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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED December 31, 2006
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to _______________
COMMISSION FILE NUMBER: 001-33279
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NTR ACQUISITION CO.
(Exact name of registrant as specified in its charter)
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Delaware 13-4335685
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Mill Plain Road, Suite 320
Danbury, CT 06811
(Address of principal executive office)
(203) 546-3437
(Registrant's telephone number, including area code)
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Securities Registered Pursuant to Section 12(b) of the Act:
Title of each Class Name of each Exchange on which Registered
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Units, each consisting of one share of Common Stock,
$0.001 par value, and One Warrant American Stock Exchange
Common Stock, $0.001 par value American Stock Exchange
Warrants to Purchase Common Stock American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
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Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes |_| No |X|
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes |_| No |X|
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one): Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer
|X|
Indicate by check mark if whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes |X| No |_|
Based on the closing price as reported on the American Stock Exchange, the
aggregate market value of the Registrant's common stock held by non-affiliates
on March 28, 2007 was approximately $224.2 million. Shares of common stock held
by each executive officer and director and by each stockholder affiliated with a
director or an executive officer have been excluded from this calculation
because such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
The number of outstanding shares of the Registrant's common stock as of March
28, 2007 was 24,557,205.
Documents Incorporated by Reference
Registrant's Registration Statement on Form S-1 (File No. 333-135394).
SAFE HARBOR STATEMENT
This Annual Report on Form 10-K contains statements relating to future
results of NTR Acquisition Co. (including certain projections and business
trends) that are "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and are subject to the "safe harbor" created
by those sections. Forward-looking statements frequently are identifiable by the
use of words such as "may," "should," "could," "would," "expect," "plan,"
"anticipate," "believe," "estimate," "continue," or the negative of such terms
and other similar expressions. Our actual results may differ materially from
those projected as a result of certain risks and uncertainties. These risks and
uncertainties include, but are not limited to, those set forth in Item 1A. Risk
Factors and elsewhere in this Annual Report on Form 10-K and those detailed from
time to time in our other filings with the Securities and Exchange Commission.
These forward-looking statements are made only as of the date hereof, and we
undertake no obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise.
PART I
Item 1. Business
General Development Of The Business
References to "we", "us", or the "Company" are to NTR Acquisition Co.
We are a blank check company incorporated in Delaware on June 2, 2006. We
were formed to acquire, through a merger, capital stock exchange, asset
acquisition or other similar business combination, which we refer to as our
"initial business combination," one or more businesses or assets in the energy
industry, with a particular focus on businesses or assets involved in the
refining, distribution and marketing of petroleum products in North America. On
February 5, 2007, we completed our initial public offering of 24,000,000 units,
and on February 22, 2007, we completed the closing of an additional 557,205
units that were subject to the underwriter's over-allotment option. Each Unit
consists of one share of our common stock and one warrant entitling the holder
to purchase one share of our common stock at a price of $7.50. Beginning
February 23, 2007, our common stock and warrants began trading separately on the
American Stock Exchange. The public offering price of each unit was $10.00, and
we generated total gross proceeds of approximately $245.57 million in the
initial public offering (including proceeds from the exercise of the
over-allotment option and excluding the proceeds from the offering of $3.35
million founders' warrants received upon consummation of our initial public
offering). Of the gross proceeds: (i) we deposited $234,274,168 into a trust
account (the "Trust Account") at Morgan Stanley & Co., Inc., maintained by
American Stock Transfer & Trust Company as Trustee, which included $7.37 million
of deferred underwriting fees; (ii) the underwriters received $9.82 million as
underwriting fees (excluding the deferred underwriting fees); (iii) we retained
$975,000 for offering expenses and (iv) we also retained $500,000 to fund
initial working capital. In addition, we deposited into the Trust Account total
gross proceeds of $5,850,000 consisting of gross proceeds from the issuance and
sale of 3,350,000 warrants to certain officers and directors and affiliates of
officers and directors of the Company, which was consummated concurrently with
the closing of the initial public offering, and the issuance and sale of
2,500,000 founders' warrants to certain officers and directors and affiliates of
officers and directors of the Company, which was consummated prior to the
closing of the initial public offering.
Our business plan is based on capturing the cost advantages of heavy, sour
crude oil relative to light, sweet crude oil as a raw material to manufacture
refined products. As we evaluate initial business combinations in the energy
industry, we will seek to capitalize on investment opportunities in the
petroleum refining and related industries presented by the widening of the price
differentials between light, sweet crude oil and heavy, sour crude oil and the
associated cost benefits accruing to refineries capable of processing heavy,
sour crude oils. North America will be our primary geographic focus, but we may
also seek to acquire refineries or interests in other assets in any other
markets in which we believe we could be competitive.
In implementing our business plan, we intend to leverage the extensive
contacts and relationships of our officers and directors, who together have
nearly 120 years of experience in the energy business, to source, evaluate and
manage potential investment opportunities.
While we may seek to acquire more than one business or asset, which we
refer to as our "target business" or "target businesses," our initial business
combination must involve one or more target businesses having a fair market
value, individually or collectively, equal to at least 80% of the balance in the
Trust Account (excluding deferred underwriting discounts and commissions of
$7.37 million). If our initial business combination involves a transaction in
which we acquire less than a 100% interest in the target business, the value of
the interest that we acquire will be equal to at least 80% of the balance in the
Trust Account (excluding deferred underwriting discounts and commissions of
$7.37 million).
