officer, Secretary and Treasurer. The Board of Directors, in
its discretion, may also elect one or more Vice Presidents (including Executive Vice Presidents and Senior Vice Presidents), Assistant
Secretaries, Assistant Treasurers, a Controller and such other officers as in the judgment of the Board of Directors may be necessary
or desirable. Any number of offices may be held by the same person and more than one person may hold the same office, unless otherwise
prohibited by law, the Amended and Restated Certificate of Incorporation or these Bylaws. The officers of the Corporation need
not be stockholders of the Corporation, nor need such officers be directors of the Corporation.
4.2
Election. The Board of Directors at its first meeting held after each annual
meeting of stockholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the
Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal.
Except as otherwise provided in this Article, any officer elected by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled
by the Board of Directors. The salaries of all officers who are directors of the Corporation shall be fixed by the Board of Directors.
4.3 Voting
Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President
or any Vice President, and any such officer may, in the name and on behalf of the Corporation, take all such action as any such
officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation
may own securities and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership
of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any other person or persons.
4.4
Chief Executive Officer. Subject to the provisions of these Bylaws and to the
direction of the Board of Directors, the Chief Executive Officer shall have ultimate authority for decisions relating to the general
management and control of the affairs and business of the Corporation and shall perform such other duties and exercise such other
powers which are or from time to time may be delegated to the Chief Executive Officer by the Board of Directors or these Bylaws,
all in accordance with basic policies as established by and subject to the oversight of the Board of Directors.
4.5 President.
At the request of the Chief Executive Officer, or in the absence of the Chief Executive Officer, or in the event of the Chief
Executive Officer’s inability or refusal to act, the President shall perform the duties of the Chief Executive Officer,
and when so acting, shall have all the powers of and be subject to all the restrictions upon such office. The President shall
perform such other duties and have such other powers as the Board of Directors from time to time may prescribe.
4.6
Chief Financial Officer. The Chief Financial Officer shall have general supervision,
direction and control of the financial affairs of the Corporation and shall perform such other duties and exercise such other
powers which are or from time to time may be delegated to the Chief Financial Offer by the Board of Directors or these Bylaws,
all in accordance with basic policies as established by and subject to the oversight of the Board of Directors. In the absence
of a named Treasurer, the Chief Financial Officer shall also have the powers and duties of the Treasurer as hereinafter set forth
and shall be authorized and empowered to sign as Treasurer in any case where such officer’s signature is required.
4.7 Vice
Presidents. At the request of the President or in the absence of the President, or in the event of his or her inability or
refusal to act, the Vice President or the Vice Presidents if there is more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions
upon such office. Each Vice President shall perform such other duties and have such other powers as the Board of Directors from
time to time may prescribe. If there be no Vice President, the Board of Directors shall designate the officer of the Corporation
who, in the absence of the President or in the event of the inability or refusal of such officer to act, shall perform the duties
of such office, and when so acting, shall have all the powers of and be subject to all the restrictions upon such office.
4.8 Secretary.
The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees
when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings
of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the President,
under whose supervision the Secretary shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of
all meetings of the stockholders and special meetings of the Board of Directors, then any Assistant Secretary shall perform such
actions. If there be no Assistant Secretary, then the Board of Directors or the President may choose another officer to cause
such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary,
if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested
by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to attest the affixing by the officer’s signature.
The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be
kept or filed are properly kept or filed, as the case may be.
4.9 Treasurer.
The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and
to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account
of all his or her transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors,
the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board
of Directors for the faithful performance of the duties of the office of Treasurer and for the restoration to the Corporation,
in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property
of whatever kind in the possession or under the control of the Treasurer belonging to the Corporation.
4.10 Assistant
Secretaries. Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Secretary, and in the absence of the Secretary or in the event of his or her disability or refusal to
act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions
upon the Secretary.
4.11 Assistant
Treasurers. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may
be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Treasurer, and in the
absence of the Treasurer or in the event of his or her disability or refusal to act, shall perform the duties of the Treasurer,
and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the
Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall
be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration
to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation.
4.12 Controller.
The Controller shall establish and maintain the accounting records of the Corporation in accordance with generally accepted accounting
principles applied on a consistent basis, maintain proper internal control of the assets of the Corporation and shall perform
such other duties as the Board of Directors, the President or any Vice President of the Corporation may prescribe.
4.13 Other
Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the
Corporation the power to choose such other officers and to prescribe their respective duties and powers.
4.14 Vacancies.
The Board of Directors shall have the power to fill any vacancies in any office occurring from whatever reason.
4.15 Resignations.
Any officer may resign at any time by submitting a written resignation to the Corporation. Such resignation shall take effect
at the time of its receipt by the Corporation, unless another time be fixed in the resignation, in which case it shall become
effective at the time so fixed. The acceptance of a resignation shall not be required to make it effective.
4.16 Removal.
Subject to the provisions of any employment agreement approved by the Board of Directors, any officer of the Corporation may be
removed at any time, with or without cause, by the Board of Directors.
ARTICLE
V
CAPITAL
STOCK
5.1 Form
of Certificates. The shares of stock in the Corporation shall be represented by certificates, provided that the Board of Directors
may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall
be in uncertificated form. Stock certificates shall be in such forms as the Board of Directors may prescribe and signed by the
Chairman of the Board, President or a Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation.
5.2 Signatures.
Any or all of the signatures on a stock certificate may be a facsimile, including, but not limited to, signatures of officers
of the Corporation and countersignatures of a transfer agent or registrar. In case an officer, transfer agent or registrar who
has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were
such officer, transfer agent or registrar at the date of issue.
5.3 Lost
Certificates. The Board of Directors may direct a new stock certificate or certificates to be issued in place of any stock
certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing
such issue of a new stock certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate, or his or her legal representative, to advertise the
same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct
as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost,
stolen or destroyed.
5.4 Transfers.
(a) Stock
of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of certificated stock
shall be made on the books of the Corporation only by the person named in the certificate or by such person’s attorney lawfully
constituted in writing and upon the surrender of the certificate therefor, which shall be canceled before a new certificate shall
be issued. Transfers of uncertificated stock shall be made on the books of the Corporation only by the person then registered
on the books of the Corporation as the owner of the shares or by the person's attorney lawfully constituted in writing and written
instruction to the Corporation containing such information as the Corporation or its agents may prescribe.
(b) No
transfer of uncertificated stock shall be valid as against the Corporation for any purpose until it shall have been entered in
the stock records of the Corporation by an entry showing from and to whom transferred. The Corporation shall have no duty to inquire
into adverse claims with respect to any stock transfer unless:
(i) The
Corporation has received a written notification of an adverse claim at a time and in a manner which affords the Corporation a
reasonable opportunity to act on it prior to the issuance of a new, reissued, or re-registered share certificate, in the case
of certificated stock, or entry in the stock record books of the Corporation, in the case of uncertificated stock, and the notification
identifies the claimant, the registered owner and the issue of which the share or shares is a part and provides an address for
communications directed to the claimant; or
(ii) The
Corporation has required and obtained, with respect to a fiduciary, a copy of a will, trust, indenture, articles of co-partnership,
bylaws, or other controlling instruments (for a purpose other than to obtain appropriate evidence of the appointment or incumbency
of the fiduciary), and the documents indicate, upon reasonable inspection, the existence of an adverse claim.
(c) The
Corporation may discharge any duty of inquiry by any reasonable means, including notifying an adverse claimant by registered or
certified mail at the address furnished by him or, if there be no such address, at the claimant’s residence or regular place
of business that the security has been presented for registration of transfer by a named person, and that the transfer will be
registered unless within thirty (30) days from the date of mailing the notification, either:
(i)
An appropriate restraining order, injunction or other process issues from a court of competent jurisdiction; or
(ii) An
indemnity bond, sufficient in the Corporation’s judgment to protect the Corporation and any transfer agent, registrar, or
other agent of the Corporation involved from any loss which it or they may suffer by complying with the adverse claim, is filed
with the Corporation.
5.5 Record
Date.
(a) The
Board of Directors shall fix a record date for the determination of the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof. The record date shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors, and the record date shall not be more than sixty (60) nor less than ten (10) days before
the date of the meeting to which the record date applies. If the Board of Directors shall fail to fix a record date, the record
date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business
on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at
a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall
also fix as the record date for stockholders entitled to notice of the adjourned meeting the same or an earlier date as that fixed
for determination of stockholders entitled to vote in accordance with the foregoing provisions of this Section 5.5(a) at the adjourned
meeting
(b) The
Board of Directors shall fix a record date for the determination of the stockholders entitled to consent to corporate action without
a meeting. The record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board
of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date
is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining
stockholders entitled to consent to corporate action without a meeting, when no prior action by the Board of Directors is required
by the DGCL, shall be the first date on which a signed consent setting forth the action taken or proposed to be taken is delivered
to the Corporation in accordance with §228(d) of the DGCL. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by the DGCL, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors
adopts the resolution taking the prior action.
(c) The
Board of Directors shall fix a record date for the determination of the stockholders entitled to receive payment of any dividend
or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action. The record date shall not precede the date upon
which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to
such action. If the Board of Directors fails to fix a record date, the record date for determining stockholders for any purpose
set forth in this Section 5.5(c) shall be at the close of business on the day on which the Board of Directors adopts the resolution
relating thereto.
5.6 Registered
Stockholders. Prior to due presentment for transfer of any share or shares, the Corporation shall treat the registered owner
thereof as the person exclusively entitled to vote, to receive notifications, and to all other benefits of ownership with respect
to the share or shares, and shall not be bound to recognize any equitable or other claim to or interest in the share or shares
on the part of any other person, whether or not the Corporation shall have express or other notice thereof, except as otherwise
provided by the laws of the State Delaware.
ARTICLE
VI
NOTICES
6.1 Form
of Notice. Notices to directors and stockholders other than notices to directors of special meetings of the Board of Directors
which may be given by any means stated in Section 3.4, shall be in writing and delivered personally or mailed to the directors
or stockholders at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the
time when the same shall be mailed. Notice to directors may also be given by telegram.
6.2 Waiver
of Notice. Whenever any notice is required to be given under the provisions of law or the Amended and Restated Certificate
of Incorporation or by these Bylaws, a written waiver, signed by the person or persons entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular, or special meeting of the stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice unless so required by the Amended and Restated Certificate of Incorporation.
ARTICLE
VII
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
7.1 The
Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that person is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.
7.2 The
Corporation shall indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he
or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner her or she reasonably believed to be in or not opposed
to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court shall deem proper.
7.3 To
the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in Sections 7.1 or 7.2, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her
in connection therewith.
7.4 Any
indemnification under Section 7.1 or 7.2 (unless ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances
because such person has met the applicable standard of conduct set forth in such section. Such determination shall be made:
(a) By
the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding,
or
(b)
If such a quorum is not obtainable, or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(c)
By the stockholders.
7.5 Expenses
(including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified by the Corporation as authorized in this Article. Such expenses (including
attorneys’ fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board
of Directors deems appropriate.
7.6 The
indemnification and advancement of expenses provided by, or granted pursuant to this Article shall not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action
in another capacity while holding such office.
7.7
The Corporation shall have power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this
Article.
7.8 For
purposes of this Article, references to “the Corporation” shall include, in addition to the resulting Corporation,
any constituent Corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so
that any person who is or was a director, officer employee or agent of such constituent Corporation, or is or was serving at the
request of such constituent Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article with respect to the resulting or surviving Corporation
as such person would have with respect to such constituent Corporation if its separate existence had continued.
7.9 For
purposes of this Article, references to “other enterprises” shall include employee benefit plans; references to “fines”
shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving
at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation
which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner
“not opposed to the best interests of the Corporation” as referred to in this Article.
7.10 The
indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such a person.
7.11 No
director or officer of the Corporation shall be personally liable to the Corporation or to any stockholder of the Corporation
for monetary damages for breach of fiduciary duty as a director or officer, provided that this provision shall not limit the liability
of a director or officer (i) for any breach of the director’s or the officer’s duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director or officer derived an improper
personal benefit.
ARTICLE
VIII
GENERAL PROVISIONS
8.1 Reliance
on Books and Records. Each director, each member of any committee designated by the Board of Directors, and each officer of
the Corporation, shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation, including reports made to the Corporation by any of its officers, by an independent
certified public accountant, or by an appraiser selected with reasonable care.
8.2 Maintenance
and Inspection of Records. The Corporation shall, either at its principal executive office or at such place or places as designated
by the Board of Directors, keep a record of its stockholders listing their names and addresses and the number and class of shares
held by each stockholder, a copy of Amended and Restated Certificate of Incorporation and these Bylaws, as may be amended to date,
minute books, accounting books and other records. Any such records maintained by the Corporation may be kept on, or by means of,
or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly
legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person
entitled to inspect such records pursuant to the provisions of the DGCL. When records are kept in electronic or digital format,
a clearly legible paper form produced from or by means of the information storage device or method shall be admissible in evidence,
and accepted for all other purposes, to the same extent as an original paper form accurately portrays the record. Any stockholder
of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the Corporation’s stock ledger, a list of its
stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the
person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing
that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to
the Corporation at its registered office in Delaware or at its principal executive office.
8.3 Inspection
by Directors. Any director shall have the right to examine the Corporation’s stock ledger, a list of its stockholders,
and its other books and records for a purpose reasonably related to his or her position as a director.
8.4 Dividends.
Subject to the provisions of the Amended and Restated Certificate of Incorporation, if any, dividends upon the capital stock of
the Corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Amended and Restated Certificate
of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends
such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any
such reserve in the manner in which it was created.
8.5 Checks.
All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other persons
as the Board of Directors may from time to time designate.
8.6 Fiscal
Year. The fiscal year of the Corporation shall be as determined by the Board of Directors. If the Board of Directors shall
fail to do so, the President shall fix the fiscal year.
8.7 Seal.
The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate
Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.
8.8 Amendments.
The Bylaws may be adopted, amended or repealed by the stockholders entitled to vote thereon at any regular or special meeting
or, if the Amended and Restated Certificate of Incorporation so provides, by the Board of Directors. The fact that such power
has been so conferred upon the Board of Directors shall not divest the stockholders of the power nor limit their power to adopt,
amend or repeal Bylaws.
8.9 Interpretation
of Bylaws. All words, terms and provisions of these Bylaws shall be interpreted and defined by and in accordance with the
DGCL, as amended, and as amended from time to time hereafter.
Exhibit 4.1
NUMBER
U-__________
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UNITS
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SEE
REVERSE FOR
CERTAIN DEFINITIONS
|
PROOF
ACQUISITION CORP I
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CUSIP [•]
UNITS CONSISTING OF ONE
SHARE OF CLASS A COMMON STOCK
AND
ONE-HALF OF ONE WARRANT
THIS CERTIFIES THAT
|
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is the owner of Units.
|
Each Unit (“Unit”) consists
of one (1) share of Class A common stock, par value $0.0001 per share (“Common Stock”), of PROOF Acquisition
Corp I, a Delaware corporation (the “Company”), and one-half of one warrant (“Warrant”).
Each Warrant entitles the holder to purchase one share of Common Stock for $11.50 per share (subject to adjustment). Each Warrant
will become exercisable 30 days after the Company’s completion of an initial merger, capital stock exchange, asset acquisition,
stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities
(a “Business Combination”), and will expire unless exercised before 5:00 p.m., Washington, D.C. time, on the
fifth anniversary of the completion of an initial Business Combination, or earlier upon redemption or liquidation. The Common
Stock and Warrant(s) comprising the Unit(s) represented by this certificate are not transferable separately until ninety days following
the Company’s initial public offering (the “IPO”), unless BofA Securities, Inc. informs the Company of
its decision to allow earlier separate trading, except that in no event will the Common Stock and Warrants be separately tradeable
until the Company has filed an audited balance sheet reflecting the Company’s receipt of the gross proceeds of its IPO and
issued a press release announcing when such separate trading will begin. The terms of the Warrants are governed by a Warrant Agreement,
dated as of _________, 2021, between the Company and Continental Stock Transfer & Trust Company, as Warrant Agent, and are
subject to the terms and provisions contained therein, all of which terms and provisions the holder of this certificate consents
to by acceptance hereof. Copies of the Warrant Agreement are on file at the office of the Warrant Agent at 1 State Street, 30th
Floor, New York, New York 10004, and are available to any Warrant holder on written request and without cost.
This
certificate is not valid unless countersigned by the Transfer Agent and Registrar of the Company.
Witness
the facsimile seal of the Company and the facsimile signatures of its duly authorized officers.
By
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Chief Executive Officer
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Chief Financial Officer
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PROOF Acquisition Corp I
The Company will furnish without charge
to each stockholder who so requests, a statement of the powers, designations, preferences and relative, participating, optional
or other special rights of each class of stock or series thereof of the Company and the qualifications, limitations, or restrictions
of such preferences and/or rights.
The following abbreviations, when used
in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable
laws or regulations:
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TEN COM
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as tenants in common
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UNIF GIFT MIN ACT - _____ Custodian ______
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TEN
ENT
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as tenants by the entireties
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(Cust) (Minor)
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JT TEN
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as joint tenants with right of survivorship
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under
Uniform Gifts to Minors
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and not as tenants in common
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Act
__________________________
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(State)
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Additional abbreviations may also be used
though not in the above list.
For value received, ___________________________
hereby sells, assigns, and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
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Units represented by the within Certificate,
and hereby irrevocably constitutes and appoints
Attorney to
transfer the said Units on the books of the within named Company with full power of substitution in the premises.
Dated
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Notice:
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The signature(s) to this assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement or any change whatever.
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Signature(s) Guaranteed:
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 (OR ANY SUCCESSOR RULE) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED).
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In each case, as more fully described in
the Company’s final prospectus dated ______________, 2021, the holder(s) of this certificate shall be entitled to receive
a pro-rata portion of certain funds held in the trust account established in connection with the Company’s initial public
offering only in the event that (i) the Company redeems the shares of Class A common stock sold in its initial public offering
because it does not consummate an initial business combination within the period of time set forth in the Company’s Amended
and Restated Certificate of Incorporation, as the same may be amended from time to time (the “Charter”), (ii) the Company
seeks to amend any provisions of the Charter (A) to modify the substance or timing of the Company’s obligations with respect
to conversion rights as described in the Company’s final prospectus dated ______________, 2021 or (B) with respect to any
other provision relating to stockholders’ rights or pre-initial business combination activity, or (iii) if the holder(s)
seek(s) to convert his, her or its respective shares of Class A common stock upon consummation of, or sell his, her or its shares
of Class A common stock in a tender offer in connection with, an initial business combination which the Company consummates. In
no other circumstances shall the holder(s) have any right or interest of any kind in or to the trust account.
Exhibit
4.2
C-
PROOF
ACQUISITION CORP I
INCORPORATED
UNDER THE LAWS OF THE STATE OF DELAWARE
CLASS
A COMMON STOCK
SEE
REVERSE FOR
CERTAIN DEFINITIONS
This
Certifies that
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CUSIP
[●]
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FULLY
PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $0.0001 EACH OF THE CLASS A COMMON STOCK OF
PROOF
ACQUISITION CORP I
(the
“Company”)
transferable
on the books of the Company in person or by duly authorized attorney upon surrender of this certificate properly endorsed.
The
Company will be forced to liquidate if it is unable to complete an initial business combination within the time period set forth
in the Company’s Amended and Restated Certificate of Incorporation, as the same may be amended from time to time.
This certificate is not valid unless countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers.
Dated:
Chief
Executive Officer
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Chief
Financial Officer
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PROOF
Acquisition Corp I
The
Company will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof of the Company and the qualifications, limitations,
or restrictions of such preferences, and/or rights. This certificate and the shares represented thereby are issued and shall be
held subject to all the provisions of the Company’s Amended and Restated Certificate of Incorporation and all amendments
thereto and resolutions of the Board of Directors providing for the issue of securities (copies of which may be obtained from
the secretary of the Company), to all of which the holder of this certificate by acceptance hereof assents.
The
following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:
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TEN COM
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as tenant in common
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UNIF GIFT MIN ACT - _____ Custodian ______
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TEN
ENT
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-
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as tenants by the entireties
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(Cust) (Minor)
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JT TEN
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-
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as joint tenants with right of survivorship
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Under
Uniform Gifts to Minors
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and not as tenants in common
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Act
__________________________
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(State)
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Additional
abbreviations may also be used though not in the above list.
For
value received, ___________________________ hereby sells, assigns and transfers unto
PLEASE
INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING
NUMBER OF ASSIGNEE
(PLEASE
PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
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shares
of the capital stock represented by the within Certificate, and hereby irrevocably constitutes
and appoints
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Attorney to transfer
the said stock on the books of the within named Company with full power of substitution in the premises.
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Dated
_____________________________
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Notice:
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The
signature(s) to this assignment must correspond with the name as written upon the face of the certificate in every particular,
without alteration or enlargement or any change whatever.
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Signature(s)
Guaranteed:
THE
SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 (OR ANY
SUCCESSOR RULE) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED).
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In
each case, as more fully described in the Company’s final prospectus dated ______________, 2021, the holder(s) of this certificate
shall be entitled to receive a pro-rata portion of certain funds held in the trust account established in connection with the
Company’s initial public offering only in the event that (i) the Company redeems the shares of Class A common stock sold
in its initial public offering because it does not consummate an initial business combination within the period of time set forth
in the Company’s Amended and Restated Certificate of Incorporation, as the same may be amended from time to time (the “Charter”),
(ii) the Company seeks to amend any provisions of the Charter (A) to modify the substance or timing of the Company’s obligations
with respect to conversion rights as described in the Company’s final prospectus dated ______________, 2021 or (B) with
respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, or (iii) if
the holder(s) seek(s) to convert his, her or its respective shares of Class A common stock upon consummation of, or sell his,
her or its shares of Class A common stock in a tender offer in connection with, an initial business combination which the Company
consummates. In no other circumstances shall the holder(s) have any right or interest of any kind in or to the trust account.
Exhibit
4.3
[FACE]
Number
Warrants
THIS
WARRANT SHALL BE VOID IF NOT EXERCISED PRIOR TO
THE EXPIRATION OF THE EXERCISE PERIOD PROVIDED FOR
IN THE WARRANT AGREEMENT DESCRIBED
BELOW
PROOF
Acquisition Corp I
Incorporated
Under the Laws of the State of Delaware
CUSIP
[
Warrant
Certificate
This
Warrant Certificate certifies that [ ],
or registered assigns, is the registered holder of [ ]
warrant(s) (the “Warrants” and each, a “Warrant”) to purchase shares of Class
A common stock, $0.0001 par value per share (“Common Stock”), of PROOF Acquisition Corp I, a Delaware
corporation (the “Company”). Each Warrant entitles the holder, upon exercise during the period set forth
in the Warrant Agreement referred to below, to receive from the Company that number of fully paid and nonassessable shares of
Common Stock as set forth below, at the exercise price (the “Exercise Price”) as determined pursuant
to the Warrant Agreement, payable in lawful money (or through “cashless exercise” as provided for in
the Warrant Agreement) of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise
Price at the office or agency of the Warrant Agent referred to below, subject to the conditions set forth herein and in the Warrant
Agreement. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the
Warrant Agreement.
Each
whole Warrant is initially exercisable for one fully paid and non-assessable share of Common Stock. Fractional shares shall not
be issued upon exercise of any Warrant. If, upon the exercise of Warrants, a holder would be entitled to receive a fractional
interest in a share of Common Stock, the Company shall, upon exercise, round down to the nearest whole number the number of shares
of Common Stock to be issued to the Warrant holder. The number of shares of Common Stock issuable upon exercise of the Warrants
is subject to adjustment upon the occurrence of certain events as set forth in the Warrant Agreement.
The
initial Exercise Price per one share of Common Stock for any Warrant is equal to $11.50 per share. The Exercise Price is subject
to adjustment upon the occurrence of certain events as set forth in the Warrant Agreement.
Subject
to the conditions set forth in the Warrant Agreement, the Warrants may be exercised only during the Exercise Period and to the
extent not exercised by the end of such Exercise Period, such Warrants shall become void. The Warrants may be redeemed, subject
to certain conditions, as set forth in the Warrant Agreement.
Reference
is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this place.
This
Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in accordance with the internal laws of the State of New York.