After completion of our initial public offering, we began contacting a
number of owners of refining assets to describe our strategy and discuss
potential transactions. We have also held discussions with a number of
investment banks, private equity firms and other business contacts. We have
explained our business strategy and acquisition criteria to those parties, and
remain actively engaged in our business development efforts. We have not
retained an investment banking firm or similar advisory group to conduct a
formal search for an initial business combination. Certain potential targets
were considered unsuitable by management because such targets do not fully fit
our business strategy.
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Effecting A Business Combination
General
We are not presently engaged in, and we will not engage in, any operations
for an indefinite period of time following our initial public offering. We
intend to utilize the cash proceeds of the sale of the founders' securities and
our initial public offering, our capital stock, debt or a combination of these
as the consideration to be paid in an initial business combination. If we engage
in an initial business combination with a target business using our capital
stock or debt financing to fund the combination, proceeds from our initial
public offering will then be used to undertake additional acquisitions or to
fund the operations of the target business on a post-combination basis. We may
engage in an initial business combination with a company that does not require
significant additional capital but is seeking a public trading market for its
shares, and which wants to merge with an already public company to avoid the
uncertainties associated with undertaking its own public offering. These
uncertainties include time delays, compliance and governance issues, significant
expense, a possible loss of voting control, and the risk that market conditions
will not be favorable for an initial public offering at the time the offering is
ready to be commenced. We may seek to effect a business combination with more
than one target business, although our limited resources may serve as a
practical limitation on our ability to do so. Although our initial business
combination may be structured as a purchase of operating assets, we expect that
it will in all cases constitute an acquisition of a "business" under the
applicable rules of the Securities and Exchange Commission.
We Have Identified A Target Business
Prior to the founding of our company, our initial stockholder, NTR
Partners LLC, commissioned and obtained from a consulting firm a report in order
to validate one of the premises of our business plan--that the capital cost of
upgrading an existing refinery to process heavy, sour crude oils could, in an
appropriate case, be economically justified by the resulting ability to take
advantage of the light/heavy and the sweet/sour differentials. That report
screened a large selection of U.S. refineries and identified a number of
refineries that would be suitable for processing heavy, sour crude oils but are
either not currently equipped to do so or might have potential to increase
capacity to do so. The report supported our view that opportunities exist in the
U.S. refining industry to process increased production of heavy, sour crude oils
economically. However, the report did not address whether any existing
refineries are available for acquisition or the potential cost of any such
acquisition, and so did not assess the overall economic feasibility of our
acquisition-based business plan or provide the information necessary to identify
and evaluate particular refineries as potential acquisition targets.
Since completing our initial public offering, we have identified and
entered into preliminary, confidential discussions with certain target
businesses with respect to which we may pursue an initial business combination.
These target businesses are not discussing opportunities exclusively with us and
are accepting offers from competitive bidders. Our discussions may or may not
result in the consummation of our initial business combination and any such
transaction or transactions would only occur after completing financial,
operational, environmental and legal due diligence, and will be subject to the
negotiation and execution of definitive agreements governing the terms and
conditions of such transactions, as well as compliance with other terms and
conditions (including obtaining shareholder approval) for the business
combination as set forth in our Prospectus. We have not engaged or retained any
agent or representative to identify a suitable acquisition candidate, to conduct
any research or take any measures, directly or indirectly, to locate or contact
a target business. Should our negotiations with the present target businesses
fail to produce an initial business combination, we will continue to pursue
other potential candidates for a potential acquisition. We may also seek out
other potential targets during the course of our negotiations with these or any
other target company, subject to any applicable restrictions on our ability to
do so in any preliminary agreement we may enter into as part of the current
discussions.
Subject to the limitations that a target business has a fair market value
of at least 80% of our net assets at the time of the initial business
combination, as described below in more detail, and that is primarily focused on
the refining, distribution and marketing of petroleum products in North America,
we have virtually unrestricted flexibility in identifying and selecting one or
more prospective target businesses. To the extent we effect a business
combination with a financially unstable company, we may be affected by numerous
risks inherent in the business and operations of financially unstable companies.
Sources Of Target Businesses
We expect that our principal means of identifying potential target
businesses will be through the extensive contacts and relationships of our
officers and directors within the energy industry. While our officers are not
required to commit to our business on a full-time basis and our directors have
no commitment to spend any time in identifying or performing due diligence on
potential target businesses, our officers and directors believe that the
relationships they have developed over their careers may generate a number of
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potential investment opportunities that will warrant further investigation.
Various unaffiliated parties, such as investment banking firms, venture capital
funds, private equity funds, leveraged buyout funds, management buyout funds and
similar sources, may also bring potential target businesses to our attention. As
described above under "We have identified a target business," our initial
stockholder commissioned and obtained a report that screened a large selection
of U.S. refineries. Because of the broad universe of refineries covered by the
report, it is likely that we will contact the management and owners of some of
those refineries. However, because the scope of that report did not include an
assessment of the availability or valuation of any refinery, we do not know at
this time whether any of those refineries would be available for acquisition or
on what terms.