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PROOF ACQUISITION CORP I
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By:
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Name:
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Title:
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CONTINENTAL STOCK TRANSFER & TRUST COMPANY, AS WARRANT AGENT
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By:
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Name:
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Title:
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[Form
of Warrant Certificate]
[Reverse]
The
Warrants evidenced by this Warrant Certificate are part
of a duly authorized issue of Warrants entitling the holder on exercise to receive
[ ] shares of Common Stock and are issued or to
be issued pursuant to a Warrant Agreement dated as of , 2021 (the “Warrant
Agreement”), duly executed and
delivered by the Company to Continental
Stock Transfer & Trust Company, a New York corporation, as warrant agent (the “Warrant Agent”), which
Warrant Agreement is hereby incorporated by reference in and made a part of this instrument
and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties
and immunities thereunder of the Warrant Agent, the Company and the holders (the words “holders” or “holder” meaning
the Registered Holders or Registered Holder, respectively)
of the Warrants. A
copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Defined terms used in
this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.
Warrants
may be exercised at any time during the Exercise Period set forth in the Warrant Agreement. The holder of Warrants evidenced by
this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of Election to Purchase set
forth hereon properly completed and executed,
together with payment of the
Exercise Price as specified in the Warrant Agreement (or through “cashless exercise” as provided for in the Warrant
Agreement) at the principal corporate trust office of the Warrant Agent. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued
to the holder hereof or his,
her or its assignee,
a new Warrant Certificate evidencing
the number of Warrants not exercised.
Notwithstanding
anything else in this Warrant Certificate or the Warrant Agreement, no Warrant may be exercised unless at the time of exercise
(i) a registration statement covering the shares of Common Stock to be issued upon exercise is effective under the Securities
Act and (ii) a prospectus thereunder relating to the shares of Common Stock is current, except through “cashless exercise”
as provided for in the Warrant Agreement.
The
Warrant Agreement provides that
upon the occurrence of certain events the number of shares of Common Stock issuable upon exercise of the Warrants set
forth on the face hereof may, subject to certain conditions,
be adjusted.
If, upon exercise of a Warrant,
the holder thereof would be entitled to receive a fractional interest in a share of Common Stock,
the Company shall, upon exercise
, round
down to the nearest whole number of shares of Common Stock to be issued to the holder of the Warrant.
Warrant
Certificates , when
surrendered at the principal corporate trust office of the Warrant Agent by the Registered Holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged ,
in the manner and subject to
the limitations provided in the Warrant Agreement, but without payment of any service charge,
for another Warrant Certificate
or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants.
Upon
due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s)
in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any
tax or other governmental charge imposed in connection therewith.
The
Company and the Warrant Agent may deem and treat the Registered Holder(s) hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of
any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a
stockholder of the Company.
Election
to Purchase
(To
Be Executed Upon Exercise of Warrant)
The
undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive [
shares
of Common Stock and herewith tenders payment for such shares of Common Stock to the order of PROOF Acquisition Corp I
(the “Company”) in
the amount of$[ ] in accordance with the terms
hereof. The undersigned requests that a certificate for such shares of Common Stock be registered in the name of
[ ], whose address is
[ ] and that such shares of Common Stock be
delivered to
[ ]
whose address is [ ]. If
said [ ] number of shares of Common Stock is
less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares of Common Stock be registered in the name
of [ ], whose address is
[ ] and that such Warrant Certificate be
delivered to [ ], whose address is
[ ].
In
the event that the Warrant has been called for redemption by the Company pursuant to Section 6.2 of the Warrant Agreement
and a holder thereof elects to exercise its Warrant pursuant to a Make-Whole Exercise, the number of shares of Common Stock that
this Warrant is exercisable for shall be determined in accordance with subsection 3.3.l(c) or Section 6.2 of the
Warrant Agreement, as applicable.
In
the event that the Warrant is a Private Placement Warrant that is to be exercised on a “cashless” basis pursuant to
subsection 3.3.1(c) of the Warrant Agreement, the number of shares of Common Stock that this Warrant is exercisable for
shall be detennined in accordance with subsection 3.3.l(c) of the Warrant Agreement.
In
the event that the Warrant is to be exercised on a “cashless”
basis pursuant to Section
7.4 of the Warrant Agreement, the number of shares of Common Stock that this Warrant is exercisable for shall be determined
in accordance with Section 7.4 of the Warrant Agreement.
In
the event that the Warrant may be exercised, to the extent allowed by the Warrant Agreement, through cashless exercise (i) the
number of shares of
Common Stock that this Warrant is exercisable for would be determined in accordance with the relevant section of the Warrant Agreement
which allows for such cashless
exercise and (ii) the holder hereof shall complete the following: The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, through the cashless exercise provisions of the Warrant Agreement, to receive shares
of Common Stock. If said number of shares is less than all of the shares of Common Stock purchasable hereunder (after giving effect
to the cashless exercise), the
undersigned requests that a new Warrant Certificate representing the remaining balance of such shares of Common Stock be registered
in the name of [ ], whose address is [ ] and that such Warrant Certificate be delivered to [ ], whose address is [ ].
[Signature
Page Follows]
Date:
[ ], 20
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(Signature)
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(Address)
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(Tax Identification Number)
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Signature Guaranteed:
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THE
SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS ,
SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM,
PURSUANT TO S.E.C. RULE
17Ad-15 UNDER
THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED).
5
Exhibit 5.1
PROOF
Acquisition Corp I
11911 Freedom Drive
Suite
1080
Reston, VA 20190
Re:
PROOF Acquisition Corp I Registration Statement on Form S-1
Ladies
and Gentlemen:
We
are issuing this opinion in our capacity as special counsel to PROOF Acquisition Corp I, a Delaware corporation (the “Company”),
in connection with the registration under the Securities Act of 1933, as amended (the “Act”), on a Registration
Statement on Form S-1 filed with the Securities and Exchange Commission (the “Commission”) on ,
2021 (the “Registration Statement”) of up to 23,000,000 units of the Company (the “Units”),
including the underwriter’s over-allotment option, with each Unit consisting of one share of Class A common stock,
par value $0.0001 per share (the “Common Stock”), of the Company and one-half of one redeemable warrant
of the Company to purchase one share of Common Stock (the “Warrants”).
This
opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K promulgated under the
Act.
In
rendering the opinions stated herein, we have examined and relied upon the following:
(a)
the form of Underwriting Agreement (the “Underwriting Agreement”) proposed to be entered into by and
between the Company and BofA Securities, Inc., as the underwriter (the “Underwriter”), relating to the
sale by the Company to the Underwriter of the Units, filed as Exhibit 1.1 to the Registration Statement;
(ii)
the form of Amended and Restated Certificate of Incorporation of the Company to be filed with the Secretary of State of the State
of Delaware prior to the sale of any Units, filed as Exhibit 3.2 to the Registration Statement (the “New Charter”);
(iii)
the form of Amended and Restated Bylaws of the Company, filed as Exhibit 3.4 to the Registration Statement;
(iv)
the form of Unit certificate, filed as Exhibit 4.1 to the Registration Statement;
(v)
the form of Common Stock certificate, filed as Exhibit 4.2 to the Registration Statement;
(vi)
the form of Warrant certificate, filed as Exhibit 4.3 to the Registration Statement;
(vii)
the form of Warrant Agreement proposed to be entered into by and between the Company and Continental Stock Transfer &
Trust Company, as warrant agent, filed as Exhibit 4.4 to the Registration Statement (the “Warrant Agreement”);
(viii)
the minutes and records of the corporate proceedings of the Company with respect to the issuance of the Units; and
(ix)
the Registration Statement and the other exhibits thereto.
For
purposes of this letter, we have assumed the authenticity of all documents submitted to us as originals, the conformity to the
originals of all documents submitted to us as copies and the authenticity of the originals of such documents. We have also assumed
the legal capacity of all natural persons, the genuineness of the signatures of persons signing all documents in connection with
which this opinion is rendered, that all parties to such documents had the power, corporate or other, to enter into and perform
all obligations hereunder, the authority of such persons signing on behalf of the parties thereto, and the due authorization,
execution and delivery of all documents by the parties thereto. As to any facts material to the opinions expressed herein which
we have not independently established or verified, we have relied upon statements and representations of officers and other representatives
of the Company and others. In rendering the opinions set forth below, we have further assumed that, before the issuance of the
Units, the Common Stock and the Warrants, (i) the Registration Statement will have become effective under the Securities Act and
(ii) the conditions to consummating the transactions contemplated by the Underwriting Agreement will have been satisfied or duly
waived and such transactions are consummated.
Subject
to the assumptions, qualifications and limitations identified in this letter, we advise you that in our opinion:
1.
When the Units are delivered in accordance with
the Underwriting Agreement upon payment of the agreed upon consideration therefor, the Units will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with their terms.
2.
The shares of Common Stock included in the Units,
or issuable upon the exercise or redemption of the Warrants in accordance with the Warrant Agreement, will be validly issued,
fully paid and nonassessable when, as and if (i) the Units are delivered to and paid for by the Underwriters in accordance
with the Underwriting Agreement, (ii) the Registration Statement shall have become effective pursuant to the provisions of
the Act, (iii) the New Charter shall have been duly adopted and (iv) a prospectus with respect to the Common Stock shall
have been filed (or transmitted for filing) with the Commission pursuant to Rule 424(b) of the Act.
3.
When the Units are delivered in accordance with
the Underwriting Agreement upon payment of the agreed upon consideration therefor, the Warrants included in such Units will constitute
valid and binding obligations of the Company, enforceable against the Company in accordance with their terms.
Our
advice on every legal issue addressed in this letter is based exclusively on the internal laws of the State of New York and the
General Corporation Law of the State of Delaware (under which the Company is incorporated).
Our
opinions expressed above are subject to the qualifications that we express no opinion as to the applicability of, compliance with,
or effect of (i) any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent conveyance, moratorium or other similar
law or judicially developed doctrine in this area (such as substantive consolidation or equitable subordination) affecting the
enforcement of creditors’ rights generally, (ii) general principles of equity (regardless of whether enforcement is considered
in a proceeding in equity or at law), (iii) an implied covenant of good faith and fair dealing, (iv) public policy considerations
which may limit the rights of parties to obtain certain remedies, (v) any requirement that a claim with respect to any security
denominated in other than U.S. dollars (or a judgment denominated in other than U.S. dollars in respect of such claim) be converted
into U.S. dollars at a rate of exchange prevailing on a date determined in accordance with applicable law, (vi) governmental authority
to limit, delay or prohibit the making of payments outside of the United States or in a foreign currency or currency unit and
(vii) any laws except the laws of the State of New York and the General Corporation Law of the State of Delaware. We advise you
that issues addressed by this letter may be governed in whole or in part by other laws, but we express no opinion as to whether
any relevant difference exists between the laws upon which our opinions are based and any other laws which may actually govern.
Without limiting the foregoing, we are not rendering any opinion as to the compliance with any federal or state securities or
“blue sky” laws.
In
addition, in providing the opinions herein, we have relied, with respect to matters related to the Company’s existence,
upon the certificates of officials of the Company, public officials, and others as we have deemed appropriate.
We
do not find it necessary for the purposes of this opinion, and accordingly we do not purport to cover herein, the application
of the securities or “Blue Sky” laws of the various states to the issuance of the Units and the Warrants and shares
of Common Stock included in the Units.
This
opinion is limited to the specific issues addressed herein, and no opinion may be inferred or implied beyond that expressly stated
herein. We assume no obligation to revise or supplement this opinion should the present laws of the State of New York or the General
Corporation Law of the State of Delaware be changed by legislative action, judicial decision or otherwise.
This
opinion is furnished to you in connection with the filing of the Registration Statement and is not to be used, circulated, quoted
or otherwise relied upon for any other purposes.
We
hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement. We also consent to the reference
to our firm under the heading “Legal Matters” in the prospectus contained in the Registration Statement. In giving
this consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Commission.
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Very truly yours,
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/s/
STEPTOE & JOHNSON LLP
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Exhibit
10.2
FORM
OF REGISTRATION AND STOCKHOLDER RIGHTS AGREEMENT AMONG THE REGISTRANT, THE SPONSOR AND THE HOLDERS SIGNATORY THERETO
REGISTRATION
AND STOCKHOLDER RIGHTS AGREEMENT
THIS
REGISTRATION AND STOCKHOLDER RIGHTS AGREEMENT (this “Agreement”), dated as of [●], 2021, is made
and entered into by and among PROOF Acquisition Corp I, a Delaware corporation (the “Company”), PROOF
Acquisition Sponsor I, LLC, a Delaware limited liability company (the “Sponsor”), and the undersigned
parties listed under Holder on the signature page hereto (each such party, together with the Sponsor and any person or entity
who hereafter becomes a party to this Agreement pursuant to Section 5.2 of this Agreement, a “Holder”
and collectively the “Holders”).
RECITALS
WHEREAS,
the Sponsor and the other Holders currently own an aggregate of 5,750,000 shares of the Company’s Class B common stock,
par value $0.0001 per share (the “Class B Common Stock”);
WHEREAS,
the Class B Common Stock are convertible into the Company’s Class A common stock, par value $0.0001 per share (the “Common
Stock”), at the time of the initial Business Combination on a one-for-one basis, subject to adjustment, on the terms
and conditions provided in the Company’s amended and restated certificate of incorporation, as may be amended from time
to time;
WHEREAS,
on [●], 2021, the Company entered into certain Private Placement Warrants Purchase Agreements with the Sponsor and each
of the parties listed on Schedule A hereto, pursuant to which the Sponsor and such parties agreed to purchase a total of
11,500,000 warrants (or up to 13,225,000 warrants if the Underwriters’ (as defined below) option to purchase additional
units in connection with the Company’s initial public offering is exercised in full) (the “Private Placement
Warrants”), in a private placement transaction occurring simultaneously with the closing of the Company’s
initial public offering;
WHEREAS,
in order to finance the Company’s transaction costs in connection with an intended Business Combination (as defined below),
the Sponsor or certain of the Company’s officers or directors may, but are not obligated to, loan the Company funds as the
Company may require, of which up to $1,500,000 of such loans may be convertible into an additional 1,500,000 Private Placement
Warrants (the “Working Capital Warrants”); and
WHEREAS,
in order to extend the period of time to consummate the Business Combination by an additional three months, the Sponsor (or its
designees) must deposit into the trust account funds equal to one percent (1.0%) of the gross proceeds of the offering ($2,000,000,
or up to $2,300,000 if the underwriter’s over-allotment option is exercised in full) for each of up to two three-month extensions,
up to a total of $4,000,000 (or $4,600,000 if the underwriters’ over-allotment option is exercised in full), in exchange
for a non-interest bearing, unsecured promissory note (an “Extension Promissory Note”), and such Extension
Promissory Note may be convertible into warrants at a price of $1.00 per warrant (“Extension Promissory Note Warrants”);
and
WHEREAS,
the Company and the Holders desire to enter into this Agreement, pursuant to which the Company shall grant the Holders certain
registration rights with respect to certain securities of the Company, as set forth in this Agreement.
NOW,
THEREFORE, in consideration of the mutual representations, covenants and agreements contained herein, and certain other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE
1
DEFINITIONS
1.1
Definitions. The terms defined in this
Article I shall, for all purposes of this Agreement, have the respective meanings set forth below:
“Adverse
Disclosure” shall mean any public disclosure of material non-public information, which disclosure, in the good faith
judgment of the principal executive officer or principal financial officer of the Company, after consultation with counsel to
the Company, (i) would be required to be made in any Registration Statement or Prospectus in order for the applicable Registration
Statement or Prospectus not to contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements contained therein (in the case of any prospectus and any preliminary prospectus, in the light of the circumstances
under which they were made) not misleading, (ii) would not be required to be made at such time if the Registration Statement were
not being filed, and (iii) the Company has a bona fide business purpose for not making such information public.
“Agreement”
shall have the meaning given in the Preamble.
“Board”
shall mean the Board of Directors of the Company.
“Business
Combination” shall mean any merger, capital stock exchange, asset acquisition, stock purchase, reorganization or
other similar business combination with one or more businesses, involving the Company.
“Commission”
shall mean the U.S. Securities and Exchange Commission.
“Common
Stock” shall have the meaning in the Recitals hereto.
“Company”
shall have the meaning given in the Preamble.
“Demand
Registration” shall have the meaning given in subsection 2.1.1.
“Demanding
Holder” shall have the meaning given in subsection 2.1.1.
“Exchange
Act” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.
“Extension
Loan Warrants” shall have the meaning given in the Recitals.
“Form
S-1” shall have the meaning given in subsection 2.1.1.
“Form
S-3” shall have the meaning given in subsection 2.3.1.
“Founder
Shares” shall mean the Shares of Class B Common Stock and shall be deemed to include the shares of Common Stock
issuable upon conversion thereof.
“Founder
Shares Lock-up Period” shall mean, with respect to the Founder Shares, the period ending on the earlier of (A) one
year after the completion of the Company’s initial Business Combination and (B) subsequent to the Business Combination,
(x) if the last reported sales price of the Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing
at least 150 days after the Company’s initial Business Combination or (y) the date on which the Company completes a liquidation,
merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders
having the right to exchange their shares of Common Stock for cash, securities or other property.
“Holders”
shall have the meaning given in the Preamble.
“Insider
Letter” shall mean that certain letter agreement, dated as of the date hereof, by and between the Company, the Sponsor
and each of the Company’s officers, directors and director nominees.
“Maximum
Number of Securities” shall have the meaning given in subsection 2.1.4.
“Misstatement”
shall mean an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration
Statement or Prospectus, or necessary to make the statements in a Registration Statement or Prospectus (in the case of a Prospectus,
in the light of the circumstances under which they were made) not misleading.
“Permitted
Transferees” shall mean a person or entity to whom a Holder of Registrable Securities is permitted to transfer such
Registrable Securities prior to the expiration of the Founder Shares Lock-up Period or Private Placement Lock-up Period, as the
case may be, under the Insider Letter and any other applicable agreement between such Holder and the Company, and to any transferee
thereafter.
“Piggyback
Registration” shall have the meaning given in subsection 2.2.1.
“Private
Placement Lock-up Period” shall mean, with respect to Private Placement Warrants that are held by the initial purchasers
of such Private Placement Warrants or their Permitted Transferees, and any of the Common Stock issued or issuable upon the exercise
or conversion of the Private Placement Warrants and that are held by the initial purchasers of the Private Placement Warrants
or their Permitted Transferees, the period ending 30 days after the completion of the Company’s initial Business Combination.
“Private
Placement Warrants” shall have the meaning given in the Recitals hereto.
“Prospectus”
shall mean the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as
amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.
“Registrable
Security” shall mean (a) the Founder Shares (including any shares of Common Stock or other equivalent equity security
issued or issuable upon the conversion of any such Founder Shares or exercisable for Common Stock), (b) the Private Placement
Warrants (including any shares of Common Stock issued or issuable upon the exercise of any such Private Placement Warrants), (c)
the Working Capital Warrants (including any shares of Common Stock issued or issuable upon the conversion of working capital loans),
(d) the Extension Promissory Note Warrants (including any shares of Common Stock issued or issuable upon the conversion of Extension
Promissory Notes), (e) any outstanding shares of Common Stock or any other equity security (including the shares of Common Stock
issued or issuable upon the exercise of any other equity security) of the Company held by a Holder as of the date of this Agreement,
and (f) any other equity security of the Company issued or issuable with respect to any such shares of Common Stock by way of
a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization;
provided, however, that, as to any particular Registrable Security, such securities shall cease to be Registrable
Securities when: (i) a Registration Statement with respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration
Statement; (ii) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall
not require registration under the Securities Act; (iii) such securities shall have ceased to be outstanding; or (iv) such securities
have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction.
“Registration”
shall mean a registration effected by preparing and filing a registration statement or similar document in compliance with the
requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement
becoming effective.
“Registration
Expenses” shall mean the out-of-pocket expenses of a Registration, including, without limitation, the following:
(A)
all registration and filing fees (including fees with respect to filings required to be made with the Financial Industry Regulatory
Authority, Inc.) and any securities exchange on which the Common Stock are then listed;
(B)
fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the
Underwriters in connection with blue sky qualifications of Registrable Securities);
(C)
printing, messenger, telephone and delivery expenses;
(D)
reasonable fees and disbursements of counsel for the Company;
(E)
reasonable fees and disbursements of all independent registered public accountants of the Company incurred specifically in connection
with such Registration; and
(F)
reasonable fees and expenses of one (1) legal counsel selected by the majority-in-interest of the Demanding Holders initiating
a Demand Registration to be registered for offer and sale in the applicable Registration or the Takedown Requesting Holder initiating
an Underwritten Shelf Takedown.
“Registration
Statement” shall mean any registration statement that covers the Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments)
and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration
statement.
“Requesting
Holder” shall have the meaning given in subsection 2.1.1.
“Securities
Act” shall mean the Securities Act of 1933, as amended from time to time.
“Shelf”
shall have the meaning given in subsection 2.3.1.
“Sponsor”
shall have the meaning given in the Recitals hereto.
“Sponsor
Director” means an individual elected to the Board that has been nominated by the Sponsor pursuant to this Agreement.
“Subsequent
Shelf Registration” shall have the meaning given in subsection 2.3.2.
“Takedown
Requesting Holder” shall have the
meaning given in subsection 2.3.3.
“Underwriter”
shall mean a securities dealer who purchases any Registrable Securities as principal in an Underwritten Offering and not as part
of such dealer’s market-making activities.
“Underwritten
Registration” or “Underwritten Offering” shall mean a Registration in which securities
of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public.
“Underwritten
Shelf Takedown” shall have the
meaning given in subsection 2.3.3.
“Working
Capital Warrants” shall have the meaning given in the Recitals hereto.
ARTICLE
2
REGISTRATIONS
2.1
Demand Registration.
2.1.1
Request for Registration. Subject to the
provisions of subsection 2.1.4 and Section 2.4 hereof, at any time and from time to time on or after the date the
Company consummates the Business Combination, the Holders of at least a majority-in-interest of the then-outstanding number of
Registrable Securities (the “Demanding Holders”) may make a written demand for Registration of all or
part of their Registrable Securities, which written demand shall describe the amount and type of securities to be included in
such Registration and the intended method(s) of distribution thereof (such written demand a “Demand Registration”).
The Company shall, within five (5) days of the Company’s receipt of the Demand Registration, notify, in writing, all other
Holders of Registrable Securities of such demand, and each Holder of Registrable Securities who thereafter wishes to include all
or a portion of such Holder’s Registrable Securities in a Registration pursuant to a Demand Registration (each such Holder
that includes all or a portion of such Holder’s Registrable Securities in such Registration, a “Requesting Holder”)
shall so notify the Company, in writing, within three (3) business days after the receipt by the Holder of the notice from the
Company. Upon receipt by the Company of any such written notification from a Requesting Holder(s) to the Company, such Requesting
Holder(s) shall be entitled to have their Registrable Securities included in a Registration pursuant to a Demand Registration
and the Company shall effect, as soon thereafter as practicable, but not more than forty five (45) days immediately after the
Company’s receipt of the Demand Registration, the Registration of all Registrable Securities requested by the Demanding
Holders and Requesting Holders pursuant to such Demand Registration. Under no circumstances shall the Company be obligated to
effect more than an aggregate of three (3) Registrations pursuant to a Demand Registration under this subsection 2.1.1
with respect to any or all Registrable Securities; provided, however, that a Registration shall not be counted for
such purposes unless a Form S-1 or any similar long-form registration statement that may be available at such time (“Form
S-1”) has become effective and all of the Registrable Securities requested by the Requesting Holders to be registered
on behalf of the Requesting Holders in such Form S-1 Registration have been sold, in accordance with Section 3.1 of this
Agreement; provided, further, that an Underwritten Shelf Takedown shall not count as a Demand Registration.
2.1.2
Effective Registration. Notwithstanding
the provisions of subsection 2.1.1 above or any other part of this Agreement, a Registration pursuant to a Demand Registration
shall not count as a Registration unless and until (i) the Registration Statement filed with the Commission with respect to a
Registration pursuant to a Demand Registration has been declared effective by the Commission and (ii) the Company has complied
with all of its obligations under this Agreement with respect thereto; provided, further, that if, after such Registration
Statement has been declared effective, an offering of Registrable Securities in a Registration pursuant to a Demand Registration
is subsequently interfered with by any stop order or injunction of the Commission, federal or state court or any other governmental
agency the Registration Statement with respect to such Registration shall be deemed not to have been declared effective, unless
and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated and (ii) a majority-in-interest of
the Demanding Holders initiating such Demand Registration thereafter affirmatively elect to continue with such Registration and
accordingly notify the Company in writing, but in no event later than five (5) days, of such election; provided, further,
that the Company shall not be obligated or required to file another Registration Statement until the Registration Statement that
has been previously filed with respect to a Registration pursuant to a Demand Registration becomes effective or is subsequently
terminated.