We have not, nor do we plan to retain an investment bank or other agent to
identify potential acquisition opportunities for us. However, we may pay fees or
compensation to third parties for their efforts in introducing us to potential
target businesses that we have not previously identified. Such payments are
typically, although not always, calculated as a percentage of the dollar value
of the transaction. We have not anticipated use of a particular percentage fee,
but instead will seek to negotiate the lowest reasonable percentage fee
consistent with the attractiveness of the opportunity and the alternatives, if
any, that are then available to us. Payment of finder's fees is customarily tied
to completion of a transaction. Although it is possible that we may pay finder's
fees in the case of an uncompleted transaction, we consider this possibility to
be extremely remote. In no event will we pay any of our officers or directors or
any entity with which they or we are affiliated any finder's fee or other
compensation for services rendered to us prior to or in connection with the
consummation of an initial business combination. In addition, none of our
officers or directors or any entity with which they are affiliated will receive
any finder's fee, consulting fees or any similar fees from any person or entity
in connection with any initial business combination involving us other than any
compensation or fees that may be received for any services provided following
such initial business combination.
Selection Of A Target Business And Structuring Of A Business Combination
Subject to the requirement that our initial business combination must be
with a target business with a fair market value that is at least 80% of the
balance in the Trust Account (excluding deferred underwriting discounts and
commissions of $7.37 million) at the time of such initial business combination,
our management will have virtually unrestricted flexibility in identifying and
selecting a prospective target business. If our initial business combination
involves a transaction in which we acquire less than a 100% interest in the
target business, the value of the interest that we acquire will be equal to at
least 80% of the balance in the Trust Account (excluding deferred underwriting
discounts and commissions of $7.37 million). We are presently involved in
preliminary, confidential negotiations with certain target businesses which, if
our initial business combination with any such company were consummated as of
March 28, 2007, would satisfy these requirements in the opinion of management
based on information provided to us by such target businesses.
In evaluating a prospective target business, our management primarily
considers a variety of criteria and guidelines, including the following:
o condition of target assets and assessment of any capital requirements,
necessary infrastructure and facility improvements;
o ability to access heavy, sour crude oil supplies;
o local supply/demand dynamics for crude oil, other feedstocks and refined
products in the region in which the target business is located;
o financial condition and results of operations;
o assessment of potential environmental liabilities;
o nature and terms of any pre-existing supply or distribution agreements;
o access to distribution and logistics infrastructure;
o market growth potential;
o experience and skill of management and availability of additional
personnel;
o impact of regulation on the business and local permit requirements for any
necessary upgrades or expansion projects; and
o costs associated with effecting the proposed initial business combination.
As part of our evaluation criteria, we assess the current financial
condition of a refinery or other target business and the potential impact that
incremental investments in processing capacity may have on its future financial
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condition. Our key focus is what incremental financial benefit can be derived
from investing in additional processing capacity, regardless of the target's
current financial condition. If a target refinery is financially healthy but
shows limited expected returns from incremental investments in processing
capacity, then such a refinery may be less attractive to us than one that is in
weaker financial condition but demonstrates larger potential returns from
incremental investments in additional processing capacity.
These criteria are not intended to be exhaustive. Any evaluation relating
to the merits of a particular initial business combination is based, to the
extent relevant, on the above factors as well as other considerations deemed
relevant by our management to our business objective. In evaluating a
prospective target business, we expect to conduct an extensive due diligence
review which will encompass, among other things, meetings with incumbent
management and employees, document reviews, interviews of customers and
suppliers, inspection of facilities, as well as review of financial and other
information which will be made available to us.
The time required to select and evaluate a target business and to
structure and complete the initial business combination, and the costs
associated with this process, are not currently ascertainable with any degree of
certainty. We expect that due diligence of prospective target businesses will be
performed by some or all of our officers and directors, and also that it may
include engaging market research firms or third-party consultants, who may
assist us with performing due diligence and valuations of the target company.
Any costs incurred with respect to the identification and evaluation of a
prospective target business with which a potential or initial business
combination is not ultimately completed will result in our incurring losses and
will reduce the funds we can use to complete an initial business combination. We
will not pay any finders' or consulting fees to our officers or directors, or
any of their respective affiliates, for services rendered to or in connection
with an initial business combination.
Fair Market Value Of Target Business Or Businesses
The initial target business or businesses with which we combine must have
a collective fair market value equal to at least 80% of the balance in the Trust
Account (excluding deferred underwriting discounts and commissions of $7.37
million) at the time of such initial business combination. We may seek to
consummate our initial business combination with a target business or businesses
with a collective fair market value in excess of 80% of the balance in the Trust
Account. However, we would likely need to obtain additional financing to
consummate such an initial business combination, and there is no assurance we
would be able to obtain such financing.
Our management believes (based on their preliminary assessment of the
potential universe of acquisition candidates and their collective experience)
that the net proceeds from our initial public offering will provide us with
sufficient equity capital to execute our business plan. We believe that this
amount of equity capital, plus the possibility of using both cash and stock to
make an acquisition, will give us substantial flexibility in selecting an
acquisition target and structuring our initial business combination.
In contrast to many other blank check companies that must combine with one
or more target businesses that have a fair market value equal to 80% or more of
the acquiring company's net assets, we will not combine with a target business
or businesses unless the fair market value of such entity or entities meets a
minimum valuation threshold of 80% of the amount in the Trust Account (excluding
deferred underwriting discounts and commissions of $7.37 million). We have used
this criterion to provide stockholders and our officers and directors with
greater certainty as to the fair market value that a target business or
businesses must have in order to qualify for our initial business combination.
The determination of net assets requires an acquiring company to have deducted
all liabilities from total assets to arrive at the balance of net assets. Given
the ongoing nature of legal, accounting, stockholder meeting and other expenses
that will be incurred immediately before and at the time of an initial business
combination, the balance of the target company's total liabilities may be
difficult to ascertain at a particular point in time with a high degree of
certainty. Accordingly, we have decided to use the valuation threshold of 80% of
the amount in the Trust Account (excluding deferred underwriting discounts and
commissions of $7.37 million) for the fair market value of the target business
or businesses with which we combine so that our officers and directors will have
greater certainty when selecting, and our stockholders will have greater
certainty when voting to approve or disapprove, a proposed initial business
combination with a target business or businesses that such target business or
businesses will meet the minimum valuation criterion for our initial business
combination. If our initial business combination involves a transaction in which
we acquire less than a 100% interest in the target business, the value of the
interest that we acquire will be equal to at least 80% of the balance in the
Trust Account (excluding deferred underwriting discounts and commissions of
$7.37 million). If our initial business combination involves a transaction in
which we exchange out shares for shares in another company, we will determine
whether the 80% threshold has been met on the basis of the market price of the
target company's shares, if those shares are publicly traded, or on the basis of
our board of directors' determination of the fair market value of the target
company shares we receive, based on their valuation of the target company as
described below.
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Our board of directors will perform its own valuations and analyses in
seeking to determine whether the target has a fair market value of at least 80%
of the balance in the Trust Account (excluding deferred underwriting discounts
and commissions of $7.37 million) at the time of the proposed business
combination. Our board of directors will base its determination upon standards
generally accepted by the financial community, such as actual and potential
gross margins, the values of comparable businesses, earnings and cash flow, and
book value. The board of directors will make its assessment based on all
relevant information available at the time, which may differ on a case-by-case
basis depending on the specific nature of the target and the structure of the
transaction, including the projected performance of the target based on its
potential under our business plan (as determined based upon standards generally
accepted by the financial community, as well as the criteria discussed under
"Selection Of A Target Business And Structuring Of A Business Combination"
above). Accordingly, we cannot predict at this time the precise information that
the board of directors will provide to stockholders regarding the valuation of a
particular target, other than whether it meets the 80% threshold criterion. If
our board is not able to determine independently that the target business has a
sufficient fair market value to meet the threshold criterion, we will obtain an
opinion in that regard from an unaffiliated, independent investment banking firm
which is a member of the National Association of Securities Dealers, Inc. We
expect that any such opinion would be included in our proxy soliciting materials
furnished to our stockholders in connection with the stockholder vote on our
initial business combination, and that such independent investment banking firm
will be a consenting expert. We will not be required to obtain an opinion from
an investment banking firm as to the fair market value of the business if our
board of directors independently determines that the target business or
businesses has sufficient fair market value to meet the threshold criterion. In
addition, if our board of directors has informed stockholders that it believes
that a target business meets the 80% threshold criterion, the board will not be
otherwise required to provide stockholders with valuations and analyses or
quantify the value of any target. However, if our board of directors makes a
specific determination of the estimated value of a target, we will disclose that
estimated value to our stockholders when we seek approval of our initial
business combination. Our board will also provide any other material information
in our possession regarding the proposed transaction, including any revised
estimate of the cost to upgrade any refinery we acquire, if applicable. If our
board is unable to make a determination as to the value of the target other than
that it meets the 80% threshold, stockholders will have to rely solely upon that
statement for a quantification of the value of the target business. However, we
believe our board of directors would be unlikely to propose an initial business
combination to our stockholders if the board is not able to obtain and
adequately process enough information about the target business to provide
stockholders with an estimated value of the target business. Further, in the
event that we issue shares in order to acquire a target business and such
issuance causes our stockholders to become minority stockholders, we will not be
required to obtain an opinion or independently opine on whether the transaction
is fair to our stockholders. However, we expect that our board of directors will
propose an initial business combination to our stockholders only if the
transaction has been recommended by the board as fair to and in the best
interests of the stockholders, and informed the stockholders of such
recommendation.
Lack Of Business Diversification
While we may seek to effect business combinations with more than one
target business, our initial business combination must involve one or more
target businesses whose collective fair market value meets the criteria
discussed above at the time of such initial business combination. Consequently,
we expect to complete only a single initial business combination, although this
may entail a simultaneous combination with several operating businesses. At the
time of our initial business combination, we may not be able to acquire more
than one target business because of various factors, including complex
accounting or financial reporting issues. For example, we may need to present
pro forma financial statements reflecting the operations of several target
businesses as if they had been combined historically.
A simultaneous combination with several target businesses also presents
logistical issues, such as the need to coordinate the timing of negotiations,
proxy statement disclosure and closings. In addition, if conditions to closings
with respect to one or more of the target businesses are not satisfied, the fair
market value of the businesses could fall below the required fair market value
threshold described above.
Accordingly, while it is possible that our initial business combination
may involve more than one target business, we are more likely to choose a single
target business if all other factors appear equal. This means that for an
indefinite period of time, the prospects for our success may depend entirely on
the future performance of a single target business. Unlike other entities that
have the resources to complete business combinations with multiple entities in
one or several industries, it is probable that we will not have the resources to
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diversify our operations and mitigate the risks of being in a single line of
business. By consummating our initial business combination with only a single
entity, our lack of diversification may subject us to negative economic,
competitive and regulatory developments, in the particular industry in which we
operate after our initial business combination. As discussed above, we are
presently involved in preliminary, confidential negotiations with certain target
businesses any of which would satisfy the requirements in our Prospectus for an
initial business combination with a single entity.
If we complete our initial business combination structured as a merger in
which the consideration is our stock, we could have a significant amount of cash
available to make subsequent add-on acquisitions.