2.1.3
Underwritten Offering. Subject to the
provisions of subsection 2.1.4 and Section 2.4 hereof, if a majority-in-interest of the Demanding Holders so advise
the Company as part of their Demand Registration that the offering of the Registrable Securities pursuant to such Demand Registration
shall be in the form of an Underwritten Offering, then the right of such Demanding Holder or Requesting Holder (if any) to include
its Registrable Securities in such Registration shall be conditioned upon such Holder’s participation in such Underwritten
Offering and the inclusion of such Holder’s Registrable Securities in such Underwritten Offering to the extent provided
herein. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this subsection
2.1.3 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten
Offering by the majority-in-interest of the Demanding Holders initiating the Demand Registration.
2.1.4
Reduction of Underwritten Offering. If
the managing Underwriter or Underwriters in an Underwritten Registration pursuant to a Demand Registration, in good faith, advises
the Company, the Demanding Holders and the Requesting Holders (if any) in writing that the dollar amount or number of Registrable
Securities that the Demanding Holders and the Requesting Holders (if any) desire to sell, taken together with all other Common
Stock or other equity securities that the Company desires to sell and the Common Stock, if any, as to which a Registration has
been requested pursuant to separate written contractual piggy-back registration rights held by any other stockholders who desire
to sell, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in the Underwritten Offering
without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of
such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number
of Securities”), then the Company shall include in such Underwritten Offering, as follows: (i) first, the Registrable
Securities of the Demanding Holders and the Requesting Holders (if any) (pro rata based on the respective number of Registrable
Securities that each Demanding Holder and Requesting Holder (if any) has requested be included in such Underwritten Registration
and the aggregate number of Registrable Securities that the Demanding Holders and Requesting Holders have requested be included
in such Underwritten Registration (such proportion is referred to herein as “Pro Rata”)) that can be
sold without exceeding the Maximum Number of Securities; (ii) second, to the extent that the Maximum Number of Securities has
not been reached under the foregoing clause (i), the Common Stock or other equity securities that the Company desires to sell,
which can be sold without exceeding the Maximum Number of Securities; and (iii) third, to the extent that the Maximum Number of
Securities has not been reached under the foregoing clauses (i) and (ii), the Common Stock or other equity securities of other
persons or entities that the Company is obligated to register in a Registration pursuant to separate written contractual arrangements
with such persons and that can be sold without exceeding the Maximum Number of Securities.
2.1.5
Demand Registration Withdrawal. A majority-in-interest
of the Demanding Holders initiating a Demand Registration or a majority-in-interest of the Requesting Holders (if any), pursuant
to a Registration under subsection 2.1.1 shall have the right to withdraw from a Registration pursuant to such Demand Registration
for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of their
intention to withdraw from such Registration prior to the effectiveness of the Registration Statement filed with the Commission
with respect to the Registration of their Registrable Securities pursuant to such Demand Registration. Notwithstanding anything
to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with
a Registration pursuant to a Demand Registration prior to its withdrawal under this subsection 2.1.5.
2.2
Piggyback Registration.
2.2.1
Piggyback Rights. If, at any time on or
after the date the Company consummates a Business Combination, the Company proposes to file a Registration Statement under the
Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable
for, or convertible into equity securities, for its own account or for the account of stockholders of the Company (or by the Company
and by the stockholders of the Company including, without limitation, pursuant to Section 2.1 hereof), other than a Registration
Statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering
of securities solely to the Company’s existing stockholders, (iii) for an offering of debt that is convertible into equity
securities of the Company or (iv) for a dividend reinvestment plan, then the Company shall give written notice of such proposed
filing to all of the Holders of Registrable Securities as soon as practicable but not less than seven (7) days before the anticipated
filing date of such Registration Statement, which notice shall (A) describe the amount and type of securities to be included in
such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any,
in such offering, and (B) offer to all of the Holders of Registrable Securities the opportunity to register the sale of such number
of Registrable Securities as such Holders may request in writing within three (3) business days after receipt of such written
notice (such Registration a “Piggyback Registration”). The Company shall, in good faith, cause such
Registrable Securities to be included in such Piggyback Registration and shall use its best efforts to cause the managing Underwriter
or Underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested by the Holders pursuant to
this subsection 2.2.1 to be included in a Piggyback Registration on the same terms and conditions as any similar securities
of the Company included in such Registration and to permit the sale or other disposition of such Registrable Securities in accordance
with the intended method(s) of distribution thereof. All such Holders proposing to distribute their Registrable Securities through
an Underwritten Offering under this subsection 2.2.1 shall enter into an underwriting agreement in customary form with
the Underwriter(s) selected for such Underwritten Offering by the Company. The notice periods set forth in this subsection
2.2.1 shall not apply to an Underwritten Shelf Takedown conducted in accordance with subsection 2.3.3.
2.2.2
Reduction of Piggyback Registration. If
the managing Underwriter or Underwriters in an Underwritten Registration that is to be a Piggyback Registration (other than Underwritten
Shelf Takedown), in good faith, advises the Company and the Holders of Registrable Securities participating in the Piggyback Registration
in writing that the dollar amount or number of the shares of Common Stock that the Company desires to sell, taken together with
(i) the Common Stock, if any, as to which Registration has been demanded pursuant to separate written contractual arrangements
with persons or entities other than the Holders of Registrable Securities hereunder, (ii) the Registrable Securities as to which
registration has been requested pursuant Section 2.2 hereof, and (iii) the Common Stock, if any, as to which Registration
has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of the Company,
exceeds the Maximum Number of Securities, then:
(a)
If the Registration is undertaken for the Company’s
account, the Company shall include in any such Registration (A) first, the Common Stock or other equity securities that the Company
desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (B) second, to the extent that the
Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of Holders exercising
their rights to register their Registrable Securities pursuant to subsection 2.2.1 hereof, Pro Rata based on the respective
number of Registrable Securities that each Holder has so requested exercising its rights to register its Registrable Securities
pursuant to subsection 2.2.1 hereof, which can be sold without exceeding the Maximum Number of Securities; and (C) third,
to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), the Common Stock,
if any, as to which Registration has been requested pursuant to written contractual piggy-back registration rights of other stockholders
of the Company, which can be sold without exceeding the Maximum Number of Securities;
(b)
If the Registration is pursuant to a request
by persons or entities other than the Holders of Registrable Securities, then the Company shall include in any such Registration
(A) first, the Common Stock or other equity securities, if any, of such requesting persons or entities, other than the Holders
of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that
the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of Holders exercising
their rights to register their Registrable Securities pursuant to subsection 2.2.1, Pro Rata, which can be sold without
exceeding the Maximum Number of Securities; (C) third, to the extent that the Maximum Number of Securities has not been reached
under the foregoing clauses (A) and (B), the Common Stock or other equity securities that the Company desires to sell, which can
be sold without exceeding the Maximum Number of Securities; and (D) fourth, to the extent that the Maximum Number of Securities
has not been reached under the foregoing clauses (A), (B) and (C), the Common Stock or other equity securities for the account
of other persons or entities that the Company is obligated to register pursuant to separate written contractual arrangements with
such persons or entities, which can be sold without exceeding the Maximum Number of Securities.
2.2.3
Piggyback Registration Withdrawal. Any
Holder of Registrable Securities shall have the right to withdraw from a Piggyback Registration for any or no reason whatsoever
upon written notification to the Company and the Underwriter or Underwriters (if any) of his, her or its intention to withdraw
from such Piggyback Registration prior to the effectiveness of the Registration Statement filed with the Commission with respect
to such Piggyback Registration. The Company (whether on its own good faith determination or as the result of a request for withdrawal
by persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission
in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement. Notwithstanding
anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection
with the Piggyback Registration prior to its withdrawal under this subsection 2.2.3.
2.2.4
Unlimited Piggyback Registration Rights.
For purposes of clarity, any Registration effected pursuant to Section 2.2 hereof shall not be counted as a Registration
pursuant to a Demand Registration effected under Section 2.1 hereof.
2.3
Shelf Registrations.
2.3.1
The Holders of Registrable Securities may at
any time, and from time to time, request in writing that the Company, pursuant to Rule 415 under the Securities Act (or any successor
rule promulgated thereafter by the Commission), register the resale of any or all of their Registrable Securities on Form S-3
or similar short form registration statement that may be available at such time (“Form S-3”), or if
the Company is ineligible to use Form S-3, on Form S-1; a registration statement filed pursuant
to this subsection 2.3.1 (a “Shelf”) shall provide for the resale of the Registrable Securities
included therein pursuant to any method or combination of methods legally available to, and requested by, any Holder. Within
three (3) days of the Company’s receipt of a written request from a Holder or Holders of Registrable Securities for a Registration
on a Shelf, the Company shall promptly give written notice of the proposed Registration to all other Holders of Registrable Securities,
and each Holder of Registrable Securities who thereafter wishes to include all or a portion of such Holder’s Registrable
Securities in such Registration shall so notify the Company, in writing, within three (3) business days after the receipt by the
Holder of the notice from the Company. As soon as practicable thereafter, but not more than ten (10) days after the Company’s
initial receipt of such written request for a Registration on a Shelf, the Company shall register all or such portion of such
Holder’s Registrable Securities as are specified in such written request, together with all or such portion of Registrable
Securities of any other Holder or Holders joining in such request as are specified in the written notification given by such Holder
or Holders; provided, however, that the Company shall not be obligated to effect any such Registration pursuant
to this subsection 2.3.1 if the Holders of Registrable Securities, together with the Holders of any other equity securities
of the Company entitled to inclusion in such Registration, propose to sell the Registrable Securities and such other equity securities
(if any) at any aggregate price to the public of less than $10,000,000. The Company shall
maintain each Shelf in accordance with the terms hereof, and shall prepare and file with the SEC such amendments, including post-effective
amendments, and supplements as may be necessary to keep such Shelf continuously effective, available for use and in compliance
with the provisions of the Securities Act until such time as there are no longer any Registrable Securities included on such Shelf.
In the event the Company files a Shelf on Form S-1, the Company shall use its commercially reasonable efforts to convert the Form
S-1 to a Form S-3 as soon as practicable after the Company is eligible to use Form S-3.
2.3.2
If any Shelf ceases to be effective under the
Securities Act for any reason at any time while Registrable Securities included thereon are still outstanding, the Company shall
use its commercially reasonable efforts to as promptly as is reasonably practicable cause such Shelf to again become effective
under the Securities Act (including obtaining the prompt withdrawal of any order suspending the effectiveness of such Shelf),
and shall use its commercially reasonable efforts to as promptly as is reasonably practicable amend such Shelf in a manner reasonably
expected to result in the withdrawal of any order suspending the effectiveness of such Shelf or file an additional registration
statement (a “Subsequent Shelf Registration”) registering the resale of all Registrable Securities including
on such Shelf, and pursuant to any method or combination of methods legally available to, and requested by, any Holder. If a Subsequent
Shelf Registration is filed, the Company shall use its commercially reasonable efforts to (i) cause such Subsequent Shelf Registration
to become effective under the Securities Act as promptly as is reasonably practicable after the filing thereof and (ii) keep such
Subsequent Shelf Registration continuously effective, available for use and in compliance with the provisions of the Securities
Act until such time as there are no longer any Registrable Securities included thereon. Any such Subsequent Shelf Registration
shall be on Form S-3 to the extent that the Company is eligible to use such form. Otherwise, such Subsequent Shelf Registration
shall be on another appropriate form. In the event that any Holder holds Registrable Securities that are not registered for resale
on a delayed or continuous basis, the Company, upon request of a Holder shall promptly use its commercially reasonable efforts
to cause the resale of such Registrable Securities to be covered by either, at the Company’s option, a Shelf (including
by means of a post-effective amendment) or a Subsequent Shelf Registration and cause the same to become effective as soon as practicable
after such filing and such Shelf or Subsequent Shelf Registration shall be subject to the terms hereof; provided, however,
the Company shall only be required to cause such Registrable Securities to be so covered once annually after inquiry of the Holders.
2.3.3
At any time and from
time to time after a Shelf has been declared effective by the Commission, the Sponsor may request to sell all or any portion of
its Registrable Securities in an underwritten offering that is registered pursuant to the Shelf (each, an “Underwritten
Shelf Takedown”); provided that the Company shall only be obligated to effect an Underwritten Shelf Takedown
if such offering shall include securities with a total offering price (including piggyback securities and before deduction of
underwriting discounts) reasonably expected to exceed, in the aggregate, $10,000,000. All requests for Underwritten Shelf Takedowns
shall be made by giving written notice to the Company at least 48 hours prior to the public announcement of such Underwritten
Shelf Takedown, which shall specify the approximate number of Registrable Securities proposed to be sold in the Underwritten Shelf
Takedown and the expected price range (net of underwriting discounts and commissions) of such Underwritten Shelf Takedown. The
Company shall include in any Underwritten Shelf Takedown the securities requested to be included by any holder (each a “Takedown
Requesting Holder”) at least 24 hours prior to the public announcement of such Underwritten Shelf Takedown pursuant
to written contractual piggyback registration rights of such holder (including to those set forth herein). The Sponsor shall have
the right to select the underwriter(s) for such offering (which shall consist of one or more reputable nationally recognized investment
banks), subject to the Company’s prior approval which shall not be unreasonably withheld, conditioned or delayed. For
purposes of clarity, any Registration effected pursuant to this subsection 2.3.3 shall not be counted as a Registration
pursuant to a Demand Registration effected under Section 2.1 hereof.
2.3.4
If the managing Underwriter or Underwriters in
an Underwritten Shelf Takedown, in good faith, advises the Company, the Sponsor and the Takedown Requesting Holders (if any) in
writing that the dollar amount or number of Registrable Securities that the Sponsor and the Takedown Requesting Holders (if any)
desire to sell, taken together with all other Common Stock or other equity securities that the Company desires to sell, exceeds
the Maximum Number of Securities, then the Company shall include in such Underwritten Shelf Takedown, as follows: (i) first, the
Registrable Securities of the Sponsor that can be sold without exceeding the Maximum Number of Securities; (ii) second, to the
extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), the Common Stock or other equity
securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (iii) third,
to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i) and (ii), the Common
Stock or other equity securities of the Takedown Requesting Holders, if any, that can be sold without exceeding the Maximum Number
of Securities, determined Pro Rata based on the respective number of Registrable Securities that each Takedown Requesting Holder
has so requested to be included in such Underwritten Shelf Takedown.
2.3.5
The Sponsor shall have the right to withdraw
from an Underwritten Shelf Takedown for any or no reason whatsoever upon written notification to the Company and the Underwriter
or Underwriters (if any) of its intention to withdraw from such Underwritten Shelf Takedown prior to the public announcement of
such Underwritten Shelf Takedown. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible
for the Registration Expenses incurred in connection with an Underwritten Shelf Takedown prior to a withdrawal under this subsection
2.3.5.
2.4
Restrictions on Registration Rights. If
(A) during the period starting with the date sixty (60) days prior to the Company’s
good faith estimate of the date of the filing of, and ending on a date one hundred and twenty (120) days after the effective date
of, a Company initiated Registration and provided that the Company has delivered written notice to the Holders prior to receipt
of a Demand Registration pursuant to subsection 2.1.1 and it continues to actively employ, in good faith, all reasonable
efforts to cause the applicable Registration Statement to become effective; (B) the Holders have requested an Underwritten Registration
and the Company and the Holders are unable to obtain the commitment of underwriters to firmly underwrite the offer; or (C) in
the good faith judgment of the Board such Registration would be seriously detrimental to the Company and the Board concludes as
a result that it is essential to defer the filing of such Registration Statement at such time, then in each case the Company shall
furnish to such Holders a certificate signed by the Chairman of the Board stating that in the good faith judgment of the Board
it would be seriously detrimental to the Company for such Registration Statement to be filed in the near future and that it is
therefore essential to defer the filing of such Registration Statement. In such event, the Company shall have the right to defer
such filing for a period of not more than thirty (30) days; provided, however, that the Company shall not defer
its obligation in this manner more than once in any 12-month period. Notwithstanding anything to the contrary contained in this
Agreement, no Registration shall be effected or permitted and no Registration Statement shall become effective, with respect to
any Registrable Securities held by any Holder, until after the expiration of the Founder Shares Lock-Up Period or the Private
Placement Lock-Up Period, as the case may be.
ARTICLE
3
COMPANY PROCEDURES
3.1
General Procedures. If at any time on
or after the date the Company consummates a Business Combination the Company is required to effect the Registration of Registrable
Securities, the Company shall use its best efforts to effect such Registration to permit the
sale of such Registrable Securities in accordance with the intended plan of distribution thereof, and pursuant thereto the Company
shall, as expeditiously as possible:
3.1.1
prepare and file with the Commission as soon
as practicable a Registration Statement with respect to such Registrable Securities and use its reasonable best efforts to cause
such Registration Statement to become effective and remain effective until all Registrable Securities covered by such Registration
Statement have been sold;
3.1.2
prepare and file with the Commission such amendments
and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be requested by the
Holders or any Underwriter of Registrable Securities or as may be required by the rules, regulations or instructions applicable
to the registration form used by the Company or by the Securities Act or rules and regulations thereunder to keep the Registration
Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance with the intended
plan of distribution set forth in such Registration Statement or supplement to the Prospectus;
3.1.3
prior to filing a Registration Statement or Prospectus,
or any amendment or supplement thereto, furnish without charge to the Underwriters, if any, and the Holders of Registrable Securities
included in such Registration, and such Holders’ legal counsel, copies of such Registration Statement as proposed to be
filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents
incorporated by reference therein), the Prospectus included in such Registration Statement (including each preliminary Prospectus),
and such other documents as the Underwriters and the Holders of Registrable Securities included in such Registration or the legal
counsel for any such Holders may request in order to facilitate the disposition of the Registrable Securities owned by such Holders;
3.1.4
prior to any public offering of Registrable Securities,
use its best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities
or “blue sky” laws of such jurisdictions in the United States as the Holders of Registrable Securities included in
such Registration Statement (in light of their intended plan of distribution) may request and (ii) take such action necessary
to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental
authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things
that may be necessary or advisable to enable the Holders of Registrable Securities included in such Registration Statement to
consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company
shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify
or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is
not then otherwise so subject;
3.1.5
cause all such Registrable Securities to be listed
on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed;
3.1.6
provide a transfer agent or warrant agent, as
applicable, and registrar for all such Registrable Securities no later than the effective date of such Registration Statement;
3.1.7
advise each seller of such Registrable Securities,
promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending
the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly
use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should
be issued;
3.1.8
at least five (5) days prior to the filing of
any Registration Statement or Prospectus or any amendment or supplement to such Registration Statement or Prospectus (other than
by way of a document incorporated by reference) furnish a copy thereof to each seller of such Registrable Securities or its counsel;
3.1.9
notify the Holders at any time when a Prospectus
relating to such Registration Statement is required to be delivered under the Securities Act, of the happening of any event as
a result of which the Prospectus included in such Registration Statement, as then in effect, includes a Misstatement, and then
to correct such Misstatement as set forth in Section 3.4 hereof;
3.1.10
permit a representative of the Holders, the Underwriters,
if any, and any attorney or accountant retained by such Holders or Underwriters to participate, at each such person’s own
expense, in the preparation of the Registration Statement, and cause the Company’s officers, directors and employees to
supply all information reasonably requested by any such representative, Underwriters, attorney or accountant in connection with
the Registration; provided, however, that such representatives or Underwriters enter into a confidentiality agreement,
in form and substance reasonably satisfactory to the Company, prior to the release or disclosure of any such information;
3.1.11
obtain a “cold comfort” letter from
the Company’s independent registered public accountants in the event of an Underwritten Registration, in customary form
and covering such matters of the type customarily covered by “cold comfort” letters as the managing Underwriters may
reasonably request, and reasonably satisfactory to a majority-in-interest of the participating Holders;
3.1.12
on the date the Registrable Securities are delivered
for sale pursuant to such Registration, obtain an opinion, dated such date, of counsel representing the Company for the purposes
of such Registration, addressed to the Holders, the placement agent or sales agent, if any, and the Underwriters, if any, covering
such legal matters with respect to the Registration in respect of which such opinion is being given as the Holders, placement
agent, sales agent, or Underwriters may reasonably request and as are customarily included in such opinions and negative assurance
letters, and reasonably satisfactory to a majority-in-interest of the participating Holders;
3.1.13
in the event of any Underwritten Offering, enter
into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing Underwriters
of such offering;
3.1.14
make available to its security holders, as soon
as reasonably practicable, an earnings statement covering the period of at least twelve (12) months beginning with the first day
of the Company’s first full calendar quarter after the effective date of the Registration Statement which satisfies the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any successor rule promulgated thereafter by the
Commission);
3.1.15
if the Registration involves the Registration
of Registrable Securities involving gross proceeds in excess of $50,000,000, use its reasonable efforts to make available senior
executives of the Company to participate in customary “road show” presentations that may be reasonably requested by
the Underwriters in any Underwritten Offering; and
3.1.16
otherwise, in good faith, cooperate reasonably
with, and take such customary actions as may reasonably be requested by the Holders, in connection with such Registration.
3.2
Registration Expenses. The Registration
Expenses of all Registrations shall be borne by the Company. It is acknowledged by the Holders that the Holders shall bear all
incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’ commissions and discounts,
brokerage fees, Underwriters marketing costs and, other than as set forth in the definition of “Registration Expenses,”
all reasonable fees and expenses of any legal counsel representing the Holders.
3.3
Requirements for Participation in Underwritten
Offerings. No person may participate in any Underwritten Offering for equity securities of the Company pursuant to a Registration
initiated by the Company hereunder unless such person (i) agrees to sell such person’s securities on the basis provided
in any underwriting arrangements approved by the Company and (ii) completes and executes all customary questionnaires, powers
of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required
under the terms of such underwriting arrangements.
3.4
Suspension of Sales; Adverse Disclosure.
Upon receipt of written notice from the Company that a Registration Statement or Prospectus contains a Misstatement, each of the
Holders shall forthwith discontinue disposition of Registrable Securities until it has received copies of a supplemented or amended
Prospectus correcting the Misstatement (it being understood that the Company hereby covenants to prepare and file such supplement
or amendment as soon as practicable after the time of such notice), or until it is advised in writing by the Company that the
use of the Prospectus may be resumed. If the filing, initial effectiveness or continued use of a Registration Statement in respect
of any Registration at any time would require the Company to make an Adverse Disclosure or would require the inclusion in such
Registration Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control,
the Company may, upon giving prompt written notice of such action to the Holders, delay the filing or initial effectiveness of,
or suspend use of, such Registration Statement for the shortest period of time, but in no event more than thirty (30) days, determined
in good faith by the Company to be necessary for such purpose. In the event the Company exercises its rights under the preceding
sentence, the Holders agree to suspend, immediately upon their receipt of the notice referred to above, their use of the Prospectus
relating to any Registration in connection with any sale or offer to sell Registrable Securities. The Company shall immediately
notify the Holders of the expiration of any period during which it exercised its rights under this Section 3.4.
3.5
Reporting Obligations. As long as any
Holder shall own Registrable Securities, the Company, at all times while it shall be a reporting company under the Exchange Act,
covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required
to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act and to promptly furnish
the Holders with true and complete copies of all such filings. The Company further covenants that it shall take such further action
as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Common
Stock held by such Holder without registration under the Securities Act within the limitation of the exemptions provided by Rule
144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission, to the extent that such
rule or such successor rule is available to the Company), including providing any legal opinions. Upon the request of any Holder,
the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with
such requirements.
ARTICLE
4
INDEMNIFICATION AND CONTRIBUTION
4.1
Indemnification.
4.1.1
The Company agrees to indemnify, to the extent
permitted by law, each Holder of Registrable Securities, its officers and directors and each person who controls such Holder (within
the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including attorneys’ fees)
caused by any untrue or alleged untrue statement of material fact contained in any Registration Statement, Prospectus or preliminary
Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained
in any information furnished in writing to the Company by such Holder expressly for use therein. The Company shall indemnify the
Underwriters, their officers and directors and each person who controls such Underwriters (within the meaning of the Securities
Act) to the same extent as provided in the foregoing with respect to the indemnification of the Holder.
4.1.2
In connection with any Registration Statement
in which a Holder of Registrable Securities is participating, such Holder shall furnish to the Company in writing such information
and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and,
to the extent permitted by law, shall indemnify the Company, its directors and officers and agents and each person who controls
the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses (including
without limitation reasonable attorneys’ fees) resulting from any untrue statement of material fact contained in the Registration
Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission of a material fact
required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so furnished in writing by such Holder expressly for use therein;
provided, however, that the obligation to indemnify shall be several, not joint and several, among such Holders
of Registrable Securities, and the liability of each such Holder of Registrable Securities shall be in proportion to and limited
to the net proceeds received by such Holder from the sale of Registrable Securities pursuant to such Registration Statement. The
Holders of Registrable Securities shall indemnify the Underwriters, their officers, directors and each person who controls such
Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to indemnification
of the Company.