Limited Ability To Evaluate The Target Business' Management
We will independently evaluate the quality and experience of the existing
management of a target business and will make an assessment as to whether or not
they should be replaced on a case-by-case basis. As an example, a refinery in
weak financial condition may be experiencing difficulties because of its
capitalization and not because of its operations, in which case operating
management may not need to be replaced.
Although we intend to closely scrutinize the management of a prospective
target business when evaluating the desirability of effecting an initial
business combination with that business, we cannot assure you that our
assessment of the target business' management will prove to be correct. In
addition, we cannot assure you that management of the target business will have
the necessary skills, qualifications or abilities to manage a public company.
Furthermore, the future role of our officers and directors, if any, in the
target business cannot presently be stated with any certainty. While it is
possible that one or more of our officers and directors will remain associated
in some capacity with us following our initial business combination, a final
determination of their continued involvement with the business upon completion
of an initial business combination will be made jointly with our board of
directors and based on the facts and circumstances at the time. The goal of our
board of directors will be to ensure that they select the best management team
to pursue our business strategy. If they determine that the incumbent management
of an acquired business should be replaced and that one or more of our officers
and directors is the best available replacement, it is possible that some of our
officers or directors will devote some or all of their efforts to our affairs
subsequent to our initial business combination.
Following our initial business combination, we may seek to recruit
additional managers to supplement the incumbent management of the target
business. We cannot assure you that we will have the ability to recruit
additional managers, or that additional managers will have the requisite skills,
knowledge or experience necessary to enhance the incumbent management.
Opportunity For Stockholder Approval Of Business Combination
Prior to the completion of our initial business combination, we will
submit the transaction to our stockholders for approval, even if the nature of
the transaction is such as would not ordinarily require stockholder approval
under applicable state law. At the same time, we will submit to our stockholders
for approval a proposal to amend our amended and restated certificate of
incorporation to permit our continued corporate existence if the initial
business combination is approved and consummated. The quorum required to
constitute this meeting, as for all meetings of our stockholders in accordance
with our bylaws, is a majority of our issued and outstanding common stock
(whether or not held by public stockholders). We will consummate our initial
business combination only if the required number of shares is voted in favor of
both the initial business combination and the amendment to extend our corporate
life. If a majority of the shares of common stock voted by the public
stockholders are not voted in favor of a proposed initial business combination,
we may continue to seek other target businesses with which to effect our initial
business combination that meet the criteria set forth above until January 30,
2009, the date upon which our dissolution will commence. In connection with
seeking stockholder approval of our initial business combination, we will
furnish our stockholders with proxy solicitation materials prepared in
accordance with the Exchange Act, which, among other matters, will include a
description of the operations of the target business and audited historical
financial statements of the target business based on United States generally
accepted accounting principles. The failure by public stockholders to vote their
common shares in favor of or against the business combination, or a "non-vote"
of such shares, will have no effect on the outcome of the vote on the
transaction, unless such failure to vote results in the lack of a quorum, which
would prevent the vote from being taken until a proper quorum could be
constituted in accordance with our bylaws.
In connection with the stockholder vote required to approve our initial
business combination, our founders have agreed to vote the initial founders'
shares in accordance with a majority of the shares of common stock voted by the
public stockholders. Each of the holders of the founders' securities and each of
our officers and directors has also agreed that for shares of common stock
acquired by it, he or she in or following the initial public offering, such
acquirer will vote all such acquired shares in favor of our initial business
combination. As a result, neither the holders of the founders' securities nor
any of our officers or directors will be able to exercise the conversion rights
with respect to any of our shares that it, he or she may have acquired prior to,
6
in or after the initial public offering. We will proceed with our initial
business combination only if a quorum is present at the stockholders' meeting
and, as required by our second amended and restated certificate of
incorporation, a majority of the shares of common stock voted by the public
stockholders in person or by proxy are voted in favor of our initial business
combination and stockholders owning less than 20% of the shares sold in the
initial public offering exercise their conversion rights. Under the terms of the
Company's second amended and restated certificate of incorporation, this
provision may not be amended without the unanimous consent of the Company's
stockholders prior to consummation of an initial business consummation. Even
though the validity of unanimous consent provisions under Delaware law has not
been settled, the Company believes it has an obligation to structure and
consummate a business combination in which public stockholders holding less than
20% of the total shares outstanding may exercise their conversion rights and the
business combination will still go forward. Neither we nor our board of
directors will propose any amendment to this 20% threshold, or support, endorse
or recommend any proposal that stockholders amend this threshold. Provided that
a quorum is in attendance at the meeting, in person or by proxy, a failure by
public stockholders to vote their common shares in favor of or against the
initial business combination, or a "non-vote" of such shares, will have no
effect on the outcome of the vote on the transaction. In accordance with our
bylaws, we will give our stockholders between 10 and 60 days' notice of a
stockholders' meeting, or at least 20 days' notice if the initial business
combination transaction is structured as a merger, in accordance with Delaware
law. Voting against our initial business combination alone will not result in
conversion of a stockholder's shares into a pro rata share of the Trust Account.
In order for a shareholder to convert his or her shares, a stockholder must also
exercise the conversion rights described below.
Conversion Rights
At the time we seek stockholder approval of our initial business
combination, we will offer our public stockholders the right to have their
shares of common stock converted to cash if they vote against the business
combination and the business combination is approved and completed. The actual
per-share conversion price will be equal to the aggregate amount then on deposit
in the Trust Account (before payment of deferred underwriting discounts and
commissions and including accrued interest, net of any income taxes payable on
such interest, which shall be paid from the Trust Account, and net of interest
income of up to $3.25 million previously released to us to fund our working
capital requirements), calculated as of two business days prior to the
consummation of the proposed initial business combination, divided by the number
of shares sold in our initial public offering. The initial per-share conversion
price would be approximately $9.78, or $0.22 less than the per-unit offering
price of $10.00. A public stockholder may request conversion at any time after
the mailing to our stockholders of the proxy statement and prior to the vote
taken with respect to a proposed initial business combination at a meeting held
for that purpose, but the request will not be granted unless the stockholder
votes against our initial business combination and our initial business
combination is approved and completed. If stockholders vote against our initial
business combination but do not properly exercise their conversion rights, such
stockholders will not be able to convert their shares of common stock into cash
at the conversion price. Any request for conversion, once made, may be withdrawn
at any time up to the date of the meeting. We anticipate that stockholders who
validly elect conversion will receive the funds to which they are entitled
promptly after completion of our initial business combination. Public
stockholders who obtained their stock in the form of units and who subsequently
convert their stock into their pro rata share of the Trust Account will continue
to have the right to exercise the warrants that they received as part of the
units. We will not complete our proposed initial business combination if public
stockholders owning 20% or more of the shares sold in the initial public
offering exercise their conversion rights.
The initial conversion price will be approximately $9.78. As this amount
is lower than the $10.00 per unit offering price and it may be less than the
market price of a share of our common stock on the date of conversion, there may
be a disincentive to public stockholders to exercise their conversion rights.
If the initial business combination is not approved or completed for any
reason, then public stockholders voting against our initial business combination
who sought to exercise their conversion rights would not be entitled to convert
their shares of common stock into a pro rata share of the aggregate amount then
on deposit in the Trust Account. Those public stockholders would be entitled to
receive their pro rata share of the aggregate amount on deposit in the Trust
Account only in the event that the initial business combination they voted
against was duly approved and subsequently completed, or in connection with our
dissolution and liquidation.
Dissolution And Liquidation If No Business Combination
Our second amended and restated certificate of incorporation provides that
we will continue in existence only until January 30, 2009. If we consummate our
initial business combination prior to that date, we will amend this provision to
7
permit our continued existence. If we have not completed our initial business
combination by that date, our corporate existence will cease except for the
purposes of winding up our affairs and liquidating pursuant to Section 278 of
the Delaware General Corporation Law. Because of this provision in our second
amended and restated certificate of incorporation, no resolution by our board of
directors and no vote by our stockholders to approve our dissolution would be
required for us to dissolve and liquidate. Instead, we will notify the Delaware
Secretary of State in writing on the termination date that our corporate
existence is ceasing, and include with such notice payment of any franchise
taxes then due to or assessable by the state.
If we are unable to complete a business combination by January 30, 2009,
we will automatically dissolve and as promptly as practicable thereafter adopt a
plan of dissolution and distribution in accordance with Section 281(b) of the
Delaware General Corporation Law. Section 281(b) will require us to pay or make
reasonable provision for all then-existing claims and obligations, and to make
such provision as will be reasonably likely to be sufficient to provide
compensation for any then-pending claims and for claims that have not been made
known to us or that have not arisen but that, based on facts known to us at the
time, are likely to arise or to become known to us within 10 years after the
date of dissolution. Under Section 281(b), the plan of distribution must provide
for all of such claims to be paid in full or make provision for payments to be
made in full, as applicable, if there are sufficient assets. If there are
insufficient assets, the plan must provide that such claims and obligations be
paid or provided for according to their priority and, among claims of equal
priority, ratably to the extent of legally available assets. Any remaining
assets will be available for distribution to our stockholders.
We expect that all costs and expenses associated with implementing our
plan of dissolution and liquidation, as well as payments to any creditors, will
be funded from amounts remaining out of the $3.25 million in interest income on
the balance of the Trust Account that may be released to us to fund our working
capital requirements. However, if those funds are not sufficient to cover the
costs and expenses associated with implementing our plan of dissolution and
liquidation, to the extent that there is any interest accrued in the Trust
Account that is not required to pay income taxes on interest income earned on
the Trust Account balance, we may request that the Trustee release to us an
additional amount of up to $75,000 of such accrued interest to pay those costs
and expenses. Should there be no such interest available or should those funds
still not be sufficient, Mr. Gilliam, Mr. Hantke, Mrs. Hendricks, Mr. Ortale and
Mr. Rodriguez will agree in a letter agreement to be executed in connection with
our initial public offering to reimburse us for our out-of-pocket costs
associated with our dissolution and liquidation, excluding any special, indirect
or consequential costs, such as litigation, pertaining to the dissolution and
liquidation.
Upon its receipt of notice from counsel that we have been dissolved, the
Trustee will commence liquidating the investments constituting the Trust Account
and distribute the proceeds to our public stockholders. Each of our founders has
waived their right to participate in any liquidation distribution with respect
to any initial founders' shares such founder holds. Additionally, if we do not
complete an initial business combination and the Trustee must distribute the
balance of the Trust Account, the underwriters have agreed to forfeit any rights
or claims to their deferred underwriting discounts and commissions then in the
Trust Account, and those funds will be included in the pro rata liquidation
distribution to the public stockholders. There will be no distribution from the
Trust Account with respect to any of our warrants, which will expire worthless
if we are liquidated.
If we are unable to conclude an initial business combination and expend
all of the proceeds deposited in the Trust Account, and without taking into
account any interest earned on the Trust Account, the initial per-share
liquidation price will be approximately $9.78, or $0.22 less than the per-unit
offering price of $10.00.