4.1.3
Any person entitled to indemnification herein
shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided
that the failure to give prompt notice shall not impair any person’s right to indemnification hereunder to the extent such
failure has not materially prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment
a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying
party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent
(but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified
by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying
party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which
cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the
terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.
4.1.4
The indemnification provided for under this Agreement
shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer,
director or controlling person of such indemnified party and shall survive the transfer of securities. The Company and each Holder
of Registrable Securities participating in an offering also agrees to make such provisions as are reasonably requested by any
indemnified party for contribution to such party in the event the Company’s or such Holder’s indemnification is unavailable
for any reason.
4.1.5
If the indemnification provided under Section
4.1 hereof from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of
any losses, claims, damages, liabilities and expenses referred to herein, then the indemnifying party, in lieu of indemnifying
the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims,
damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party
and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party
and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue
or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates
to information supplied by, such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s
relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however,
that the liability of any Holder under this subsection 4.1.5 shall be limited to the amount of the net proceeds received
by such Holder in such offering giving rise to such liability. The amount paid or payable by a party as a result of the losses
or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in subsections 4.1.1,
4.1.2 and 4.1.3 above, any legal or other fees, charges or expenses reasonably incurred by such party in connection
with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant
to this subsection 4.1.5 were determined by pro rata allocation or by any other method of allocation, which does not take
account of the equitable considerations referred to in this subsection 4.1.5. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this subsection 4.1.5
from any person who was not guilty of such fraudulent misrepresentation.
ARTICLE
5
MISCELLANEOUS
5.1
Notices. Any notice or communication under
this Agreement must be in writing and given by (i) deposit in the United States mail, addressed to the party to be notified, postage
prepaid and registered or certified with return receipt requested, (ii) delivery in person or by courier service providing evidence
of delivery, or (iii) transmission by hand delivery, electronic mail, telecopy, telegram or facsimile. Each notice or communication
that is mailed, delivered, or transmitted in the manner described above shall be deemed sufficiently given, served, sent, and
received, in the case of mailed notices, on the third business day following the date on which it is mailed and, in the case of
notices delivered by courier service, hand delivery, electronic mail, telecopy, telegram or facsimile, at such time as it is delivered
to the addressee (with the delivery receipt or the affidavit of messenger) or at such time as delivery is refused by the addressee
upon presentation. Any notice or communication under this Agreement must be addressed, if to the Company, to: 11911 Freedom Drive,
Suite 1080, Reston, VA 20190, Attention: Michael Zarlenga, with copy to; Steptoe & Johnson LLP, 1114 Avenue of the Americas,
New York, New York 10036, Attention: Scott Fisher, and, if to any Holder, at such Holder’s address or facsimile number as
set forth in the Company’s books and records. Any party may change its address for notice at any time and from time to time
by written notice to the other parties hereto, and such change of address shall become effective thirty (30) days after delivery
of such notice as provided in this Section 5.1.
5.2
Assignment; No Third Party Beneficiaries.
5.2.1
This Agreement and the rights, duties and obligations
of the Company hereunder may not be assigned or delegated by the Company in whole or in part.
5.2.2
Prior to the expiration of the Founder Shares
Lock-up Period or the Private Placement Lock-up Period, as the case may be, no Holder may assign or delegate such Holder’s
rights, duties or obligations under this Agreement, in whole or in part, except in connection with a transfer of Registrable Securities
by such Holder to a Permitted Transferee.
5.2.3
This Agreement and the provisions hereof shall
be binding upon and shall inure to the benefit of each of the parties and its successors and the permitted assigns of the Holders,
which shall include Permitted Transferees.
5.2.4
This Agreement shall not confer any rights or
benefits on any persons that are not parties hereto, other than as expressly set forth in this Agreement and Section 5.2
hereof.
5.2.5
No assignment by any party hereto of such party’s
rights, duties and obligations hereunder shall be binding upon or obligate the Company unless and until the Company shall have
received (i) written notice of such assignment as provided in Section 5.1 hereof and (ii) the written agreement of the
assignee, in a form reasonably satisfactory to the Company, to be bound by the terms and provisions of this Agreement (which may
be accomplished by an addendum or certificate of joinder to this Agreement). Any transfer or assignment made other than as provided
in this Section 5.2 shall be null and void.
5.3
Severability. This Agreement shall be
deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability
of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or
provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to
such invalid or unenforceable provision as may be possible that is valid and enforceable.
5.4
Counterparts. This Agreement may be executed
in multiple counterparts (including facsimile or PDF counterparts), each of which shall be deemed an original, and all of which
together shall constitute the same instrument, but only one of which need be produced.
5.5
Entire Agreement. This Agreement (including
all agreements entered into pursuant hereto and all certificates and instruments delivered pursuant hereto and thereto) constitute
the entire agreement of the parties with respect to the subject matter hereof and supersede all prior and contemporaneous agreements,
representations, understandings, negotiations and discussions between the parties, whether oral or written.
5.6
Governing Law; Venue. NOTWITHSTANDING
THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO AGREEMENTS AMONG NEW YORK RESIDENTS ENTERED
INTO AND TO BE PERFORMED ENTIRELY WITHIN NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION.
5.7
WAIVER OF TRIAL BY JURY. EACH PARTY
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREBY, OR THE ACTIONS OF THE SPONSOR IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
5.8
Amendments and Modifications. Upon
the written consent of the Company and the Holders of at least a majority-in-interest of the Registrable Securities at the time
in question, compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any
of such provisions, covenants or conditions may be amended or modified; provided, however, that notwithstanding
the foregoing, any amendment hereto or waiver hereof that adversely affects one Holder, solely in its capacity as a holder of
the shares of capital stock of the Company, in a manner that is materially different from the other Holders (in such capacity)
shall require the consent of the Holder so affected. No course of dealing between any Holder or the Company and any other party
hereto or any failure or delay on the part of a Holder or the Company in exercising any rights or remedies under this Agreement
shall operate as a waiver of any rights or remedies of any Holder or the Company. No single or partial exercise of any rights
or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies
hereunder or thereunder by such party.
5.9
Titles and Headings. Titles and headings
of sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement.
5.10
Waivers and Extensions. Any party to this
Agreement may waive any right, breach or default which such party has the right to waive; provided that such waiver will
not be effective against the waiving party unless it is in writing, is signed by such party, and specifically refers to this Agreement.
Waivers may be made in advance or after the right waived has arisen or the breach or default waived has occurred. Any waiver may
be conditional. No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding
or succeeding breach thereof nor of any other agreement or provision herein contained. No waiver or extension of time for performance
of any obligations or acts shall be deemed a waiver or extension of the time for performance of any other obligations or acts.
5.11
Remedies Cumulative. In the event that
the Company fails to observe or perform any covenant or agreement to be observed or performed under this Agreement, the Holders
may proceed to protect and enforce its rights by suit in equity or action at law, whether for specific performance of any term
contained in this Agreement or for an injunction against the breach of any such term or in aid of the exercise of any power granted
in this Agreement or to enforce any other legal or equitable right, or to take any one or more of such actions, without being
required to post a bond. None of the rights, powers or remedies conferred under this Agreement shall be mutually exclusive, and
each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy, whether conferred by
this Agreement or now or hereafter available at law, in equity, by statute or otherwise.
5.12
Other Registration Rights. The Company
represents and warrants that no person, other than a Holder of Registrable Securities, has any right to require the Company to
register any securities of the Company for sale or to include such securities of the Company in any Registration filed by the
Company for the sale of securities for its own account or for the account of any other person. Further, the Company represents
and warrants that this Agreement supersedes any other registration rights agreement or agreement with similar terms and conditions
and in the event of a conflict between any such agreement or agreements and this Agreement, the terms of this Agreement shall
prevail.
5.13
Term. This Agreement shall terminate upon
the earlier of (i) the tenth anniversary of the date of this Agreement and (ii) the date as of which no Registrable Securities
remain outstanding. The provisions of Section 3.5 and Article IV shall survive any termination.
IN
WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above.
[Signature
Pages Follows]
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COMPANY:
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PROOF ACQUISITION CORP I
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By:
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Name:
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Title:
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[Signature
Page to Registration and Shareholder Agreement]
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HOLDERS:
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PROOF ACQUISITION SPONSOR I, LLC
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By: PROOF Sponsor Management, LLC
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Its: Manager
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By:
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Its:
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[Signature
Page to Registration and Shareholder Agreement]
[Signature
Page to Registration and Shareholder Agreement]
Schedule
A
Purchasers
of Private Placement Warrants
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1.
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[Certain
funds and accounts managed by subsidiaries of BlackRock, Inc.]
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Exhibit
10.3
FORM
OF PRIVATE PLACEMENT WARRANTS PURCHASE AGREEMENT BETWEEN THE REGISTRANT AND THE SPONSOR
PRIVATE
PLACEMENT WARRANTS PURCHASE AGREEMENT
THIS
PRIVATE PLACEMENT WARRANTS PURCHASE AGREEMENT (as it may from time to time be amended and including all exhibits referenced herein,
this “Agreement”), dated as of [●], 2021, is entered into by and between PROOF Acquisition Corp
I, a Delaware corporation (the “Company”), and PROOF Acquisition Sponsor I, LLC, a Delaware limited
liability company (the “Purchaser”).
WHEREAS,
the Company intends to consummate an initial public offering of the Company’s units (the “Public Offering”),
each unit consisting of one share of Class A common stock of the Company, par value $0.0001 per share (each, a “Share”),
and one-half of one redeemable warrant, each whole warrant entitling the holder to purchase one Share at an exercise price of
$11.50 per Share, as set forth in the Company’s Registration Statement on Form S-1, filed with the U.S. Securities and Exchange
Commission (the “SEC”), File Number 333-[ ], under the Securities Act of 1933, as amended (the “Securities
Act”).
WHEREAS,
the Purchaser has agreed to purchase an aggregate of 11,500,000 warrants (plus up to 1,725,000 additional redeemable warrants
if the underwriters in the Public Offering exercises their option to purchase additional units in full) (the “Private
Placement Warrants”), each Private Placement Warrant entitling the holder to purchase one Share at an exercise price
of $11.50 per Share, at a price of $1.00 per warrant, subject to adjustment.
NOW
THEREFORE, in consideration of the mutual promises contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby, intending legally to be bound,
agree as follows:
AGREEMENT
Section
1. Authorization, Purchase and Sale; Terms
of the Private Placement Warrants.
Authorization
of the Private Placement Warrants. The Company has duly authorized the issuance and sale of the Private Placement Warrants
to the Purchaser.
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A.
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Purchase
and Sale of the Private Placement Warrants.
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(i) On
the date of the consummation of the Public Offering (the “IPO Closing Date”), the Company shall issue
and sell to the Purchaser, and the Purchaser shall purchase from the Company, 11,500,000 Private Placement Warrants at a price
of $1.00 per warrant for an aggregate purchase price of $11,500,000 (the “Purchase Price”). The Purchaser
shall pay the Purchase Price by wire transfer of immediately available funds in the following amounts: (i)$[ ] to the Company
at a financial institution to be chosen by the Company, and (ii) $[ ] to the trust account maintained by Continental Stock Transfer
& Trust Company, acting as trustee (the “Trust Account”), in each case in accordance with the Company’s
wiring instructions, at least one (1) business day prior to the IPO Closing Date. On the IPO Closing Date, subject to the receipt
of funds pursuant to the immediately prior sentence, the Company, at its option, shall deliver a certificate evidencing the Private
Placement Warrants purchased on such date duly registered in the Purchaser’s name to the Purchaser or effect such delivery
in book-entry form.
(ii) On
the date of the closing of the option to purchase additional units, if any, in connection with the Public Offering or on such
earlier time and date as may be mutually agreed by the Purchaser and the Company (the “Option Closing Date”,
and each Option Closing Date (if any) and the IPO Closing Date, a “Closing Date”), the Company shall
issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, up to 1,725,000 Private Placement Warrants
(or, to the extent the option to purchase additional units is not exercised in full, a lesser number of Private Placement Warrants
in proportion to portion of the option that is exercised) at a price of $1.00 per warrant for an aggregate purchase price of up
to $1,725,000 (the “Option Purchase Price”). The Purchaser shall pay the Option Purchase Price in accordance
with the Company’s wire instruction by wire transfer of immediately available funds to the Trust Account, at least one (1)
business day prior to the Option Closing Date. On the Option Closing Date, subject to the receipt of funds pursuant to the immediately
prior sentence, the Company shall, at its option, deliver a certificate evidencing the Private Placement Warrants purchased on
such date duly registered in the Purchaser’s name to the Purchaser or effect such delivery in book-entry form.
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B.
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Terms
of the Private Placement Warrants.
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(i) Each
Private Placement Warrant shall have the terms set forth in a Warrant Agreement to be entered into by the Company and a warrant
agent on the IPO Closing Date, in connection with the Public Offering (the “Warrant Agreement”).
(ii) On
the IPO Closing Date, the Company and the Purchaser shall enter into a registration and stockholder rights agreement (the “Registration
and Stockholder Rights Agreement”) pursuant to which the Company will grant certain registration rights to the Purchaser
relating to the Private Placement Warrants and the Shares underlying the Private Placement Warrants.
Section
2. Representations and Warranties of the
Company. As a material inducement to the Purchaser to enter
into this Agreement and purchase the Private Placement Warrants, the Company hereby represents and warrants to the Purchaser (which
representations and warranties shall survive each Closing Date) that:
A. Incorporation
and Corporate Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws
of the State of Delaware and is qualified to do business in every jurisdiction in which the failure to so qualify would reasonably
be expected to have a material adverse effect on the financial condition, operating results or assets of the Company. The Company
possesses all requisite corporate power and authority necessary to carry out the transactions contemplated by this Agreement and
the Warrant Agreement.
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B.
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Authorization;
No Breach.
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(i) The
execution, delivery and performance of this Agreement and the Private Placement Warrants have been duly authorized by the Company
as of the Closing Date. This Agreement constitutes the valid and binding obligation of the Company, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors’ rights and to general equitable principles (whether considered in a proceeding
in equity or law). Upon issuance in accordance with, and payment pursuant to, the terms of the Warrant Agreement and this Agreement,
the Private Placement Warrants will constitute valid and binding obligations of the Company, enforceable in accordance with their
terms as of the Closing Date.
(ii) The
execution and delivery by the Company of this Agreement and the Private Placement Warrants, the issuance and sale of the Private
Placement Warrants, the issuance of the Shares upon exercise of the Private Placement Warrants and the fulfillment of and compliance
with the respective terms hereof and thereof by the Company, do not and will not as of the Closing Date (a) conflict with or result
in a breach of the terms, conditions or provisions of, (b) constitute a default under, (c) result in the creation of any lien,
security interest, charge or encumbrance upon the Company’s capital stock or assets under, (d) result in a violation of,
or (e) require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with,
any court or administrative or governmental body or agency pursuant to the certificate of incorporation of the Company (in effect
on the date hereof or as may be amended prior to completion of the Public Offering) or any material law, statute, rule or regulation
to which the Company is subject, or any agreement, order, judgment or decree to which the Company is subject, except for any filings
required after the date hereof under federal or state securities laws.
C. Title
to Securities. Upon issuance in accordance with, and payment pursuant to, the terms hereof and the Warrant Agreement, the
Shares issuable upon exercise of the Private Placement Warrants will be duly and validly issued, fully paid and non-assessable.
On the date of issuance of the Private Placement Warrants, the Shares issuable upon exercise of the Private Placement Warrants
shall have been reserved for issuance. Upon issuance in accordance with, and payment pursuant to, the terms hereof and the Warrant
Agreement, the Purchaser will have good title to the Private Placement Warrants purchased by it and the Shares issuable upon exercise
of such Private Placement Warrants, free and clear of all liens, claims and encumbrances of any kind, other than (i) transfer
restrictions hereunder and under the other agreements contemplated hereby, (ii) transfer restrictions under federal and state
securities laws, and (iii) liens, claims or encumbrances imposed due to the actions of the Purchaser.
D. Governmental
Consents. No permit, consent, approval or authorization of, or declaration to or filing with, any governmental authority is
required in connection with the execution, delivery and performance by the Company of this Agreement or the consummation by the
Company of any other transactions contemplated hereby.
E. Regulation
D Qualification. Neither the Company nor, to its actual knowledge, any of its affiliates, members, officers, directors or
beneficial stockholders of 20% or more of its outstanding securities, has experienced a disqualifying event as enumerated pursuant
to Rule 506(d) of Regulation D under the Securities Act.
Section
3. Representations and Warranties of the
Purchaser. As a material inducement to the Company to enter
into this Agreement and issue and sell the Private Placement Warrants to the Purchaser, the Purchaser hereby represents and warrants
to the Company (which representations and warranties shall survive each Closing Date) that:
A. Organization
and Requisite Authority. The Purchaser possesses all requisite power and authority necessary to carry out the transactions
contemplated by this Agreement.
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B.
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Authorization;
No Breach.
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(i) This
Agreement constitutes a valid and binding obligation of the Purchaser, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other laws of general applicability relating to or affecting
creditors’ rights and to general equitable principles (whether considered in a proceeding in equity or law).
(ii) The
execution and delivery by the Purchaser of this Agreement and the fulfillment of and compliance with the terms hereof by the Purchaser
does not and shall not as of each Closing Date (a) conflict with or result in a breach by the Purchaser of the terms, conditions
or provisions of, (b) constitute a default under, (c) result in the creation of any lien, security interest, charge or encumbrance
upon the Purchaser’s equity or assets under, (d) result in a violation of, or (e) require authorization, consent, approval,
exemption or other action by or notice or declaration to, or filing with, any court or administrative or governmental body or
agency pursuant to the Purchaser’s organizational documents in effect on the date hereof or as may be amended prior to completion
of the contemplated Public Offering, or any material law, statute, rule or regulation to which the Purchaser is subject, or any
agreement, instrument, order, judgment or decree to which the Purchaser is subject, except for any filings required after the
date hereof under federal or state securities laws.
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C.
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Investment
Representations.
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(i) The
Purchaser is acquiring the Private Placement Warrants and, upon exercise of the Private Placement Warrants, the Shares issuable
upon such exercise (collectively, the “Securities”) for its own account, for investment purposes only
and not with a view towards, or for resale in connection with, any public sale or distribution thereof.
(ii) The
Purchaser is an “accredited investor” as such term is defined in Rule 501(a)(3) of Regulation D, and
the Purchaser has not experienced a disqualifying event as enumerated pursuant to Rule 506(d) of Regulation D under the Securities
Act.
(iii) The
Purchaser understands that the Securities are being offered and will be sold to it in reliance on specific exemptions from the
registration requirements of the United States federal and state securities laws and that the Company is relying upon the truth
and accuracy of, and the Purchaser’s compliance with, the representations and warranties of the Purchaser set forth herein
in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire such Securities.
(iv) The
Purchaser did not decide to enter into this Agreement as a result of any general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act.
(v) The
Purchaser has been furnished with all materials relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities which have been requested by the Purchaser. The Purchaser has been afforded the
opportunity to ask questions of the executive officers and directors of the Company. The Purchaser understands that its investment
in the Securities involves a high degree of risk and it has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to the acquisition of the Securities.
(vi) The
Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed
on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities
by the Purchaser nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(vii) The
Purchaser understands that: (a) the Securities have not been and are not being registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred unless (1) subsequently registered thereunder
or (2) sold in reliance on an exemption therefrom; and (b) except as specifically set forth in the Registration and Stockholder
Rights Agreement, neither the Company nor any other person is under any obligation to register the Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. In this regard, the Purchaser
understands that the SEC has taken the position that promoters or affiliates of a blank check company and their transferees, both
before and after an initial Business Combination, are deemed to be “underwriters” under the Securities
Act when reselling the securities of a blank check company. Based on that position, Rule 144 adopted pursuant to the Securities
Act would not be available for resale transactions of the Securities despite technical compliance with the requirements of such
Rule, and the Securities can be resold only through a registered offering or in reliance upon another exemption from the registration
requirements of the Securities Act.
(viii) The
Purchaser has such knowledge and experience in financial and business matters, knowledge of the high degree of risk associated
with investments in the securities of companies in the development stage such as the Company, is capable of evaluating the merits
and risks of an investment in the Securities and is able to bear the economic risk of an investment in the Securities in the amount
contemplated hereunder for an indefinite period of time. The Purchaser has adequate means of providing for its current financial
needs and contingencies and will have no current or anticipated future needs for liquidity which would be jeopardized by the investment
in the Securities. The Purchaser can afford a complete loss of its investments in the Securities.
(ix) The
Purchaser understands that the Private Placement Warrants shall bear the legend substantially in the form set forth in the Warrant
Agreement.
Section
4. Conditions of the Purchaser’s
Obligations. The obligations of the Purchaser to purchase and
pay for the Private Placement Warrants are subject to the fulfillment, on or before each Closing Date, of each of the following
conditions:
A. Representations
and Warranties. The representations and warranties of the Company contained in Section 2 shall be true and correct
at and as of the Closing Date as though then made.
B. Performance.
The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before such Closing Date.
C. No
Injunction. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby, which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Warrant Agreement.
D. Warrant
Agreement and Registration and Stockholder Rights Agreement. The Company shall have entered into the Warrant Agreement, in
the form of Exhibit A hereto, and the Registration and Stockholder Rights Agreement, in the form of Exhibit B hereto, in each
case on terms satisfactory to the Purchaser.
Section
5. Conditions of the Company’s Obligations.
The obligations of the Company to the Purchaser under this Agreement
are subject to the fulfillment, on or before each Closing Date, of each of the following conditions:
A. Representations
and Warranties. The representations and warranties of the Purchaser contained in Section 3 shall be true and correct
at and as of such Closing Date as though then made.
B. Performance.
The Purchaser shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by the Purchaser on or before such Closing Date.
C. Corporate
Consents. The Company shall have obtained the consent of its Board of Directors authorizing the execution, delivery and performance
of this Agreement and the Warrant Agreement and the issuance and sale of the Private Placement Warrants hereunder.
D. No
Injunction. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby, which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Warrant Agreement.
E. Warrant
Agreement. The Company shall have entered into the Warrant Agreement.
Section
6. Miscellaneous.
A. Successors
and Assigns. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors of the parties hereto
whether so expressed or not. Notwithstanding the foregoing or anything to the contrary herein, the parties may not assign this
Agreement, other than assignments by the Purchaser to affiliates thereof (including, without limitation one or more of its members).
B. Severability.
Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
C. Counterparts.
This Agreement may be executed simultaneously in two or more counterparts, none of which need contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the same agreement. Signatures to this Agreement
transmitted via facsimile or e-mail shall be valid and effective to bind the party so signing.
D. Descriptive
Headings; Interpretation. The descriptive headings of this Agreement are inserted for convenience only and do not constitute
a substantive part of this Agreement. The use of the word “including” in this Agreement shall be by way of example
rather than by limitation.
E. Governing
Law. This Agreement shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with the internal laws of the State of New York, without giving effect to conflicts of law principles
that would result in the application of the laws of another jurisdiction.
F. Amendments.
This Agreement may not be amended, modified or waived as to any particular provision, except by a written instrument executed
by the parties hereto.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement.
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COMPANY:
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PROOF ACQUISITION CORP I
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By:
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Name:
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Title:
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PURCHASER:
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PROOF ACQUISITION SPONSOR I,
LLC
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By:
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Name:
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Title:
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[Signature
Page to Private Placement Warrants Purchase Agreement]
EXHIBIT
A
Warrant
Agreement
[Exhibit
A to Private Placement Warrants Purchase Agreement]
EXHIBIT
B
Registration
and Stockholder Rights Agreement
[Exhibit
B to Private Placement Warrants Purchase Agreement]
Exhibit 10.4
FORM
OF INDEMNITY AGREEMENT
INDEMNITY
AGREEMENT
THIS
INDEMNITY AGREEMENT (this “Agreement”) is made as of ,
2021, by and between PROOF Acquisition Corp I, a Delaware corporation (the “Company”), and
(“Indemnitee”).
WHEREAS, highly
competent persons have become more reluctant to serve publicly-held corporations as directors, officers or in other capacities
unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims
and actions against them arising out of their service to and activities on behalf of such corporations;
WHEREAS, the
Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain
qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect
persons serving the Company and its subsidiaries from certain liabilities. The Amended and Restated Certificate of Incorporation
(the “Charter”) and the Amended and Restated Bylaws (“Bylaws”) of the Company require indemnification
of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to provisions of the
Delaware General Corporation Law (“DGCL”). The Charter, Bylaws and the DGCL expressly provide that the indemnification
provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company
and members of the Board, officers and other persons with respect to indemnification, hold harmless, exoneration, advancement
and reimbursement rights;
WHEREAS, the
uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such
persons;
WHEREAS, the
Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests
of the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty
of such protection in the future;
WHEREAS, it
is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, hold harmless, exonerate and
to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue
to serve the Company free from undue concern that they will not be so protected against liabilities;
WHEREAS, this
Agreement is a supplement to and in furtherance of the Charter and Bylaws of the Company and any resolutions adopted pursuant
thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee
may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve
in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the
Company on the condition that he or she be so indemnified.