The proceeds deposited in the Trust Account could, however, become subject
to claims of our creditors that are in preference to the claims of our
stockholders, and we therefore cannot assure you that the actual per-share
liquidation price will not be less than $9.78. Although prior to completion of
our initial business combination, we will seek to have all third parties
(including any vendors or other entities we engage after our initial public
offering) and any prospective target businesses enter into valid and enforceable
agreements with us waiving any right, title, interest or claim of any kind in or
to any monies held in the Trust Account, there is no guarantee that they will
execute such agreements. However, to the extent we have engaged with certain
third parties, we have asked for and have obtained such waiver agreements at
this time. It is also possible that such waiver agreements would be held
unenforceable, and there is no guarantee that the third parties would not
otherwise challenge the agreements and later bring claims against the Trust
Account for monies owed them. In the case of such a challenge, we will be
responsible for the cost associated with defending the validity of the
challenged waiver agreement. If a target business or other third party were to
refuse to enter into such a waiver, we would enter into discussions with such
target business or engage such other third party only if our management
determined that we could not obtain, on a reasonable basis, substantially
similar services or opportunities from another entity willing to enter into such
a waiver. In addition, there is no guarantee that such entities will agree to
waive any claims they may have in the future as a result of, or arising out of,
any negotiations, contracts or agreements with us and will not seek recourse
against the Trust Account for any reason.
8
Mr. Gilliam, Mr. Hantke, Mrs. Hendricks, Mr. Ortale and Mr. Rodriguez have
agreed that they will be personally liable on a joint and several basis to the
Company if and to the extent claims by third parties reduce the amounts in the
Trust Account available for payment to our stockholders in the event of a
liquidation and the claims are made by a vendor for services rendered, or
products sold, to us, or by a prospective target business. A "vendor" refers to
a third party that enters into an agreement with us to provide goods or services
to us. However, the agreements entered into by each of Mr. Gilliam, Mr. Hantke,
Mrs. Hendricks, Mr. Ortale or Mr. Rodriguez specifically provide for two
exceptions to the personal indemnity each has given: none will have any personal
liability (1) as to any claimed amounts owed to a third party who executed a
legally enforceable waiver, or (2) as to any claims under our indemnity of the
underwriters of our initial public offering against certain liabilities,
including liabilities under the Securities Act. These individuals' personal
liability does not extend to claims of third parties who executed a legally
enforceable waiver because we believe that acceptance by a company's officers
and directors of personal liability for claims against that company is an
extraordinary measure and that it would be unfair to these officers and
directors if they remained personally liable despite having taken such steps as
are available to them, such as obtaining legally enforceable waivers, to prevent
such claims from arising against that company. Based on the information in the
director and officer questionnaires provided to us in connection with our
initial public offering as well as representations as to their accredited
investor status (as such term is defined in Regulation D under the Securities
Act), we currently believe that each of Mr. Gilliam, Mr. Hantke, Mrs. Hendricks,
Mr. Ortale and Mr. Rodriguez is of substantial means and capable of funding his
or her indemnity obligations, even though we have not asked any of them to
reserve for such an eventuality. We cannot assure you, however, that they would
be able to satisfy those obligations. If these individuals were to refuse to
honor their obligations to indemnify us, our directors' fiduciary duty under
Delaware law to protect the Company's interests and to act in the best interests
of its stockholders would require them to take action, which may (but will not
necessarily) include bringing a claim against these individuals to enforce the
indemnity.
Under Delaware law, creditors of a corporation have a superior right to
stockholders in the distribution of assets upon dissolution. Consequently, if
the Trust Account is dissolved and paid out to our public stockholders prior to
satisfaction of the claims of all of our creditors, it is possible that our
stockholders may be held liable for third parties' claims against us to the
extent of the distributions received by them.
If we are forced to file a bankruptcy case or an involuntary bankruptcy
case is filed against us that is not dismissed, the proceeds held in the Trust
Account could be subject to applicable bankruptcy law, and may be included in
our bankruptcy estate and subject to the claims of third parties with priority
over the claims of our stockholders. To the extent any bankruptcy claims deplete
the Trust Account, we cannot assure you that we will be able to return at least
$9.78 per share to our public stockholders.
A public stockholder will be entitled to receive funds from the Trust
Account only in the event of our liquidation or if the stockholder converts its
shares into cash after voting against an initial business combination that is
actually completed by us and exercising its conversion rights. In no other
circumstances will a stockholder have any right or interest of any kind to or in
the Trust Account. Prior to our completing an initial business combination or
liquidating, we are permitted to have released from the Trust Account only (i)
interest income to pay income taxes on interest income earned on the Trust
Account balance, and (ii) interest income earned of up to $3.25 million to fund
our working capital requirements.