NOW,
THEREFORE, in consideration of the premises and the covenants contained herein and subject to the provisions of the letter
agreement dated as of , 2021, the
Company and Indemnitee do hereby covenant and agree as follows:
1. SERVICES TO THE COMPANY
In
consideration of the Company’s covenants and obligations hereunder, Indemnitee will serve or continue to serve as an
officer, director, advisor, key employee or in any other capacity of the Company, as applicable, for so long as Indemnitee is
duly elected or appointed or retained or until Indemnitee tenders his or her resignation or until Indemnitee is removed. The foregoing
notwithstanding, this Agreement shall continue in full force and effect after Indemnitee has ceased to serve as a director, officer,
advisor, key employee or in any other capacity of the Company, as provided in Section 17. This Agreement, however, shall
not impose any obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company beyond any period
otherwise required by law or by other agreements or commitments of the parties, if any.
2. DEFINITIONS
As
used in this Agreement:
(a)
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References to “agent” shall mean any person who is or was a director, officer or employee of the Company or a subsidiary of the
Company or other person authorized by the Company to act for the Company, to include such person serving in such capacity as a director, officer, employee, advisor, fiduciary or other official of another corporation, partnership, limited
liability company, joint venture, trust or other enterprise at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company.
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(b)
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The terms “Beneficial Owner” and “Beneficial Ownership” shall have the meanings set forth in Rule 13d-3 promulgated
under the Exchange Act as in effect on the date hereof.
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(c)
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“Delaware Court” shall mean the Court of Chancery of the State of Delaware.
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(d)
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A “Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following
events:
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(i)
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Acquisition of Stock by Third Party. Other than an affiliate of PROOF Acquisition Sponsor I, LLC (the “Sponsor”), any Person
is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing fifteen percent (15%) or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the
election of directors, unless (1) the change in the relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally
in the election of directors, or (2) such acquisition was approved in advance by the Continuing Directors and such acquisition would not constitute a Change in Control under part (iii) of this definition;
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(ii)
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Change in Board of Directors. Individuals who, as of the date hereof, constitute the Board, and any new director whose election by the
Board or nomination for election by the Company’s stockholders was approved by a vote of at least two thirds of the directors then still in office who were directors on the date hereof or whose election or nomination for election was previously
so approved (collectively, the “Continuing Directors”), cease for any reason to constitute at least a majority of the members of the Board;
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(iii)
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Corporate Transactions. The effective date of a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or
similar business combination, involving the Company and one or more businesses (a “Business Combination”), in each case, unless, following such Business Combination: (1) all or substantially all of the individuals and entities who
were the Beneficial Owners of securities entitled to vote generally in the election of directors immediately prior to such Business Combination beneficially own, directly or indirectly, more than 51% of the combined voting power of the then
outstanding securities of the Company entitled to vote generally in the election of directors resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all
or substantially all of the Company’s assets either directly or through one or more Subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination, of the securities entitled to vote
generally in the election of directors; (2) other than an affiliate of the Sponsor, no Person (excluding any corporation resulting from such Business Combination) is the Beneficial Owner, directly or indirectly, of 15% or more of the combined
voting power of the then outstanding securities entitled to vote generally in the election of directors of the surviving corporation except to the extent that such ownership existed prior to the Business Combination; and (3) at least a majority
of the board of directors of the corporation resulting from such Business Combination were Continuing Directors at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination;
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(iv)
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Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement or
series of agreements for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than factoring the Company’s current receivables or escrows due (or, if such approval is not required, the decision by
the Board to proceed with such a liquidation, sale, or disposition in one transaction or a series of related transactions); or
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(v)
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Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement.
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(e)
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“Corporate Status” describes the status of a person who is or was a director, officer, trustee, general partner, manager, managing
member, fiduciary, employee or agent of the Company or of any other Enterprise which such person is or was serving at the request of the Company.
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(f)
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“Disinterested Director” shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
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(g)
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“Enterprise” shall mean the Company and any other corporation, constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger to which the Company (or any of its wholly owned subsidiaries) is a party, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or
was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent.
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(h)
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“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
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(i)
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“Expenses” shall include all direct and indirect costs, fees and expenses of any type or nature whatsoever, including, without
limitation, all reasonable attorneys’ fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, fees of private investigators and professional advisors, duplicating costs, printing and binding
costs, telephone charges, postage, delivery service fees, fax transmission charges, secretarial services and all other disbursements, obligations or expenses in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, being or preparing to be a witness in, settlement or appeal of, or otherwise participating in, a Proceeding, including reasonable compensation for time spent by the Indemnitee for which he or she is not otherwise compensated by
the Company or any third party. Expenses also shall include Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the principal, premium, security for, and other costs relating to any cost
bond, supersedeas bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
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(j)
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References to “fines” shall include any excise tax assessed on Indemnitee with respect to any employee benefit plan.
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(k)
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References to “serving at the request of the Company” shall include any service as a director, officer, employee, agent or fiduciary
of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or beneficiaries; and if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company”
as referred to in this Agreement.
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(l)
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“Independent Counsel” shall mean a law firm or a member of a law firm with significant experience in matters of corporate law and
that neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement, or
of other indemnitees under similar indemnification agreements); or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall
not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this
Agreement.
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(m)
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The term “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act as in effect
on the date hereof; provided, however, that “Person” shall exclude: (i) the Company; (ii) any Subsidiaries of the Company; (iii) any employment benefit plan of the Company or of a Subsidiary of the Company or of
any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company; and (iv) any trustee or other fiduciary holding securities under an employee
benefit plan of the Company or of a Subsidiary of the Company or of a corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
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(n)
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The term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute
resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil (including intentional or
unintentional tort claims), criminal, administrative or investigative or related nature, in which Indemnitee was, is, will or might be involved as a party or otherwise by reason of the fact that Indemnitee is or was a director or officer of the
Company, by reason of any action (or failure to act) taken by him or her or of any action (or failure to act) on his or her part while acting as a director or officer of the Company, or by reason of the fact that he or she is or was serving at
the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary, employee or agent of any other Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is
incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Agreement.
|
(o)
|
The term “Subsidiary,” with respect to any Person, shall mean any corporation, limited
liability company, partnership, joint venture, trust or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by that Person.
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3.
|
INDEMNITY IN THIRD-PARTY PROCEEDINGS
|
To
the fullest extent permitted by applicable law, the Company shall indemnify, hold harmless and exonerate Indemnitee in accordance
with the provisions of this Section 3 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as
a witness, deponent or otherwise) in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment
in its favor by reason of Indemnitee’s Corporate Status. Pursuant to this Section 3, Indemnitee shall be indemnified,
held harmless and exonerated against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement (including
all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines,
penalties and amounts paid in settlement) actually, and reasonably incurred by Indemnitee or on his or her behalf in connection
with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding, had no reasonable
cause to believe that his or her conduct was unlawful; provided, however in no event shall Indemnitee
be entitled to be indemnified, held harmless or advanced any amounts hereunder in respect of any Expenses, judgments, liabilities,
fines, penalties and amounts paid in settlement (if any) that Indemnitee may incur by reason of his or her own actual fraud or
intentional misconduct. Indemnitee shall not be found to have committed actual fraud or intentional misconduct for any purpose
of this Agreement unless or until a court of competent jurisdiction shall have made a finding to that effect.
4.
|
INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY
|
To
the fullest extent permitted by applicable law, the Company shall indemnify, hold harmless and exonerate Indemnitee in accordance
with the provisions of this Section 4 if Indemnitee was, is, or is threatened to be made, a party to or a participant (as
a witness, deponent or otherwise) in any Proceeding by or in the right of the Company to procure a judgment in its favor by reason
of Indemnitee’s Corporate Status. Pursuant to this Section 4, Indemnitee shall be indemnified, held harmless and
exonerated against all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection with such
Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Company. No indemnification, hold harmless or exoneration for Expenses shall
be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged
by a court of competent jurisdiction to be liable to the Company, unless and only to the extent that any court in which the Proceeding
was brought or the Delaware Court shall determine upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification, to be held harmless or
to exoneration.
5.
|
INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL
|
Notwithstanding
any other provisions of this Agreement, but subject to Section 27, to the extent that Indemnitee was or is, by reason of
Indemnitee’s Corporate Status, a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding
or in defense of any claim, issue or matter therein, in whole or in part, the Company shall, to the fullest extent permitted by
applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses actually and reasonably incurred by him
or her in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall, to the fullest
extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses actually and reasonably
incurred by him or her or on his or her behalf in connection with each successfully resolved claim, issue or matter. If Indemnitee
is not wholly successful in such Proceeding, the Company also shall, to the fullest extent permitted by applicable law, indemnify,
hold harmless and exonerate Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related
to any claim, issue, or matter on which Indemnitee was successful. For purposes of this Section 5 and without limitation,
the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to
be a successful result as to such claim, issue or matter.
6.
|
INDEMNIFICATION FOR EXPENSES OF A WITNESS
|
Notwithstanding
any other provision of this Agreement, but subject to Section 27, to the extent that Indemnitee is, by reason of his or her
Corporate Status, a witness or deponent in any Proceeding to which Indemnitee is not a party or threatened to be made a party,
he or she shall, to the fullest extent permitted by applicable law, be indemnified, held harmless and exonerated against all Expenses
actually and reasonably incurred by him or her or on his or her behalf in connection therewith.
7.
|
ADDITIONAL INDEMNIFICATION, HOLD HARMLESS AND EXONERATION RIGHTS
|
Notwithstanding
any limitation in Sections 3, 4 or 5, but subject to Section 27, the Company shall, to the fullest extent permitted by applicable
law, indemnify, hold harmless and exonerate Indemnitee if Indemnitee is a party to or threatened to be made a party to any Proceeding
(including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments,
fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection
with or in respect of such Expenses, judgments, fines, penalties and amounts paid in settlement) actually and reasonably incurred
by Indemnitee in connection with the Proceeding. No indemnification, hold harmless or exoneration rights shall be available under
this Section 7 on account of Indemnitee’s conduct which constitutes a breach of Indemnitee’s duty of loyalty
to the Company or its stockholders or is an act or omission not in good faith or which involves intentional misconduct or a knowing
violation of the law.
8.
|
CONTRIBUTION IN THE EVENT OF JOINT LIABILITY
|
(a)
|
To the fullest extent permissible under applicable law, if the indemnification, hold harmless and/or exoneration rights provided for in this
Agreement are unavailable to Indemnitee in whole or in part for any reason whatsoever, the Company, in lieu of indemnifying, holding harmless or exonerating Indemnitee, shall pay, in the first instance, the entire amount incurred by Indemnitee,
whether for judgments, liabilities, fines, penalties, amounts paid or to be paid in settlement and/or for Expenses, in connection with any Proceeding without requiring Indemnitee to contribute to such payment, and the Company hereby waives and
relinquishes any right of contribution it may have at any time against Indemnitee.
|
(b)
|
The Company shall not enter into any settlement of any Proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in
such Proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.
|
(c)
|
The Company hereby agrees to fully indemnify, hold harmless and exonerate Indemnitee from any claims for contribution which may be brought by
officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee. Indemnitee shall seek payments or advances from the Company only to the extent that such payments or advances are unavailable from
any insurance policy of the Company covering Indemnitee.
|
Notwithstanding
any provision in this Agreement, but subject to Section 27, the Company shall not be obligated under this Agreement to make
any indemnification, advance Expenses, hold harmless or exoneration payment in connection with any claim made against Indemnitee:
(a)
|
for which payment has actually been received by or on behalf of Indemnitee under any insurance policy or other indemnity or advancement provision,
except with respect to any excess beyond the amount actually received under any insurance policy, contract, agreement, other indemnity or advancement provision or otherwise;
|
(b)
|
for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning
of Section 16(b) of the Exchange Act (or any successor rule) or similar provisions of state statutory law or common law; or
|
(c)
|
except as otherwise provided in Sections 14(f) and (g) hereof, prior to a Change in Control, in connection with any Proceeding (or any part of any
Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding
(or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, hold harmless or exoneration payment, in its sole discretion, pursuant to the powers vested in the Company under applicable law.
|
10.
|
ADVANCES OF EXPENSES; DEFENSE OF CLAIM
|
(a)
|
Notwithstanding any provision of this Agreement to the contrary, but subject to Section 27, and to the fullest extent not prohibited by applicable
law, the Company shall pay the Expenses incurred by Indemnitee (or reasonably expected by Indemnitee to be incurred by Indemnitee within three months) in connection with any Proceeding within ten (10) days after the receipt by the Company of a
statement or statements requesting such advances from time to time, prior to the final disposition of any Proceeding. Advances shall, to the fullest extent permitted by law, be unsecured and interest free. Advances shall, to the fullest extent
permitted by law, be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to be indemnified, held harmless or exonerated under the other provisions of this Agreement. Advances
shall include any and all reasonable Expenses incurred pursuing a Proceeding to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. To the fullest
extent required by applicable law, such payments of Expenses in advance of the final disposition of the Proceeding shall be made only upon the Company’s receipt of an undertaking, by or on behalf of Indemnitee, to repay the advanced amounts to
the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Charter, the Bylaws, applicable law or otherwise. If it shall be determined by a final
judgment or other final adjudication that Indemnitee was not so entitled to indemnification, any advancement shall be returned to the Company (without interest) by the Indemnitee. This Section 10(a) shall not apply to any claim made by
Indemnitee for which an indemnification, hold harmless or exoneration payment is excluded pursuant to Section 9, but shall apply to any Proceeding referenced in Section 9(b) prior to a final determination that Indemnitee is liable therefor.
|
(b)
|
The Company will be entitled to participate in the Proceeding at its own expense.
|
(c)
|
The Company shall not settle any action, claim or Proceeding (in whole or in part) which would impose any Expense, judgment, fine, penalty or
limitation on Indemnitee without Indemnitee’s prior written consent.
|
11.
|
PROCEDURE FOR NOTIFICATION AND APPLICATION FOR INDEMNIFICATION
|
(a)
|
Indemnitee agrees to notify promptly the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating to any Proceeding, claim, issue or matter therein which may be subject to indemnification, hold harmless or exoneration rights, or advancement of Expenses covered hereunder. The failure of Indemnitee to so
notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement, or otherwise.
|
(b)
|
Indemnitee may deliver to the Company a written application to indemnify, hold harmless or exonerate Indemnitee in accordance with this Agreement.
Such application(s) may be delivered from time to time and at such time(s) as Indemnitee deems appropriate in his or her sole discretion. Following such a written application for indemnification by Indemnitee, Indemnitee’s entitlement to
indemnification shall be determined according to Section 12(a) of this Agreement.
|
12.
|
PROCEDURE UPON APPLICATION FOR INDEMNIFICATION
|
(a)
|
A determination, if required by applicable law, with respect to Indemnitee’s entitlement to indemnification shall be made in the specific case by
one of the following methods, which shall be at the election of Indemnitee: (i) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, (ii) by a committee of such directors designated by majority vote of
such directors, (iii) if there are no Disinterested Directors or if such directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or (iv) by vote of the stockholders. The
Company promptly will advise Indemnitee in writing with respect to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied. If it is so
determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall reasonably cooperate with the person, persons or entity making such determination
with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure
and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses (including reasonable attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or
entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby agrees to indemnify and to hold Indemnitee harmless therefrom.
|
(b)
|
In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12(a) hereof, the
Independent Counsel shall be selected as provided in this Section 12(b). The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board), and Indemnitee shall give written
notice to the Company advising it of the identity of the Independent Counsel so selected and certifying that the Independent Counsel so selected meets the requirements of “Independent Counsel” as defined in Section 2 of this
Agreement. If the Independent Counsel is selected by the Board, the Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected and certifying that the Independent Counsel so
selected meets the requirements of “Independent Counsel” as defined in Section 2 of this Agreement. In either event, Indemnitee or the Company, as the case may be, may, within ten (10) days after such written notice of selection
shall have been received, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel
so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely
objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or
a court of competent jurisdiction has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 11(b) hereof, no Independent Counsel
shall have been selected and not objected to, either the Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected by the Delaware Court, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under
Section 12(a) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 14(a) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject
to the applicable standards of professional conduct then prevailing).
|
(c)
|
The Company agrees to pay the reasonable fees and expenses of Independent Counsel and to fully indemnify and hold harmless such Independent
Counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
|
13.
|
PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS
|
(a)
|
In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall
presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 11(b) of this Agreement, and the Company shall have the burden of proof to overcome
that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including by the Disinterested Directors or Independent Counsel) to have made
a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company
(including by the Disinterested Directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of
conduct.
|
(b)
|
If the person, persons or entity empowered or selected under Section 12 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within thirty (30) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall, to the fullest extent permitted by law, be
deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading,
in connection with the request for indemnification, or (ii) a final judicial determination that any or all such indemnification is expressly prohibited under applicable law; provided, however, that such 30-day period may be
extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the
obtaining or evaluating of documentation and/or information relating thereto.
|
(c)
|
The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.
|
(d)
|
For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the
records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the directors, manager, or officers of the Enterprise in the course of their duties, or on the advice of legal counsel
for the Enterprise, its Board, any committee of the Board or any director, trustee, general partner, manager or managing member, or on information or records given or reports made to the Enterprise, its Board, any committee of the Board or any
director, trustee, general partner, manager or managing member, by an independent certified public accountant or by an appraiser or other expert selected by the Enterprise, its Board, any committee of the Board or any director, trustee, general
partner, manager or managing member. The provisions of this Section 13(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed or found to have met the applicable standard of
conduct set forth in this Agreement.
|
(e)
|
The knowledge and/or actions, or failure to act, of any other director, officer, trustee, general partner, manager, managing member, fiduciary,
agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
|
14.
|
REMEDIES OF INDEMNITEE
|
(a)
|
In the event that (i) a determination is made pursuant to Section 12 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses, to the fullest extent permitted by applicable law, is not timely made pursuant to Section 10 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant
to Section 12(a) of this Agreement within thirty (30) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 5, 6, 7 or the last sentence of Section 12(a) of this
Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) a contribution payment is not made in a timely manner pursuant to Section 8 of this Agreement, (vi) payment of indemnification pursuant to Section 3
or 4 of this Agreement is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vii) payment to Indemnitee pursuant to any hold harmless or exoneration rights under this Agreement
or otherwise is not made in accordance with this Agreement within ten (10) days after receipt by the Company of a written request therefor, Indemnitee shall be entitled to an adjudication by the Delaware Court to such indemnification, hold
harmless, exoneration, contribution or advancement rights. Alternatively, Indemnitee, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules and Mediation
Procedures of the American Arbitration Association. Except as set forth herein, the provisions of Delaware law (without regard to its conflict of law rules) shall apply to any such arbitration. The Company shall not oppose Indemnitee’s right to
seek any such adjudication or award in arbitration.
|
(b)
|
In the event that a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse
determination.
|
(c)
|
In any judicial proceeding or arbitration commenced pursuant to this Section 14, Indemnitee shall be presumed to be entitled to be indemnified,
held harmless, exonerated to receive advancement of Expenses under this Agreement and the Company shall have the burden of proving Indemnitee is not entitled to be indemnified, held harmless, exonerated and to receive advancement of Expenses,
as the case may be, and the Company may not refer to or introduce into evidence any determination pursuant to Section 12(a) of this Agreement adverse to Indemnitee for any purpose. If Indemnitee commences a judicial proceeding or arbitration
pursuant to this Section 14, Indemnitee shall not be required to reimburse the Company for any advances pursuant to Section 10 until a final determination is made with respect to Indemnitee’s entitlement to indemnification (as to which all
rights of appeal have been exhausted or lapsed).
|
(d)
|
If a determination shall have been made pursuant to Section 12(a) of this Agreement that Indemnitee is entitled to indemnification, the Company
shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 14, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s
statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.
|
(e)
|
The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 14 that the procedures
and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
|
(f)
|
The Company shall indemnify and hold harmless Indemnitee to the fullest extent permitted by law against all Expenses and, if requested by
Indemnitee, shall (within ten (10) days after the Company’s receipt of such written request) pay to Indemnitee, to the fullest extent permitted by applicable law, such Expenses which are incurred by Indemnitee in connection with any judicial
proceeding or arbitration brought by Indemnitee: (i) to enforce his or her rights under, or to recover damages for breach of, this Agreement or any other indemnification, hold harmless, exoneration, advancement or contribution agreement or
provision of the Charter, or the Company’s Bylaws now or hereafter in effect; or (ii) for recovery or advances under any insurance policy maintained by any person for the benefit of Indemnitee, regardless of the outcome and whether Indemnitee
ultimately is determined to be entitled to such indemnification, hold harmless or exoneration right, advancement, contribution or insurance recovery, as the case may be (unless such judicial proceeding or arbitration was not brought by
Indemnitee in good faith).
|
(g)
|
Interest shall be paid by the Company to Indemnitee at the legal rate under Delaware law for amounts which the Company indemnifies, holds harmless
or exonerates, or advances, or is obliged to indemnify, hold harmless or exonerate or advance for the period commencing with the date on which Indemnitee requests indemnification, to be held harmless, exonerated, contribution, reimbursement or
advancement of any Expenses and ending with the date on which such payment is made to Indemnitee by the Company.
|
Notwithstanding
anything herein to the contrary, but subject to Section 27, to the extent requested by Indemnitee and approved by the Board,
the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder
through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee,
may not be revoked or released without the prior written consent of Indemnitee.
16.
|
NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION; PRIORITY OF OBLIGATIONS
|
(a)
|
The rights of Indemnitee as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be
entitled under applicable law, the Charter, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict
any right of Indemnitee under this Agreement in respect of any Proceeding (regardless of when such Proceeding is first threatened, commenced or completed) or claim, issue or matter therein arising out of, or related to, any action taken or
omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in applicable law, whether by statute or judicial decision, permits greater indemnification, hold harmless or
exoneration rights or advancement of Expenses than would be afforded currently under the Charter, the Bylaws or this Agreement, then this Agreement (without any further action by the parties hereto) shall automatically be deemed to be amended
to require that the Company indemnify the Indemnitee to the fullest extent permitted by law. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other right or remedy.
|
(b)
|
The DGCL, the Charter and the Bylaws permit the Company to purchase and maintain insurance or furnish similar protection or make other
arrangements including, but not limited to, providing a trust fund, letter of credit, or surety bond (“Indemnification Arrangements”) on behalf of Indemnitee against any liability asserted against him or her or incurred by or on
behalf of him or her in such capacity as a director, officer, employee or agent of the Company, or arising out of his or her status as such, whether or not the Company would have the power to indemnify him or her against such liability under
the provisions of this Agreement or under the DGCL, as it may then be in effect. The purchase, establishment, and maintenance of any such Indemnification Arrangement shall not in any way limit or affect the rights and obligations of the Company
or of Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the
other party or parties thereto under any such Indemnification Arrangement.
|
(c)
|
To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, trustees,
partners, managers, managing members, fiduciaries, employees, or agents of the Company or of any other Enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with
its or their terms to the maximum extent of the coverage available for any such director, officer, trustee, partner, managers, managing member, fiduciary, employee or agent under such policy or policies. If, at the time the Company receives
notice from any source of a Proceeding as to which Indemnitee is a party or a participant (as a witness or otherwise), the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding
to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter use commercially reasonable efforts to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of
such Proceeding in accordance with the terms of such policies.
|
(d)
|
In the event of any payment under this Agreement, the Company, to the fullest extent permitted by law, shall be subrogated to the extent of such
payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to
enforce such rights. No such payment by the Company shall be deemed to relieve any insurer of its obligations.
|
(e)
|
The Company’s obligation to indemnify, hold harmless, exonerate or advance Expenses hereunder to Indemnitee who is or was serving at the request
of the Company as a director, officer, trustee, partner, manager, managing member, fiduciary, employee or agent of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification, hold harmless or
exoneration payments or advancement of expenses from such Enterprise. Notwithstanding any other provision of this Agreement to the contrary, but subject to Section 27, (i) Indemnitee shall have no obligation to reduce, offset, allocate, pursue
or apportion any indemnification, hold harmless, exoneration, advancement, contribution or insurance coverage among multiple parties possessing such duties to Indemnitee prior to the Company’s satisfaction and performance of all its obligations
under this Agreement, and (ii) the Company shall perform fully its obligations under this Agreement without regard to whether Indemnitee holds, may pursue or has pursued any indemnification, advancement, hold harmless, exoneration, contribution
or insurance coverage rights against any person or entity other than the Company.
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(f)
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Notwithstanding anything contained herein, the Company is the primary indemnitor, and any indemnification or advancement obligation of the Sponsor
or its affiliates or members or any other Person is secondary.
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17.
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DURATION OF AGREEMENT
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All
agreements and obligations of the Company contained herein shall continue during the period Indemnitee serves as a director or
officer of the Company or as a director, officer, trustee, partner, manager, managing member, fiduciary, employee or agent of
any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise which Indemnitee serves at
the request of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible Proceeding (including
any rights of appeal thereto and any Proceeding commenced by Indemnitee pursuant to Section 14 of this Agreement) by reason
of his or her Corporate Status, whether or not he or she is acting in any such capacity at the time any liability or expense is
incurred for which indemnification or advancement can be provided under this Agreement.
If
any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation,
each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal
or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and
shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed
to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to
the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph
or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.
19.
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ENFORCEMENT AND BINDING EFFECT
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(a)
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The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to
induce Indemnitee to serve as a director, officer or key employee of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director, officer or key employee of the Company.
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(b)
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Without limiting any of the rights of Indemnitee under the Charter or the Bylaws of the Company as they may be amended from time to time, this
Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the
subject matter hereof.
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(c)
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The indemnification, hold harmless, exoneration and advancement of expenses rights provided by or granted pursuant to this Agreement shall be
binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or
assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or a director, officer, trustee, general partner, manager, managing member, fiduciary, employee or agent of
any other Enterprise at the Company’s request, and shall inure to the benefit of Indemnitee and his or her spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.
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(d)
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The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all,
substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform if no such succession had taken place.
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(e)
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The Company and Indemnitee agree herein that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable
and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree that Indemnitee may, to the fullest extent permitted by law, enforce this Agreement by seeking, among other
things, injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking
or obtaining any other relief to which he or she may be entitled. The Company and Indemnitee further agree that Indemnitee shall, to the fullest extent permitted by law, be entitled to such specific performance and injunctive relief, including
temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond or
undertaking may be required of Indemnitee by a Court of competent jurisdiction, and the Company hereby waives any such requirement of such a bond or undertaking to the fullest extent permitted by law.
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20.
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MODIFICATION AND WAIVER
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No
supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this
Agreement nor shall any waiver constitute a continuing waiver.
All
notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been
duly given (i) if delivered by hand and receipted for by the party to whom said notice or other communication shall have
been directed, or (ii) if mailed by certified or registered mail with postage prepaid, on the third (3rd) business day after
the date on which it is so mailed:
(a)
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If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide in writing
to the Company.
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(b)
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If to the Company, to:
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PROOF
Acquisition Corp I
11911 Freedom Drive, Suite 1080
Reston, VA 20190
Attention: Michael Zarlenga
With
a copy, which shall not constitute notice, to:
Steptoe &
Johnson LLP
1114 Avenue of the Americas
New York, New York 10036
Attn: Scott Fisher
or
to any other address as may have been furnished to Indemnitee in writing by the Company.
22.
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APPLICABLE LAW AND CONSENT TO JURISDICTION
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This
Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws
of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee
pursuant to Section 14(a) of this Agreement, to the fullest extent permitted by law, the Company and Indemnitee hereby
irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection with this Agreement
shall be brought only in the Delaware Court and not in any other state or federal court in the United States of America or any
court in any other country; (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any
action or proceeding arising out of or in connection with this Agreement; (c) waive any objection to the laying of venue
of any such action or proceeding in the Delaware Court; and (d) waive, and agree not to plead or to make, any claim that
any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum, or is subject
(in whole or in part) to a jury trial. To the fullest extent permitted by law, the parties hereby agree that the mailing of process
and other papers in connection with any such action or proceeding in the manner provided by Section 21 or in such other manner
as may be permitted by law, shall be valid and sufficient service thereof.
23.
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IDENTICAL COUNTERPARTS
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This
Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all
of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability
is sought needs to be produced to evidence the existence of this Agreement.
The
headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
25.
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PERIOD OF LIMITATIONS
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No
legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee’s
spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such
cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by
the timely filing of a legal action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.
If
for the validation of any of the provisions in this Agreement any act, resolution, approval or other procedure is required to
the fullest extent permitted by law, the Company undertakes to cause such act, resolution, approval or other procedure to be affected
or adopted in a manner that will enable the Company to fulfill its obligations under this Agreement.
27.
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WAIVER OF CLAIMS TO TRUST ACCOUNT
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Notwithstanding
anything contained herein to the contrary, Indemnitee hereby agrees that it does not have any right, title, interest or claim
of any kind (each, a “Claim”) in or to any monies in the trust account established in connection with
the Company’s initial public offering for the benefit of the Company and holders of shares issued in such offering, and
hereby waives any Claim it may have in the future as a result of, or arising out of, any services provided to the Company and
will not seek recourse against such trust account for any reason whatsoever. Accordingly, Indemnitee acknowledges and agrees
that any indemnification provided hereto will only be able to be satisfied by the Company if (i) the Company has sufficient
funds outside of the Trust Account to satisfy its obligations hereunder or (ii) the Company consummates a Business Combination.
28.
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MAINTENANCE OF INSURANCE
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The
Company shall use commercially reasonable efforts to obtain and maintain in effect during the entire period for which the Company
is obligated to indemnify the Indemnitee under this Agreement, one or more policies of insurance with reputable insurance companies
to provide the officers/directors of the Company with coverage for losses from wrongful acts and omissions and to ensure the Company’s
performance of its indemnification obligations under this Agreement. The Indemnitee shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of the coverage available for any such director or officer under such
policy or policies. In all such insurance policies, the Indemnitee shall be named as an insured in such a manner as to provide
the Indemnitee with the same rights and benefits as are accorded to the most favorably insured of the Company’s directors
and officers.
IN
WITNESS WHEREOF, the parties hereto have caused this Indemnity Agreement to be signed as of the day and year first above written.
[Signature
Pages Follow]
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PROOF ACQUISITION CORP I
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By:
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Name:
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Title:
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[Signature
Page to Indemnity Agreement]
[Signature
Page to Indemnity Agreement]
Exhibit
10.5
FORM
OF ADMINISTRATIVE SERVICES AGREEMENT BETWEEN THE REGISTRANT AND THE SPONSOR
PROOF
Acquisition Corp I
11911 Freedom Drive, Suite 1080
Reston, VA 20190
,
2021
PROOF
Acquisition Sponsor I, LLC
11911 Freedom Drive, Suite 1080
Reston, VA 20190
Ladies
and Gentlemen:
This
letter will confirm our agreement that, commencing on the effective date (the “Effective Date”) of the
registration statement (the “Registration Statement”) for the initial public offering (the “IPO”)
of the securities of PROOF Acquisition Corp I (the “Company”) and continuing until the earlier of (i) the
consummation by the Company of an initial business combination and (ii) the Company’s liquidation (in each case as
described in the Registration Statement) (such earlier date hereinafter referred to as the “Termination Date”),
PROOF Acquisition Sponsor I, LLC (the “Sponsor”) shall take steps directly or indirectly to make available
to the Company certain office space, secretarial and administrative services as may be required by the Company from time to time,
situated at 11911 Freedom Drive, Suite 1080, Reston, VA 20190 (or any successor location). In exchange therefore, the Company
shall pay the Sponsor a sum of $10,000 per month on the Effective Date and continuing monthly thereafter until the Termination
Date. The Sponsor hereby agrees that it does not have any right, title, interest or claim of any kind (a “Claim”)
in or to any monies that may be set aside in a trust account (the “Trust Account”) that may be established
upon the consummation of the IPO and hereby irrevocably waives any Claim it may have in the future as a result of, or arising
out of, any negotiations, contracts or agreements with the Company and will not seek recourse against the Trust Account for any
reason whatsoever.
This
letter agreement constitutes the entire agreement and understanding of the parties hereto in respect of its subject matter and
supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent
they relate in any way to the subject matter hereof or the transactions contemplated hereby.
This
letter agreement may not be amended, modified or waived as to any particular provision, except by a written instrument executed
by the parties hereto.
The
parties may not assign this letter agreement and any of their rights, interests, or obligations hereunder without the consent
of the other party.
This
letter agreement shall be governed by, construed in accordance with, and interpreted pursuant to the laws of the State of New
York, without giving effect to its choice of laws principles that will apply the laws of another jurisdiction.
This
letter agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this letter agreement.
[Signature
Page Follows]
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Very truly yours,
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PROOF ACQUISITION CORP I
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By:
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Name:
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Title:
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AGREED TO AND ACCEPTED BY:
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PROOF ACQUISITION SPONSOR I, LLC
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By:
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Name:
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Title:
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3
Exhibit
10.6
THIS
PROMISSORY NOTE (“NOTE”) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION
OF THE RESALE THEREOF UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
PROMISSORY
NOTE
Principal Amount: up to $300,000
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Dated as of March 31, 2021
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(as set forth on the Schedule of Borrowings attached hereto)
PROOF
Acquisition Corp I, a Delaware corporation and blank check company (the “Maker”), promises to pay to the order
of PROOF Acquisition Sponsor I, LLC, Delaware limited liability company, or its registered assigns or successors in interest (the
“Payee”), or order, the principal sum of up to three hundred thousand U.S. dollars ($300,000) (as set forth
on the Schedule of Borrowings attached hereto) in lawful money of the United States of America, on the terms and conditions described
below. All payments on this Note shall be made by check or wire transfer of immediately available funds or as otherwise determined
by the Maker to such account as the Payee may from time to time designate by written notice in accordance with the provisions
of this Note.
1. Principal. The principal
balance of this Note shall be payable on the earlier of: (i) March 31, 2022 or (ii) the date on
which Maker consummates an initial public offering of its securities (the “IPO”). The principal balance may
be prepaid at any time.
2. Interest. No interest
shall accrue on the unpaid principal balance of this Note.
3. Application of Payments. All
payments shall be applied first to payment in full of any costs incurred in the collection
of any sum due under this Note, including (without limitation) reasonable attorney’s fees, then to the payment in full of
any late charges and finally to the reduction of the unpaid principal balance of this Note.
4. Events of Default. The
following shall constitute an event of default (“Event of Default”):
(a) Failure to Make Required Payments.
Failure by Maker to pay the principal amount due pursuant to this Note within five (5)
business days of the date specified above.
(b) Voluntary Bankruptcy, Etc. The
commencement by Maker of a voluntary case under any applicable bankruptcy, insolvency, reorganization,
rehabilitation or other similar law, or the consent by it to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of Maker or for any substantial part of its property, or
the making by it of any assignment for the benefit of creditors, or the failure of Maker generally to pay its debts as such debts
become due, or the taking of corporate action by Maker in furtherance of any of the foregoing.
(c)
Involuntary Bankruptcy, Etc. The entry of a decree or order for relief by a court having jurisdiction
in the premises in respect of Maker in an involuntary case under any applicable bankruptcy, insolvency or other similar law, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of Maker or for any substantial
part of its property, or ordering the winding-up or liquidation of its affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days.
5.
Remedies.
(a)
Upon the occurrence of an Event of Default specified in Section 4(a) hereof, Payee may, by written notice to Maker, declare
this Note to be due immediately and payable, whereupon the unpaid principal amount of this Note, and all other amounts payable
thereunder, shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the documents evidencing the same to the contrary notwithstanding.
(b)
Upon the occurrence of an Event of Default specified in Sections 4(b) and 4(c), the unpaid principal balance of
this Note, and all other sums payable with regard to this Note, shall automatically and immediately become due and payable, in
all cases without any action on the part of Payee.
6. Waivers. Maker and all
endorsers and guarantors of, and sureties for, this Note waive presentment for payment, demand,
notice of dishonor, protest, and notice of protest with regard to the Note, all errors, defects and imperfections in any proceedings
instituted by Payee under the terms of this Note, and all benefits that might accrue to Maker by virtue of any present or future
laws exempting any property, real or personal, or any part of the proceeds arising from any sale of any such property, from attachment,
levy or sale under execution, or providing for any stay of execution, exemption from civil process, or extension of time for payment;
and Maker agrees that any real estate that may be levied upon pursuant to a judgment obtained by virtue hereof, on any writ of
execution issued hereon, may be sold upon any such writ in whole or in part in any order desired by Payee.
7. Unconditional Liability. Maker
hereby waives all notices in connection with the delivery, acceptance, performance, default,
or enforcement of the payment of this Note, and agrees that its liability shall be unconditional, without regard to the liability
of any other party, and shall not be affected in any manner by any indulgence, extension of time, renewal, waiver or modification
granted or consented to by Payee, and consents to any and all extensions of time, renewals, waivers, or modifications that may
be granted by Payee with respect to the payment or other provisions of this Note, and agrees that additional makers, endorsers,
guarantors, or sureties may become parties hereto without notice to Maker or affecting Maker’s liability hereunder.
8. Notices. All notices,
statements or other documents which are required or contemplated by this Agreement shall be: (i)
in writing and delivered personally or sent by first class registered or certified mail, overnight courier service or facsimile
or electronic transmission to the address designated in writing, (ii) by facsimile to the number most recently provided to such
party or such other address or fax number as may be designated in writing by such party and (iii) by electronic mail, to the electronic
mail address most recently provided to such party or such other electronic mail address as may be designated in writing by such
party. Any notice or other communication so transmitted shall be deemed to have been given on the day of delivery, if delivered
personally, on the business day following receipt of written confirmation, if sent by facsimile or electronic transmission, one
(1) business day after delivery to an overnight courier service or five (5) days after mailing if sent by mail.
9. Construction. THIS NOTE SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT
REGARD TO CONFLICT OF LAW PROVISIONS THEREOF.
10. Severability. Any provision
contained in this Note which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.
11. Trust Waiver. Notwithstanding
anything herein to the contrary, the Payee hereby waives any and all right, title, interest
or claim of any kind (“Claim”) in or to any distribution of or from the trust account to be established in
which the proceeds of the IPO conducted by the Maker (including the deferred underwriters discounts and commissions) and the proceeds
of the sale of the warrants issued in a private placement to occur prior to the consummation of the IPO are to be deposited, as
described in greater detail in the registration statement and prospectus to be filed with the Securities and Exchange Commission
in connection with the IPO, and hereby agrees not to seek recourse, reimbursement, payment or satisfaction for any Claim against
the trust account for any reason whatsoever.
12. Amendment; Waiver. Any
amendment hereto or waiver of any provision hereof may be made with, and only with, the written
consent of the Maker and the Payee.
13. Assignment. No assignment or
transfer of this Note or any rights or obligations hereunder may be made by any party hereto
(by operation of law or otherwise) without the prior written consent of the other party hereto and any attempted assignment without
the required consent shall be void.
IN
WITNESS WHEREOF, Maker, intending to be legally bound hereby, has caused this Note to be duly executed by the undersigned
as of the day and year first above written.
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PROOF Acquisition Corp I
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a Delaware corporation
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By: John C. Backus, Jr.
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Title: President and Chief Executive Officer
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SCHEDULE
OF BORROWINGS
The
following increases or decreases in this Promissory Note have been made:
Date of Increase or Decrease
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Amount
of decrease in Principal
Amount
of this Promissory Note
|
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Amount
of increase in Principal
Amount
of this Promissory Note
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Remaining Principal Balance
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Exhibit 10.7
PROOF ACQUISITION
CORP I
11911 Freedom Drive,
Suite 1080
Reston, Virginia 20190
March 31, 2021
PROOF Acquisition Sponsor I, LLC
11911 Freedom Drive, Suite 1080
Reston, Virginia 20190
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RE:
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Securities Subscription Agreement
|
Gentlemen:
This agreement
(this “Agreement”) is entered into on March 31, 2021 by and between PROOF Acquisition Sponsor I, LLC, a Delaware
limited liability company (the “Subscriber” or “you”), and PROOF Acquisition Corp I, a Delaware
corporation (the “Company”). Pursuant to the terms hereof, the Company hereby accepts the offer the Subscriber
has made to subscribe for and purchase 5,750,000 shares of Class B common stock, $0.0001 par value per share (the “Shares”),
up to 750,000 of which are subject to forfeiture by you if the underwriter of the initial public offering (“IPO”)
of the Company does not fully exercise their over-allotment option (the “Over-allotment Option”). The Company
and the Subscriber’s agreements regarding such Shares are as follows:
1. Subscription and Purchase
of Securities. For the sum of $25,000 (the “Purchase Price”), which
the Company acknowledges receiving in cash, the Company hereby issues the Shares to the Subscriber, and the Subscriber hereby subscribes
for and purchases the Shares from the Company, 750,000 of which are subject to forfeiture, on the terms and subject to the conditions
set forth in this Agreement.
2. Representations, Warranties and Agreements.
2.1
Subscriber’s Representations, Warranties and Agreements. To induce the Company to issue the Shares to the
Subscriber, the Subscriber hereby represents and warrants to the Company and agrees with the Company as follows:
2.1.1
No Government Recommendation or Approval. The Subscriber understands that no federal or state agency has passed upon
or made any recommendation or endorsement of the offering of the Shares.
2.1.2
No Conflicts. The execution, delivery and performance of this Agreement and the consummation by the Subscriber of
the transactions contemplated hereby do not violate, conflict with or constitute a default under (i) the limited liability company
agreement of the Subscriber, (ii) any agreement, indenture or instrument to which the Subscriber is a party or (iii) any law, statute,
rule or regulation to which the Subscriber is subject, or any agreement, order, judgment or decree to which the Subscriber is subject.
2.1.3 Organization
and Authority. The Subscriber is a Delaware limited liability company, validly existing and in good standing under the
laws of Delaware and possesses all requisite power and authority necessary to carry out the transactions contemplated by this
Agreement. Upon execution and delivery by you, this Agreement will be a legal, valid and binding agreement of Subscriber,
enforceable against Subscriber in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance or similar laws affecting the enforcement of creditors’ rights
generally and subject to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or
in equity).
2.1.4
Experience, Financial Capability, and Suitability. Subscriber is: (i) sophisticated in financial matters and is able
to evaluate the risks and benefits of the investment in the Shares and (ii) able to bear the economic risk of its investment in
the Shares for an indefinite period of time because the Shares have not been registered under the Securities Act (as defined below)
and therefore cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is
available. Subscriber is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect
its own interests. Subscriber must bear the economic risk of this investment until the Shares are sold pursuant to: (i) an effective
registration statement under the Securities Act or (ii) an exemption from registration available with respect to such sale. Subscriber
is able to bear the economic risks of an investment in the Shares and to afford a complete loss of Subscriber’s investment
in the Shares.
2.1.5
Access to Information; Independent Investigation. Prior to the execution of this Agreement, the Subscriber
has had the opportunity to ask questions of and receive answers from representatives of the Company concerning an investment in
the Company, as well as the finances, operations, business and prospects of the Company, and the opportunity to obtain additional
information to verify the accuracy of all information so obtained. In determining whether to make this investment, Subscriber has
relied solely on Subscriber’s own knowledge and understanding of the Company and its business based upon Subscriber’s
own due diligence investigation and the information furnished pursuant to this paragraph. Subscriber understands that no person
has been authorized to give any information or to make any representations which were not furnished pursuant to this Section
2 and Subscriber has not relied on any other representations or information in making its investment decision, whether written
or oral, relating to the Company, its operations and/or its prospects.
2.1.6 Regulation
D Offering. Subscriber represents that it is an “accredited investor” as such term is defined in Rule 501(a) of
Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) and acknowledges the sale
contemplated hereby is being made in reliance on a private placement exemption to “accredited investors” within the
meaning of Section 501(a) of Regulation D under the Securities Act or similar exemptions under federal and state law.
2.1.7
Investment Purposes. The Subscriber is purchasing the Shares solely for investment purposes, for the Subscriber’s
own account and not for the account or benefit of any other person, and not with a view towards the distribution or dissemination
thereof. The Subscriber did not decide to enter into this Agreement as a result of any general solicitation or general advertising
within the meaning of Rule 502 under the Securities Act.
2.1.8 Restrictions
on Transfer; Shell Company. Subscriber understands the Shares are being offered in a transaction not involving a public
offering within the meaning of the Securities Act. Subscriber understands the Shares will be
“restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, and Subscriber understands
that the certificates or book entries representing the Shares will contain a legend in respect of such restrictions. If in
the future the Subscriber decides to offer, resell, pledge or otherwise transfer the Shares, such Shares may be offered,
resold, pledged or otherwise transferred only pursuant to: (i) registration under the Securities Act, or (ii) an available
exemption from registration. Subscriber agrees that if any transfer of its Shares or any interest therein is proposed to be
made, as a condition precedent to any such transfer, Subscriber may be required to deliver to the Company an opinion of
counsel satisfactory to the Company. Absent registration or an exemption, the Subscriber agrees not to resell the Shares.
Subscriber further acknowledges that because the Company is a shell company, Rule 144 may not be available to the Subscriber
for the resale of the Shares until one year following consummation of the initial business combination of the Company,
despite technical compliance with the requirements of Rule 144 and the release or waiver of any contractual transfer
restrictions.
2.1.9
No Governmental Consents. No governmental, administrative or other third-party consents or approvals are required
or necessary on the part of Subscriber in connection with the transactions contemplated by this Agreement.
2.2
Company’s Representations, Warranties, and Agreements. To induce the Subscriber to subscribe
for and purchase the Shares, the Company hereby represents and warrants to the Subscriber and agrees with the Subscriber as follows:
2.2.1
Incorporation and Corporate Power. The Company is a Delaware corporation incorporated, validly existing and is qualified
to do business in every jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse
effect on the financial condition, operating results or assets of the Company. The Company possesses all requisite corporate power
and authority necessary to carry out the transactions contemplated by this Agreement. Upon execution and delivery by the Company,
this Agreement will be a legal, valid and binding agreement of the Company, enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance or similar
laws affecting the enforcement of creditors’ rights generally and subject to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
2.2.2
No Conflicts. The execution, delivery and performance of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not violate, conflict with or constitute a default under (i) the Certificate of Incorporation
or Bylaws of the Company, (ii) any agreement, indenture or instrument to which the Company is a party or (iii) any law, statute,
rule or regulation to which the Company is subject, or any agreement, order, judgment or decree to which the Company is subject.
2.2.3
Title to Securities. Upon issuance in accordance with, and payment pursuant to, the terms hereof, the Shares will
be duly and validly issued, fully paid and nonassessable. Upon issuance in accordance with, and payment pursuant to, the terms
hereof, the Subscriber will have or receive good title to the Shares, free and clear of all liens, claims and encumbrances of any
kind, other than (a) transfer restrictions hereunder and other agreements to which the Shares may be subject, (b) transfer restrictions
under federal and state securities laws, and (c) liens, claims or encumbrances imposed due to the actions of the Subscriber.
2.2.4
No Adverse Actions. There are no actions, suits, investigations or proceedings pending, threatened against or affecting
the Company which: (i) seek to restrain, enjoin, prevent the consummation of or otherwise affect the transactions contemplated
by this Agreement or (ii) question the validity or legality of any transactions or seeks to recover damages or to obtain other
relief in connection with any transactions.
3. Forfeiture of Shares.
3.1 Partial
or No Exercise of the Over-allotment Option. In the event the Over-allotment Option granted to
the representative(s) of the underwriters of the Company’s IPO is not exercised in full, the Subscriber acknowledges
and agrees that it shall forfeit any and all rights to such number of Shares (up to an aggregate of 750,000 Shares and pro
rata based upon the percentage of the Over-allotment Option exercised) such that immediately following such forfeiture, the
Subscriber (and all other initial stockholders prior to the IPO, if any) will own an aggregate number of Shares (not
including shares of common stock issuable upon exercise of any warrants or any shares of common stock purchased by Subscriber
in the Company’s IPO or in the aftermarket) equal to 20% of the issued and outstanding Shares immediately following the
IPO.
3.2
Termination of Rights as Stockholder. If any of the Shares are forfeited in accordance with this Section 3,
then after such time the Subscriber (or successor in interest), shall no longer have any rights as a holder of such Shares, and
the Company shall take such action as is appropriate to cancel such Shares.
4. Waiver of Liquidation
Distributions; Redemption Rights. In connection with the Shares purchased pursuant to this
Agreement, the Subscriber hereby waives any and all right, title, interest or claim of any kind in or to any distributions by the
Company from the trust account which will be established for the benefit of the Company’s public stockholders and into which
substantially all of the proceeds of the IPO will be deposited (the “Trust Account”), in the event of a liquidation
of the Company upon the Company’s failure to timely complete an initial business combination. For purposes of clarity, in
the event the Subscriber purchases shares of common stock in the IPO or in the aftermarket, any additional Shares so purchased
shall be eligible to receive any liquidating distributions by the Company. However, in no event will the Subscriber have the right
to redeem any shares of common stock into funds held in the Trust Account upon the successful completion of an initial business
combination.
5. Restrictions on Transfer.
5.1
Securities Law Restrictions. In addition to any restrictions to be contained in that certain letter agreement (commonly
known as an “Insider Letter”) to be dated as of the closing of the IPO by and between Subscriber and the Company,
Subscriber agrees not to sell, transfer, pledge, hypothecate or otherwise dispose of all or any part of the Shares unless, prior
thereto (a) a registration statement on the appropriate form under the Securities Act and applicable state securities laws with
respect to the Shares proposed to be transferred shall then be effective or (b) the Company has received an opinion from counsel
reasonably satisfactory to the Company, that such registration is not required because such transaction is exempt from registration
under the Securities Act and the rules promulgated by the Securities and Exchange Commission thereunder and with all applicable
state securities laws.
5.2
Restrictive Legends. Any certificates representing the Shares shall have endorsed thereon legends substantially as
follows:
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL, IS AVAILABLE.”
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED DURING THE TERM OF THE LOCKUP.”
5.3 Additional
Shares or Substituted Securities. In the event of the declaration of a share dividend, the declaration of an
extraordinary dividend payable in a form other than Shares, a spin-off, a share split, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company’s outstanding Shares without receipt of
consideration, any new, substituted or additional securities or other property which are by reason of such transaction
distributed with respect to any Shares subject to this Section 5 or into which such Shares thereby become convertible
shall immediately be subject to this Section 5 and Section 3. Appropriate adjustments to reflect the
distribution of such securities or property shall be made to the number and/or class of Shares subject to this Section
5 and Section 3.
5.4
Registration Rights. Subscriber acknowledges that the Shares are being purchased pursuant to an exemption from the
registration requirements of the Securities Act and will become freely tradable only after certain conditions are met or they are
registered pursuant to a Registration Rights Agreement to be entered into with the Company prior to the closing of the IPO.
6. Other Agreements.
6.1
Further Assurances. Subscriber agrees to execute such further instruments and to take such further action as may
reasonably be necessary to carry out the intent of this Agreement.
6.2 Notices.
All notices, statements or other documents which are required or contemplated by this Agreement shall be: (i) in writing and
delivered personally or sent by first class registered or certified mail, overnight courier service or facsimile or
electronic transmission to the address designated in writing, (ii) by facsimile to the number most recently provided to
such party or such other address or fax number as may be designated in writing by such party and (iii) by electronic mail, to
the electronic mail address most recently provided to such party or such other electronic mail address as may be designated
in writing by such party. Any notice or other communication so transmitted shall be deemed to have been given on the day of
delivery, if delivered personally, on the business day following receipt of written confirmation, if sent by facsimile or
electronic transmission, one (1) business day after delivery to an overnight courier service or five (5) days after mailing
if sent by mail.
6.3 Entire Agreement. This
Agreement, together with that certain Insider Letter to be entered into between Subscriber
and the Company, substantially in the form to be filed as an exhibit to the Registration Statement on Form S-1 associated with
the Company’s IPO, embodies the entire agreement and understanding between the Subscriber and the Company with respect to
the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter
hereof. No statement, representation, warranty, covenant or agreement of any kind not expressly set forth in this Agreement shall
affect, or be used to interpret, change or restrict, the express terms and provisions of this Agreement.
6.4
Modifications and Amendments. The terms and provisions of this Agreement may be modified or amended only by written
agreement executed by all parties hereto.
6.5
Waivers and Consents. The terms and provisions of this Agreement may be waived, or consent for the departure therefrom
granted, only by a written document executed by the party entitled to the benefits of such terms or provisions. No such waiver
or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose
for which it was given, and shall not constitute a continuing waiver or consent.
6.6
Assignment. The rights and obligations under this Agreement may not be assigned by either party hereto without the
prior written consent of the other party.
6.7
Benefit. All statements, representations, warranties, covenants and agreements in this Agreement shall be binding
on the parties hereto and shall inure to the benefit of the respective successors and permitted assigns of each party hereto. Nothing
in this Agreement shall be construed to create any rights or obligations except among the parties hereto, and no person or entity
shall be regarded as a third-party beneficiary of this Agreement.
6.8
Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance
with and governed by the laws of Delaware applicable to contracts wholly performed within the borders of such state, without giving
effect to the conflict of law principles thereof.
6.9
Severability. In the event that any court of competent jurisdiction shall determine that any provision, or any portion
thereof, contained in this Agreement shall be unreasonable or unenforceable in any respect, then such provision shall be deemed
limited to the extent that such court deems it reasonable and enforceable, and as so limited shall remain in full force and effect.
In the event that such court shall deem any such provision, or portion thereof, wholly unenforceable, the remaining provisions
of this Agreement shall nevertheless remain in full force and effect.
6.10
No Waiver of Rights, Powers and Remedies. No failure or delay by a party hereto in exercising any right, power or
remedy under this Agreement, and no course of dealing between the parties hereto, shall operate as a waiver of any such right,
power or remedy of such party. No single or partial exercise of any right, power or remedy under this Agreement by a party hereto,
nor any abandonment or discontinuance of steps to enforce any such right, power or remedy, shall preclude such party from any
other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The election of any remedy by
a party hereto shall not constitute a waiver of the right of such party to pursue other available remedies. No notice to or demand
on a party not expressly required under this Agreement shall entitle the party receiving such notice or demand to any other or
further notice or demand in similar or other circumstances or constitute a waiver of the rights of the party giving such notice
or demand to any other or further action in any circumstances without such notice or demand.
6.11
Survival of Representations and Warranties. All representations and warranties made by the parties hereto in this
Agreement or in any other agreement, certificate or instrument provided for or contemplated hereby, shall survive the execution
and delivery hereof and any investigations made by or on behalf of the parties.
6.12
No Broker or Finder. Each of the parties hereto represents and warrants to the other that no broker, finder or other
financial consultant has acted on its behalf in connection with this Agreement or the transactions contemplated hereby in such
a way as to create any liability on the other. Each of the parties hereto agrees to indemnify and save the other harmless from
any claim or demand for commission or other compensation by any broker, finder, financial consultant or similar agent claiming
to have been employed by or on behalf of such party and to bear the cost of legal expenses incurred in defending against any such
claim.
6.13
Headings and Captions. The headings and captions of the various subdivisions of this Agreement are for convenience
of reference only and shall in no way modify or affect the meaning or construction of any of the terms or provisions hereof.
6.14
Counterparts. This Agreement may be executed in one or more counterparts, all of which when taken together shall
be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered
to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or any other form of electronic delivery, such signature shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page
were an original thereof.
6.15
Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. If
an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof will arise favoring or disfavoring any party hereto because of the authorship of any
provision of this Agreement. The words “include,”
“includes,” and “including” will be deemed to be followed by “without limitation.”
Pronouns in masculine, feminine, and neuter genders will be construed to include any other gender, and words in the singular form
will be construed to include the plural and vice versa, unless the context otherwise requires. The words “this Agreement,”
“herein,” “hereof,” “hereby,” “hereunder,” and words
of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties
hereto intend that each representation, warranty, and covenant contained herein will have independent significance. If any party
hereto has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which
such party hereto has not breached will not detract from or mitigate the fact that such party hereto is in breach of the first
representation, warranty, or covenant.
6.16
Mutual Drafting. This Agreement is the joint product of the Subscriber and the Company and each provision hereof
has been subject to the mutual consultation, negotiation and agreement of such parties and shall not be construed for or against
any party hereto.
7. Voting and Tender of
Shares. Subscriber agrees to vote the Shares in favor of an initial business combination that
the Company negotiates and submits for approval to the Company’s stockholders and shall not seek redemption or repurchase
with respect to such Shares. Additionally, the Subscriber agrees not to tender any Shares in connection with a tender offer presented
to the Company’s stockholders in connection with an initial business combination negotiated by the Company.
If the foregoing accurately
sets forth our understanding and agreement, please sign the enclosed copy of this Agreement and return it to us.
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Very truly yours,
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PROOF ACQUISITION CORP I
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By: John C. Backus, Jr.
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Title: President and Chief Executive Officer
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Accepted and agreed as of the date first written above.
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PROOF ACQUISITION SPONSOR I, LLC
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By PROOF Sponsor Management, LLC
Its Manager
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By: Steven P. Mullins
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Title: Managing Member
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Exhibit 10.9
THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR THE SECURITIES LAWS OF ANY STATE OR ANY OTHER JURISDICTION. THERE ARE FURTHER RESTRICTIONS ON THE TRANSFERABILITY OF THE SECURITIES DESCRIBED HEREIN.
THE PURCHASE OF THE SECURITIES INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN BEAR THE RISK OF THE LOSS OF THEIR ENTIRE INVESTMENT.
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this “Agreement”) is entered into as of October __, 2021
among PROOF Acquisition Corp I., a Delaware corporation (the “Company”), PROOF Acquisition Sponsor I, LLC, a Delaware series limited liability company (the “Sponsor”), and [___] (the “Purchaser”).
RECITALS
WHEREAS, the Company was incorporated for the purpose of effecting a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more yet to be identified businesses (a “Business Combination”);
WHEREAS, the Company is in the process of registering securities with the U.S.
Securities and Exchange Commission (the “SEC”) on a registration statement on Form S-1 (the “Registration Statement”) for its initial public offering (“IPO”) of units (the “Public Units”), at a price of $10.00 per Public
Unit, each Public Unit comprised of one share of the Company’s Class A common stock, par value $0.0001 per share (“Class A Common Stock”, and the shares of Class A Common Stock included in the Public Units, the “Public Shares”), and
redeemable warrants, the terms of which are set forth in the prospectus relating to the IPO (the “Warrants,” and the Warrants included in the Public Units, the “Public Warrants”);
WHEREAS, proceeds from the IPO in an aggregate amount equal to the aggregate gross
proceeds from the IPO will be deposited into a trust account for the benefit of the holders of the Public Shares (the “Trust Account”), as described in the Registration Statement;
WHEREAS, following the closing of the IPO (the “IPO Closing”), the Company
will seek to identify and consummate a Business Combination;
WHEREAS, in connection with the IPO, the Sponsor and the Purchaser will purchase, in
a private placement that will close simultaneously with the IPO Closing, warrants which are identical to the Warrants except that they will be non-redeemable (except under certain limited circumstances) and exercisable on a cashless basis so long as
they are held by the Sponsor, the Purchaser, or their respective permitted transferees (the “Private Placement Warrants”), for a purchase price of $1.00 per Private Placement Warrant;
WHEREAS, the parties wish to enter into this Agreement, pursuant to which the
Purchaser shall subscribe for and purchase from the Company (i) shares of Class B common stock, par value $0.0001 per share, of the Company (“Class B Common Stock” and collectively with the shares of Class A Common Stock, the “Common Stock”)
(the “Founder Shares”) and (ii) Private Placement Warrants to be issued at the IPO Closing and Over-allotment Closing (as defined below), if applicable (together with the Founder Shares, the “Subscribed Securities”);
WHEREAS, the Company and the Sponsor have entered into or intend to concurrently with
this Agreement enter into agreements (collectively, the “Subscription Agreements”) in the form of this Agreement with certain affiliates of the Purchaser (together with the Purchaser, the “Subscribing Parties”) for the purchase of
Founder Shares and Private Placement Warrants as set forth therein; and
WHEREAS, the Company, the Sponsor, and the Subscribing Parties intend for the
purchase of Founder Shares and Private Placement Warrants as set forth herein to be made pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).
NOW, THEREFORE, in consideration of the premises, representations, warranties, and
the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Sale and Purchase.
a. Securities. Subject to the terms and conditions
hereof, the Purchaser hereby irrevocably subscribes for and agrees to purchase from the Company, and the Company agrees to issue and sell to the Purchaser, (i) the number of Private Placement Warrants set forth on Schedule A hereto for the
aggregate purchase price set forth on Schedule A hereto (the “Initial Warrant Purchase Price”) and (ii) the number of Founder Shares set forth on Schedule A hereto for the aggregate purchase price set forth on Schedule A
hereto (the “Initial Founder Share Purchase Price,” and together with the Initial Warrant Purchase Price, the “Initial Purchase Price”).
b. Notification of Effective Date and IPO Closing Date.
The Company shall notify the Purchaser in writing of (i) the anticipated date of the effectiveness of the Registration Statement (the “Effective Date”) at least three (3) Business Days (as defined below) prior to the Effective Date and (ii)
the anticipated date of the IPO Closing (the “IPO Closing Date”) at least three (3) Business Days prior to the IPO Closing Date (the “Closing Notice”). As used herein, “Business Day” means any day, other than a Saturday or a
Sunday, that is neither a legal holiday nor a day on which banking institutions are generally authorized or required by law or regulation to close in the City of New York, New York.
c. IPO Closing Date. On the IPO Closing Date and
concurrently with the IPO Closing, Purchaser shall remit the Initial Purchase Price to the Company, by wire transfer of immediately available funds or other means approved by the Company to an account specified by the Company in the Closing Notice
(which account shall not be an escrow account) against delivery of the Subscribed Securities as set forth in Section 3, it being understood that Purchaser shall not be required to remit the Initial Purchase Price until it has received evidence of the
issuance of the Subscribed Securities as set forth in Section 3.
d. Over-Allotment Option. If the underwriters’
over-allotment option in connection with the IPO (the “Over-allotment Option”) is exercised, the Purchaser agrees to purchase up to that number of additional Founder Shares and Private Placement Warrants as indicated on Schedule A. The
Company shall notify the Purchaser in writing of the anticipated date of each closing of the exercise of the Over-allotment Option, if any (each, an “Over-allotment Closing”), at least three (3) Business Days prior to the Over-allotment
Closing (each, an “Over-allotment Notice”). On the date of the Over-allotment Closing (the “Over-allotment Closing Date”) and concurrently with the Over-allotment Closing, Purchaser shall remit the purchase price for the additional
Founder Shares and Private Placement Warrants to the Company, by wire transfer of immediately available funds or other means approved by the Company to an account specified by the Company in the Over-allotment Notice (which account shall not be an
escrow account) against delivery of such additional Founder Shares and Private Placement Warrants as set forth in Section 3, it being understood that Purchaser shall not be required to remit the purchase price for such securities until it has
received evidence of the issuance of the additional Founder Shares and Private Placement Warrants as set forth in Section 3.
2. Closing Conditions. The Purchaser’s obligation to
purchase the Subscribed Securities and the Company’s obligation to sell the Subscribed Securities to the Purchaser on the IPO Closing Date and the Over-allotment Closing Date, if applicable, is conditioned upon satisfaction of the following
conditions precedent (any or all of which may be waived by the Company, the Sponsor, and the Purchaser in its sole discretion with respect to the other parties’ conditions):
a. no legal, administrative, or regulatory action, suit, or
proceeding shall be pending which seeks to restrain or prohibit the transactions contemplated by this Agreement;
b. the representations and warranties of the Company, the
Sponsor, and the Purchaser, contained in this Agreement shall have been true and correct on the date of this Agreement and shall be true and correct on the IPO Closing Date or the Over-allotment Closing Date, as applicable, as if made on such
applicable date; and
c. in the case of the Company and the Sponsor, each
Subscribing Party other than the Purchaser shall have, on the IPO Closing Date or the Over-allotment Closing Date, as applicable, concurrently consummated its subscription under its respective Subscription Agreement.
3. Delivery of Securities.
a. Delivery. On the IPO Closing Date and, if
applicable, the Over-allotment Closing Date, the Company shall issue to the Purchaser the number of Subscribed Securities set forth on Schedule A hereto, and shall register the Purchaser as the owner of such Subscribed Securities with the
Company’s transfer agent by book entry upon the purchase thereof and provide to Purchaser evidence from the transfer agent of the issuance of such Subscribed Securities on and as of the IPO Closing Date or, if applicable, the Over-allotment Closing
Date.
b. Restricted Securities. The Purchaser acknowledges
that the Subscribed Securities, and any securities of the Company that may be distributed to the Purchaser on account of the Subscribed Securities (collectively, the “Securities”), will be subject to restrictions on transfer as set forth in
this Agreement. Each register and book entry for the Securities shall contain a notation and each certificate (if any) evidencing the Securities shall be stamped or otherwise imprinted with a legend (the “Restrictive Legend”), in substantially
the following form:
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT AND LAWS.
THE SALE, PLEDGE, HYPOTHECATION, OR TRANSFER OF THE SECURITIES REPRESENTED HEREBY ARE
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN SUBSCRIPTION AGREEMENT BY AND AMONG THE HOLDER AND THE OTHER PARTIES THERETO. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.”
4. Restrictive Legend Removal. Following the expiration
of the transfer restrictions set forth in this Agreement, if the Securities are eligible to be sold without restriction under, and without the Company being in compliance with the current public information requirements of, Rule 144 under the
Securities Act, or if all or a portion of the Securities are registered for resale under the Securities Act pursuant to a shelf registration statement, then at the Purchaser’s written request, the Company will use commercially reasonable efforts to
cause the Company’s transfer agent to remove the Restrictive Legend, subject to compliance by the Purchaser with the reasonable and customary procedures for such removal required by the Company or its transfer agent. In connection therewith, if
required by the Company’s transfer agent, the Company will promptly cause an opinion of counsel to be delivered to and maintained with its transfer agent, together with any other authorizations, certificates, and directions required by the transfer
agent that authorize and direct the transfer agent to issue the Securities without any Restrictive Legend.
5. Registration Rights. On the Effective Date, the
Company shall enter into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Sponsor, the Subscribing Parties, and certain other parties thereto, in substantially the form provided to the Purchaser prior to the date
hereof. The Registration Rights Agreement shall provide the Purchaser with registration rights with respect to the Subscribed Securities that are no less favorable to the Purchaser than the registration rights of the Sponsor set forth therein.
6. Potential Forfeiture. The Purchaser agrees that if,
in connection with a Business Combination, the Sponsor decides (i) to forfeit, transfer to a third Person, exchange, subject to transfer, vesting, or conditional forfeiture provisions or amend the terms of all or any portion of the Founder Shares or
the Private Placement Warrants (or the Sponsor’s membership interests representing an interest in any of the foregoing) or (ii) to enter into any other arrangements with respect to the Founder Shares or the Private Placement Warrants (or the
Sponsor’s membership interests representing an interest in any of the foregoing) (each, a “Change in Investment”), then such Change in Investment shall apply pro rata to the Purchaser and the Sponsor based on the relative number of Founder
Shares or Private Placement Warrants to be held by each on the Business Combination Closing (as defined below), provided any such Change in Investment shall apply to no more than 33% of the Founder Shares or 33% of the Private Placement Warrants
acquired by the Purchaser hereunder without the Purchaser’s prior written consent. The Purchaser agrees to take all steps and execute all agreements as may be necessary or reasonably requested by the Sponsor and the Company to effectuate a Change in
Investment on the same terms as applicable to the Sponsor, subject to the foregoing limitation and provided that Purchaser shall not be required to enter into any voting agreement with respect to its Founder Shares.
7. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants to the Company as follows, as of the date hereof:
a. Organization and Power. The Purchaser is organized,
existing, and in good standing under the laws of the jurisdiction of its formation and has all requisite power and authority to carry on its business as presently conducted and as proposed to be conducted.
b. Authorization. The Purchaser has full power and
authority to enter into this Agreement. This Agreement, when executed and delivered by the Purchaser, will constitute the valid and legally binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally or (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable remedies.
c. Governmental Consents and Filings. No consent,
approval, order, or authorization of, or registration, qualification, designation, declaration, or filing with, any Federal, state, or local governmental authority is required on the part of the Purchaser in connection with the consummation of the
transactions contemplated by this Agreement, except for filings pursuant to applicable securities laws, rules, or regulations.
d. Compliance with Other Instruments. The execution,
delivery and performance by the Purchaser of this Agreement and the consummation by the Purchaser of the transactions contemplated by this Agreement will not result in any violation or default (i) under any provisions of its organizational documents,
(ii) under any instrument, judgment, order, writ, or decree to which it is a party or by which it is bound, (iii) under any note, indenture, or mortgage to which it is a party or by which it is bound, (iv) under any lease, agreement, contract, or
purchase order to which it is a party or by which it is bound or (v) under any provision of Federal or state statute, rule, or regulation applicable to the Purchaser, in each case (other than clause (i)), which would have a material adverse effect on
the Purchaser’s ability to consummate the transactions contemplated by this Agreement.
e. Purchase Entirely for Own Account. This Agreement
is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that the Securities to be acquired by the Purchaser will be acquired for
investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of any Federal or state securities laws. The Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the Securities in violation of law. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement, or arrangement
with any Person (other than the Company) to sell, transfer, or grant participations to any Person or to any third Person, with respect to any of the Securities. For purposes of this Agreement, “Person” means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity, or any government or any department or agency thereof.
f. Disclosure of Information. The Purchaser has had
an opportunity to discuss the Company’s business, management, financial affairs, and the terms and conditions of the offering of the Securities, as well as the terms of the Company’s proposed IPO, with the Company’s management, the Sponsor, and
affiliates thereof.
g. Restricted Securities. The Purchaser understands
that the offer and sale of the Securities to the Purchaser has not been and will not be registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of the Purchaser’s representations as expressed herein. The Purchaser understands that the Securities are “restricted securities” under applicable U.S. federal and state
securities laws and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely unless they are registered with the SEC and qualified by state authorities, or an exemption from the registration and qualification requirements is
available. The Purchaser acknowledges that the Company has no obligation to register or qualify the Securities except pursuant to the Registration Rights Agreement. The Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the
Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy. The Purchaser acknowledges that the Company will confidentially submit the Registration Statement for its proposed IPO. The Purchaser understands that
the offering of Securities and transactions contemplated hereunder are not and are not intended to be part of the IPO, and that the Purchaser will not be able to rely on the protection of Section 11 of the Securities Act with respect to its purchase
of Securities hereunder.
h. No Public Market. The Purchaser understands that no
public market now exists for the Securities, and that the Company has not made any assurances that a public market will ever exist or be maintained for the Securities.
i. High Degree of Risk. The Purchaser understands
that the purchase of the Subscribed Securities involves a high degree of risk which could cause the Purchaser to lose all or part of its investment.
j. Accredited Investor. The Purchaser is an
accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
k. No General Solicitation. Neither the Purchaser, nor
any of its officers, directors, employees, agents, stockholders, or partners has either directly or indirectly, including, through a broker or finder (i) to its knowledge, engaged in any general solicitation, or (ii) published any advertisement in
connection with the offer and sale of the Securities.
l. Place of Investment Decision. The Purchaser’s
investment decision was made in the office or offices located at the address of the Purchaser set forth on the signature page hereof.
m. Adequacy of Financing. The Purchaser will, when
funds are due hereunder, have sufficient funds to satisfy its obligations under this Agreement.
n. No Other Representations and Warranties; Non-Reliance.
Except for the specific representations and warranties contained in this Agreement and in any certificate or other agreement delivered pursuant hereto, none of the Purchaser nor any Person acting on behalf of the Purchaser nor any of the Purchaser’s
affiliates (the “Purchaser Parties”) has made, makes, or shall be deemed to make any other express or implied representation or warranty with respect to the Purchaser and this offering, and the Purchaser Parties disclaim any such
representation or warranty. Except for the specific representations and warranties expressly made by the Company and the Sponsor in this Agreement and in any certificate or other agreement delivered pursuant hereto, the Purchaser Parties specifically
disclaim that they are relying upon any other representations or warranties that may have been made by the Company, any Person on behalf of the Company, or any of the Company’s affiliates (collectively, the “Company Parties”) or by the
Sponsor, any Person on behalf of the Sponsor or any of the Sponsor’s affiliates (collectively, the “Sponsor Parties”) with respect to the transactions contemplated hereby.
8. Representations and Warranties of the Company. The
Company represents and warrants to the Purchaser as follows:
a. Organization and Corporate Power. The Company is
incorporated, existing, and in good standing as a corporation under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted.
b. Capitalization. The authorized share capital of the
Company is as set forth in the Registration Statement.
c. Authorization. All corporate action required to be
taken by the Company’s Board of Directors and stockholders in order to authorize the Company to enter into this Agreement, and to issue the Subscribed Securities, has been taken on or prior to the date hereof. All action on the part of the
stockholders, directors, and officers of the Company necessary for the execution and delivery of this Agreement, the performance of all obligations of the Company under this Agreement, and the issuance and delivery of the Subscribed Securities has
been taken on or prior to the date hereof. This Agreement, when executed and delivered by the Company, shall constitute the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally or (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other equitable remedies.
d. Valid Issuance of Securities.
i. The Subscribed Securities, when issued, sold, and
delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued and fully paid, as applicable, and free of all preemptive or similar rights, taxes, liens, encumbrances, and charges with respect to
the issue thereof and restrictions on transfer other than restrictions on transfer specified under this Agreement, applicable Federal and state securities laws and liens or encumbrances created by or imposed by the Purchaser. Assuming the accuracy of
the representations of the Purchaser in this Agreement and subject to the filings described in Section 8.f. below, the Subscribed Securities will be issued in compliance with all applicable Federal and state securities laws, rules, and
regulations.
ii. No “bad actor” disqualifying event described in
Rule 506(d)(1)(i) through (viii) of the Securities Act (a “Disqualification Event”) is applicable to the Company or, to the Company’s knowledge, any Company Covered Person (as defined below), except for a Disqualification Event as to which
Rule 506(d)(2)(ii through iv) or (d)(3) is applicable. “Company Covered Person” means, with respect to the Company as an “issuer” for purposes of Rule 506 promulgated under the Securities Act, any Person listed in the first paragraph of
Rule 506(d)(1).
e. IPO. The offers and sales of securities in the IPO
will be made pursuant to an effective Registration Statement and otherwise in compliance with the Securities Act and the rules and regulations promulgated thereunder and applicable state securities laws, rules and regulations.
f. Governmental Consents and Filings. Assuming the
accuracy of the representations made by the Purchaser in this Agreement, no consent, approval, order, or authorization of, or registration, qualification, designation, declaration, or filing with, any Federal, state, or local governmental authority
is required on the part of the Company in connection with the consummation of the transactions contemplated by this Agreement, except for filings pursuant to Regulation D of the Securities Act and applicable state securities laws, if any.
g. Compliance with Other Instruments. The execution,
delivery, and performance of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in any violation or default (i) under any provisions of the certificate of incorporation, bylaws, or other governing
documents of the Company, (ii) under any instrument, judgment, order, writ, or decree to which the Company is a party or by which it is bound, (iii) under any note, indenture, or mortgage to which the Company is a party or by which it is bound,
(iv) under any lease, agreement, contract, or purchase order to which the Company is a party or by which it is bound or (v) under any provision of Federal or state statute, rule, or regulation applicable to the Company, in each case (other than
clause (i)) which would have a material adverse effect on the Company or its ability to consummate the transactions contemplated by this Agreement.
h. Operations. As of the date hereof, the Company has
not conducted, and prior to the IPO Closing the Company will not conduct, any operations other than organizational activities and activities in connection with offerings of the Securities.
i. Foreign Corrupt Practices. Neither the Company,
nor any director, officer, agent, employee, or other Person acting on behalf of the Company has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment, or other
unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback, or other unlawful payment to any foreign or domestic government official or employee.
j. Compliance with Anti-Money Laundering Laws. The
operations of the Company are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements and all other applicable U.S. federal anti-money laundering laws and regulations, including, but not
limited to, those of the Currency and Foreign Transactions Reporting Act of 1970, as amended, and the USA Patriot Act of 2001, and the rules and regulations thereunder (collectively, the “Anti-Money Laundering Laws”), and no action, suit, or
proceeding by or before any court or governmental agency, authority, or body or any arbitrator involving the Company with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
k. Absence of Litigation. There is no action, suit,
proceeding, inquiry, or investigation before or by any court, public board, government agency, self-regulatory organization, or other regulatory body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of
the Company’s officers or directors, whether of a civil or criminal nature or otherwise, in their capacities as officers or directors of the Company.
l. No General Solicitation. Neither the Company nor
any of its officers, directors, employees, agents, or stockholders has either directly or indirectly, including, through a broker or finder (i) engaged in any general solicitation or (ii) published any advertisement in connection with the offer and
sale of the Subscribed Securities.
m. Non-Public Information. The Company represents and
warrants that none of the information conveyed to the Purchaser in connection with the transactions contemplated by this Agreement will constitute material non-public information of the Company upon the effectiveness of the Registration Statement.
n. No Other Representations and Warranties; Non-Reliance.
Except for the specific representations and warranties contained in this Section 8 and in any certificate or other agreement delivered pursuant hereto, none of the Company Parties has made, makes, or shall be deemed to make any other express
or implied representation or warranty with respect to the Company or the offering of Securities hereunder, and the Company Parties disclaim any such representation or warranty. Except for the specific representations and warranties expressly made by
the Purchaser in Section 7 of this Agreement and in any certificate or other agreement delivered pursuant hereto, the Company Parties specifically disclaim that they are relying upon any other representations or warranties that may have been
made by the Purchaser Parties.
9. Representations and Warranties of the Sponsor. The
Sponsor represents and warrants as follows:
a. Organization and Power. The Sponsor is organized,
existing, and in good standing as a series limited liability company under the laws of the State of Delaware and has all requisite power and authority to carry on its business as presently conducted and as proposed to be conducted.
b. Authorization. The Sponsor has full power and
authority to enter into this Agreement. This Agreement, when executed and delivered by the Sponsor, will constitute the valid and legally binding obligation of the Sponsor, enforceable against the Sponsor in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally or (ii) as limited by laws relating to the availability of
specific performance, injunctive relief, or other equitable remedies.
c. No Other Representations and Warranties; Non-Reliance.
Except for the specific representations and warranties contained in this Section 9 and in any certificate or other agreement delivered pursuant hereto, none of the Sponsor Parties has made, makes, or shall be deemed to make any other express
or implied representation or warranty with respect to the Sponsor or the offering of Securities hereunder, and the Sponsor Parties disclaim any such representation or warranty. Except for the specific representations and warranties expressly made by
the Purchaser in Section 7 of this Agreement and in any certificate or other agreement delivered pursuant hereto, the Sponsor Parties specifically disclaim that they are relying upon any other representations or warranties that may have been
made by the Purchaser Parties.
d. Sponsor Minimum Investment. The Sponsor and any of
its affiliates shall purchase at least eighty percent (80%) of the Private Placement Warrants offered by the Company in connection with the IPO which are not purchased by the Subscribing Parties.
10. Additional Agreements and Acknowledgements of the Parties.
a. Transfer Restrictions. The Purchaser agrees that,
except for Transfers (as defined below) to third parties required pursuant to Section 6 above and except as set forth in Section 10.c. below, it shall not Transfer (i) any Founder Shares until the earlier of (A) one year after the
closing of the Business Combination (the “Business Combination Closing”) and (B) the date following the Business Combination Closing on which the Company completes a liquidation, merger, capital stock exchange, or other similar transaction
that results in all of the Company’s stockholders having the right to exchange their Common Stock for cash, securities, or other property or (ii) any Private Placement Warrants (or any shares of Common Stock issuable upon exercise of the Private
Placement Warrants) until 30 days after the Business Combination Closing. Notwithstanding the foregoing, if subsequent to the Business Combination Closing, the last reported sale price of the Class A Common Stock equals or exceeds $12.00 per share
(as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any twenty (20) trading days within any thirty (30) trading day period commencing at least one hundred and fifty (150) days after the Business
Combination Closing, the Founder Shares shall be released from the lockup referenced in this Section 10.a.
b. IPO Lockup. During the period commencing on the
effective date of the prospectus relating to the IPO and ending 180 days after such date, the Purchaser shall not, without the prior written consent of the Company, (i) directly or indirectly offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of any Common Stock, Founder Shares, Warrants or Private Placement Warrants, or any securities
convertible into, or exercisable, or exchangeable for, Common Stock, Founder Shares, Warrants or Private Placement Warrants or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of Common Stock, Founder Shares, Warrants or Private Placement Warrants, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock,
Founder Shares, Warrants or Private Placement Warrants or other securities, in cash or otherwise; provided, however, that the foregoing shall not apply (i) to the forfeiture by the Purchaser of any Founder Shares pursuant to their
terms or (ii) to any Public Units (or the Public Shares and Public Warrants comprising such Public Units) acquired by the Purchaser in the IPO or in the open market following the IPO.
c. Permitted Transferees. Notwithstanding Section
10.a., Transfers of the Securities are permitted to the following individuals and entities (each a “Permitted Transferee”):
i. To the Company’s initial stockholders, officers, or
directors, any members of the Sponsor or its affiliates, any affiliates of the Sponsor, or any employees of the Sponsor, or any employees of such affiliates;
ii. In the case of an individual, by gift to a member of one of
the individual’s immediate family or to a trust, the beneficiary of which is a member of the individual’s immediate family, an affiliate of such Person or to a charitable organization;
iii. In the case of an individual, by virtue of laws of descent
and distribution upon death of the individual;
iv. In the case of an individual, pursuant to a qualified
domestic relations order;
v. By private sales or transfers made in connection with the
completion of a Business Combination at prices no greater than the price at which the Founder Shares, the Private Placement Warrants, or Class A common stock, as applicable, were originally purchased;
vi. As distributions to limited partners or members of the
Purchaser;
vii. By virtue of the laws of the State of Delaware or of the
Purchaser’s organizational documents upon liquidation or dissolution of the Purchaser;
viii. To the Company for no value for cancellation in connection
with the completion of the Business Combination;
ix. In the event of the Company’s liquidation prior to the
completion of the Business Combination;
x. To the Purchaser’s affiliates, to any investment fund or
other Person controlled or managed by the Purchaser, or to any investment manager or investment advisor of the Purchaser or an affiliate of any such investment manager or investment advisor or to any investment fund or other Person controlled or
managed by such Persons; and
xi. In the event of the Company’s liquidation, merger, stock
exchange, reorganization, or other similar transaction which results in all of the Company’s public shareholders having the right to exchange their Class A Common Stock for cash, securities, or other property subsequent to the Company’s completion of
the Business Combination.
d. Permitted Transfers. In the case of Transfer to a
Permitted Transferee pursuant to Sections 10.c.i. through 10.c.vii. or with the Company’s prior written consent, these Permitted Transferees must enter into a written agreement agreeing to be bound by the terms of this Agreement,
including the transfer restrictions. As used in this Agreement, “Transfer” shall mean the (x) sale of, offer to sell, contract or agreement to sell, hypothecation, pledge, grant of any option to purchase or otherwise dispose of or agreement to
dispose of, directly or indirectly, or establishment or increase of a put equivalent position or liquidation with respect to or decrease of a call equivalent position (within the meaning of Section 16 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and the rules and regulations of the SEC promulgated thereunder) with respect to, any of the Securities; (y) entry into any swap or other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of any of the Securities, whether any such transaction is to be settled by delivery of such Securities, in cash, or otherwise, or (z) public announcement of any intention to effect any transaction specified in
clause (x) or (y); provided further, that Section 10.a. through Section 10.c. shall not prohibit the Purchaser from effecting a Short Sale (as defined below) with securities that do not constitute “Securities” under this Agreement.
e. Trust Account.
i. The Purchaser hereby acknowledges that it is aware that the
Company will establish the Trust Account for the benefit of its public stockholders upon the IPO Closing. The Purchaser hereby agrees that it has no right, title, interest, or claim of any kind in (a “Claim”) or to any monies held in the Trust
Account, or any other asset of the Company as a result of any liquidation of the Company, except for redemption and liquidation rights, if any, the Purchaser may have in respect of any Public Shares held by it.
ii. The Purchaser hereby agrees that it shall have no right of
set-off or any Claim to, or to any monies in, the Trust Account, and hereby irrevocably waives any Claim to, or to any monies in, the Trust Account that it may have now or in the future, except for redemption and liquidation rights, if any, the
Purchaser may have in respect of any Public Shares held by it. In the event the Purchaser has any Claim against the Company under this Agreement, the Purchaser shall pursue such Claim solely against the Company and its assets outside the Trust
Account and not against the property or any monies in the Trust Account, except for redemption and liquidation rights, if any, the Purchaser may have in respect of any Public Shares held by it.
f. No Short Sales. The Purchaser hereby agrees that
neither it, nor any Person acting on its behalf, will engage in any Short Sales with respect to securities of the Company prior to the closing of the Business Combination. For purposes of this Section 10.f., “Short Sales” shall include,
without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act, and all types of direct and indirect stock pledges (other than pledges in the ordinary course of business as part of prime brokerage
arrangements), forward sale contracts, options, puts, calls, swaps, and similar arrangements (including on a total return basis).
g. Use of Purchaser’s Name. Neither the Company nor
the Sponsor will, without the written consent of the Purchaser in each instance, use in advertising, publicity, or otherwise the name of the Purchaser or any of its affiliates, or any director, officer, or employee of the Purchaser, nor any trade
name, trademark, trade device, service mark, symbol, or any abbreviation, contraction, or simulation thereof owned by the Purchaser or its affiliates or any information relating to the business or operations of the Purchaser or its affiliates
(including, for the avoidance of doubt, any investment vehicles, funds or accounts managed thereby). Notwithstanding the foregoing, the Company may disclose (i) the Purchaser’s name and information concerning the Purchaser (A) to the extent required
by law, regulation, or regulatory request, including in the Registration Statement or (B) to the Company’s lawyers, independent accountants, and to other advisors and service providers who reasonably require the Purchaser’s information in connection
with the provision of services to the Company, are advised of the confidential nature of such information, and are obligated to keep such information confidential, and (ii) the Purchaser’s name and the terms of this Agreement to the other Subscribing
Parties. The Company and the Sponsor agree to provide to the Purchaser for the Purchaser’s review any disclosure in any registration statement, proxy statement, or other document in advance of the submission, filing, or disclosure of such document in
connection with the transactions contemplated by this Agreement with respect to the Purchaser or any of its affiliates, and will not make any such submission, filing, or disclosure without including any revisions reasonably requested in writing by
the Purchaser or to the extent the Purchaser has a good faith objection to such submission, filing or disclosure.
h. Stock Exchange Listing. The Company will use
commercially reasonable efforts to effect and maintain the listing of the Class A Common Stock and Warrants on The New York Stock Exchange (or another national securities exchange) until the third anniversary of the Business Combination Closing.
i. PIPE Transaction. The Company hereby grants
Purchaser the right, but not the obligation, to participate in up to a maximum of [__]% of the private offering of public equity of the Company to institutional investors pursuant to the terms of subscription agreements to be entered into among the
subscribers and the Company, with a closing to occur substantially concurrently with the closing of the Business Combination (the “PIPE Transaction”); provided that the aggregate participation of the Subscribing Parties in the PIPE Transaction
shall not exceed 30% of such transaction. Prior to the commencement of the PIPE Transaction, the Company shall deliver written notice (the “PIPE Notice”) to Purchaser specifying the expected amount of capital proposed to be raised in, and the
material terms of, the PIPE Transaction, and following delivery of the PIPE Notice, the Company shall provide Purchaser with such information as Purchaser may reasonably request regarding the PIPE Transaction. Purchaser may indicate its interest in
participating in the contemplated PIPE Transaction by delivering written notice of its interest (a “PIPE Purchaser Notice”) to the Company within ten (10) Business Days after receipt of the PIPE Notice (such period, the “PIPE Transaction
Notice Period”). It shall be in the sole and absolute discretion of Purchaser whether to deliver a PIPE Purchaser Notice, and Purchaser is not be obligated to participate in the PIPE Transaction unless Purchaser delivers a PIPE Purchaser Notice
by the end of the PIPE Transaction Notice Period. Following delivery of the PIPE Purchaser Notice, the Company and Purchaser shall negotiate the form of subscription agreement for institutional investors relating to the PIPE Transaction on terms and
conditions customary for such transaction, including without limitation, representations and warranties of the Company and investors, registration rights, and closing conditions, provided that, without Purchaser’s consent, such agreement shall not
include any third-party beneficiary rights on behalf of the target of the Business Combination and shall provide that the terms of such agreement for all participants in the PIPE Transaction contains terms no more favorable than Purchaser’s agreement
and are acquiring the securities being offered thereunder at the same per share price as Purchaser. Neither the Sponsor nor the Company shall enter into any arrangement, agreement, side letter or other understanding containing terms relating to the
PIPE Transaction that are more favorable to the counterparty or offeree than the terms offered to Purchaser before first offering such terms to Purchaser.
11. General Provisions.
a. Notices. All notices and other communications given
or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt, or (i) personal delivery to the party to be notified, (ii) when sent, if sent by electronic mail or facsimile (if any)
during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next Business Day, (iii) five (5) Business Days after having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (iv) one (1) Business Day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next Business Day delivery, with written verification of receipt. All communications sent to the Company shall be
sent to: Scott D. Fisher, Steptoe & Johnson LLP, 1114 Avenue of the Americas, New York, New York 10036 or sfisher@steptoe.com, with a copy to Michael W. Zarlenga, PROOF Sponsor Management, LLC, 11911 Freedom Drive, Suite 1080, Reston, VA
20190 or michael@proof.vc. All communications to the Purchaser shall be sent to the Purchaser’s address as set forth on the signature page hereto, or to such email address, facsimile number (if any) or address as subsequently modified by written
notice given in accordance with this Section 11.a.
b. No Finder’s Fees. Each party represents that it
neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. The Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a
finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Purchaser or any of its officers, employees, or representatives are responsible. The Company
agrees to indemnify and hold harmless the Purchaser from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its officers, employees, or representatives is responsible.
c. Survival. All of the representations and warranties
contained herein shall survive the consummation of the transactions contemplated by this Agreement.
d. Entire Agreement. This Agreement, together with any
other documents, instruments, and writings that are delivered pursuant hereto or referenced herein, constitutes the entire agreement and understanding of the parties hereto in respect of its subject matter and supersedes all prior understandings,
agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated hereby.
e. Successors. All of the terms, agreements,
covenants, representations, warranties, and conditions of this Agreement are binding upon, and inure to the benefit of and are enforceable by, the parties hereto and their respective successors. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this
Agreement.
f. Assignments. Except as otherwise specifically
provided herein, no party hereto may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other party.
g. Counterparts. This Agreement may be executed in two
or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument.
h. Headings. The section headings contained in this
Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement.
i. Governing Law. This Agreement, the entire
relationship of the parties hereto, and any litigation between the parties (whether grounded in contract, tort, statute, law, or equity) shall be governed by, construed in accordance with, and interpreted pursuant to the laws of the State of New
York, without giving effect to its choice of laws principles.
j. Jurisdiction. The parties hereby irrevocably and
unconditionally (i) submit to the jurisdiction of the state courts of New York and the United States District Court for the Southern District of New York for the purpose of any suit, action, or other proceeding arising out of or based upon this
Agreement, (ii) agree not to commence any suit, action, or other proceeding arising out of or based upon this Agreement except in state courts of New York or the United States District Court for the Southern District of New York, and (iii) waive, and
agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action, or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from
attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such
court.
k. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY
WAIVE ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION PURSUANT TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.
l. Amendments. This Agreement may not be amended,
modified or waived as to any particular provision, except with the prior written consent of the Company and the Purchaser.
m. Severability. The provisions of this Agreement will
be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any party hereto or to any
circumstance, is adjudged by a governmental authority, arbitrator, or mediator not to be enforceable in accordance with its terms, the parties hereto agree that the governmental authority, arbitrator, or mediator making such determination will have
the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and/or to delete specific words or phrases, and in its reduced form, such provision will then be enforceable and will be enforced.
n. Expenses. Each of the Company, the Sponsor, and the
Purchaser will bear its own costs and expenses incurred in connection with the preparation, execution, and performance of this Agreement and the consummation of the transactions contemplated hereby, including all fees and expenses of agents,
representatives, financial advisors, legal counsel, and accountants, except that the Sponsor will be responsible for the Purchaser’s legal fees in an amount up to $20,000. The Company shall be responsible for the fees of its transfer agent, stamp
taxes, and all of The Depository Trust Company’s fees associated with the issuance of the Securities and the securities issuable upon conversion or exercise of the Securities.
o. Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties hereto and no presumption or burden of proof will arise
favoring or disfavoring any party hereto because of the authorship of any provision of this Agreement. Any reference to any federal, state, local, or foreign law will be deemed also to refer to law as amended and all rules and regulations promulgated
thereunder, unless the context requires otherwise. The words “include,” “includes,” and “including” will be deemed to be followed by “without limitation.” Pronouns in masculine, feminine, and neuter genders will be construed to include any other
gender, and words in the singular form will be construed to include the plural and vice versa, unless the context otherwise requires. The words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties hereto intend that each representation, warranty, and covenant contained herein will have independent significance. If any party hereto has breached
any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which such
party hereto has not breached will not detract from or mitigate the fact that such party hereto is in breach of the first representation, warranty, or covenant.
p. Waiver. No waiver by any party hereto of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, may be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any
rights arising because of any prior or subsequent occurrence.
q. Specific Performance. Each party hereto agrees that
irreparable damage may occur in the event any provision of this Agreement was not performed by the other party hereto in accordance with the terms hereof and that such party shall be entitled to specific performance of the terms hereof, in addition
to any other remedy at law or equity.
r. No Third-Party Beneficiaries. This Agreement is
for the sole benefit of the parties hereto (and their respective successors and permitted assigns) and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
s. Confidentiality. Except as may be required by law,
regulation, or applicable stock exchange listing requirements (but subject in any case to the provisions of Section 10.g. hereof), unless and until the transactions contemplated hereby and the terms hereof are publicly announced or otherwise
publicly disclosed by the Company, the parties hereto shall keep confidential and shall not publicly disclose the existence or terms of this Agreement. Notwithstanding the foregoing, the Purchaser shall be permitted to disclose any information to its
affiliates and its and their respective directors, officers, employees, advisors, direct or indirect owners, agents, and representatives, in each case so long as such Person has been advised of the confidentiality obligations hereunder; provided that
the Purchaser shall be liable for any breach of such confidentiality obligations by any such Person.
t. Termination. This Agreement shall terminate and be
void and of no further force and effect, and all rights and obligations of the parties hereunder shall terminate without any further liability on the part of any party in respect thereof, upon the earliest to occur of (a) the mutual written agreement
of each of the parties hereto to terminate this Agreement, (b) if the actual number of Public Units offered and sold in the IPO is less than 20,000,000, then any of the Purchaser, the Company, or the Sponsor may, each in its sole discretion,
terminate this Agreement upon written notice to the other parties hereto (which notice may be made by e-mail), and (c) automatically without any action by the parties if the IPO Closing has not occurred on or before December 31, 2021.
[Signature page follows]
IN WITNESS WHEREOF, the undersigned have executed this Agreement to be effective as of
the date first set forth above.
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COMPANY:
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PROOF ACQUISITION CORP I
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By John C. Backus, Jr.
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Its President and Chief Executive Officer
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SPONSOR:
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PROOF ACQUISITION SPONSOR I, LLC
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By PROOF Sponsor Management, LLC
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Its Manager
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By John C. Backus, Jr.
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Its Managing Member
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[Signature Page to Subscription Agreement]
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PURCHASER:
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[___]
By: [__]
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Name:
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Title:
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Purchaser’s Address for Notices:
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c/o BlackRock
55 East 52nd Street
New York, NY 10055
Attn: [__]
with a copy (which shall not constitute notice) to:
c/o BlackRock, Inc.
Office of the General Counsel
40 East 52nd Street, New York, NY 10022
Attn: David Maryles and Reid Fitzgerald
Email: [__]
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[Signature Page to Subscription Agreement]
Schedule A
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Number of
Subscribed Securities
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Initial Purchase Price
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Founder Shares
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[__]
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$[__]
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Private Placement Warrants
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[__]*
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$[__]
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* If the Over-allotment Option is exercised, the Purchaser agrees to purchase (i) up to an additional $[__] of Founder Shares at a price of $[__] per share (or up to [__] Founder Shares) and (ii) up to an additional $[__]
of Private Placement Warrants at a price of $1.00 per warrant (or up to [__] Private
Placement Warrants), in the same proportion as the amount of the Over-allotment Option that is exercised.
Exhibit
23.1
Independent
Registered Public Accounting Firm’s Consent
We
consent to the inclusion in this Registration Statement of PROOF Acquisition Corp I (the “Company”) on Form S-1 of
our report dated May 28, 2021, except for Note 4 and the second paragraph of Note 8 as to which the date is October 15, 2021,
which includes an explanatory paragraph as to the Company’s ability to continue as a going concern with respect to our audit
of the financial statements of PROOF Acquisition Corp I as of March 31, 2021 and for the period from March 16, 2021 (inception)
through March 31, 2021, which report appears in the Prospectus, which is part of this Registration Statement. We also consent
to the reference to our Firm under the heading “Experts” in such Prospectus.
/s/
Marcum llp
Marcum
llp
Hartford,
CT
November
12, 2021