Certificate Of Incorporation
Our second amended and restated certificate of incorporation sets forth
certain provisions designed to provide certain rights and protections to our
stockholders prior to the consummation of a business combination, including
that:
o upon the consummation of our initial public offering, $240,124,168
comprising (i) $234,274,168 of the net proceeds of our initial public
offering, including $7.37 million of deferred underwriting discounts and
commissions and (ii) $5,850,000 of proceeds from the sale of the founders'
securities, shall be placed into the Trust Account;
o prior to the consummation of our initial business combination, we shall
submit the initial business combination to our stockholders for approval;
o we may consummate our initial business combination if approved by a
majority of the shares of common stock voted by our public stockholders at
a duly held stockholders meeting, and public stockholders owning less than
20% of the shares sold in our initial public offering validly exercise
their conversion rights;
9
o if a proposed initial business combination is approved and consummated,
public stockholders who exercised their conversion rights and voted
against the initial business combination may convert their shares into
cash at the conversion price;
o if our initial business combination is not consummated by January 30,
2009, then our existence will terminate and we will distribute all amounts
in the Trust Account on a pro rata basis to all of our public
stockholders;
o we may not consummate any other business combination, merger, capital
stock exchange, asset acquisition, stock purchase, reorganization or
similar transaction prior to our initial business combination;
o we may not consummate our initial business combination with a person or
entity affiliated with any of our officers or directors or any of their
respective affiliates nor with any of the underwriters or selling group
members or their respective affiliates;
o prior to our initial business combination, we may not issue stock that
participates in any manner in the proceeds of the Trust Account, or that
votes as a class with the common stock issued in our initial public
offering on a business combination;
o our audit committee monitors compliance on a quarterly basis with the
terms of our initial public offering and, if any noncompliance is
identified, the audit committee is charged with the immediate
responsibility to take all action necessary to rectify such noncompliance
or otherwise cause compliance with the terms of our initial public
offering; and
o the audit committee reviews and approves all payments made to our
officers, directors and our and their affiliates, and any payments made to
members of our audit committee will be reviewed and approved by our board
of directors, with any interested director abstaining from such review and
approval.
Our second amended and restated certificate of incorporation requires that
prior to the consummation of an initial business combination we obtain unanimous
consent of the holders of all of the outstanding shares of our common stock to
amend any of the foregoing provisions. However, the validity of unanimous
consent provisions under Delaware law has not been settled. A court could
conclude that the unanimous consent requirement constitutes a practical
prohibition on amendment in violation of the stockholders' statutory rights to
amend the corporate charter. In that case, these provisions could be amended
without unanimous consent, and any such amendment could reduce or eliminate the
protection afforded to our stockholders. However, we view the foregoing
provisions as obligations to our stockholders and believe that our public
stockholders have made an investment in our company relying, at least in part,
on the enforceability of the rights and obligations set forth in these
provisions including, without limitation, the expectation that these provisions
cannot be amended without the unanimous consent of our stockholders, and neither
we nor our board of directors will propose any amendment to these provisions, or
support, endorse or recommend any proposal that stockholders amend any of these
provisions at any time prior to the consummation of our initial business
combination.
Competition
In identifying, evaluating and selecting a target business for our initial
business combination, we may encounter intense competition from other entities
having a business objective similar to ours, including other blank check
companies, private equity groups and leveraged buyout funds, as well as
operating businesses in the energy industry seeking acquisitions. Many of these
entities are well established and have extensive experience identifying and
effecting business combinations directly or through affiliates. Moreover, many
of these competitors possess greater financial, technical, human and other
resources than us. While we believe there are numerous potential target
businesses with which we could combine, our ability to acquire larger target
businesses will be limited by our available financial resources. This inherent
limitation gives others an advantage in pursuing the acquisition of a target
business. Furthermore:
o our obligation to seek stockholder approval of our initial business
combination or obtain necessary financial information may delay the
completion of a transaction;
o our obligation to convert into cash shares of common stock held by our
public stockholders who vote against the initial business combination and
exercise their conversion rights may reduce the resources available to us
for an initial business combination;
o our outstanding warrants and the future dilution they potentially
represent may not be viewed favorably by certain target businesses; and
10
o the requirement to acquire an operating business that has a fair market
value equal to at least 80% of the balance of the Trust Account at the
time of the acquisition (excluding deferred underwriting discounts and
commissions of $7.37 million) could require us to acquire the assets of
several operating businesses at the same time, all of which sales would be
contingent on the closings of the other sales, which could make it more
difficult to consummate the business combination.
Any of these factors may place us at a competitive disadvantage in
successfully negotiating a business combination.
Employees
As of December 31, 2006 and March 31, 2007, we had three officers. These
individuals are not obligated to devote any specific number of hours to our
business and intend to devote only as much time as they deem necessary to our
business. We do not expect to have any full-time employees prior to the
consummation of a business combination.
Available Information
Our Internet website, which is located at http://www.ntracq.com, is under
construction. This reference to our Internet website does not constitute
incorporation by reference in this report of the information contained on or
hyperlinked from our Internet website and such information should not be
considered part of this report.
We are required to file Annual Reports on Form 10-K and Quarterly Reports
on Form 10-Q with the Securities and Exchange Commission ("SEC") on a regular
basis, and are required to disclose certain material events (e.g., changes in
corporate control; acquisitions or dispositions of a significant amount of
assets other than in the ordinary course of business and bankruptcy) in a
current report on Form 8-K. The public may read and copy any materials we file
with the SEC at the SEC's Public Reference Room at 100 F Street N.E.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet website that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the SEC. The SEC's Internet website is located at http://www.sec.gov.
Item 1A. Risk Factors.
You should consider carefully all of the material risks described below,
together with the other information contained in this Annual Report on Form
10-K, before making a decision to invest in our units.
Risks Associated With Our Business
We are a development stage company with no operating history and no revenues,
and you have no basis on which to evaluate our ability to achieve our business
objective.
We are a recently incorporated development stage company with no operating
results, and we will not commence operations until we complete an initial
business combination. Because we lack an operating history, you have no basis on
which to evaluate our ability to achieve our business objective of completing an
initial business combination with one or more target businesses. We have no
plans, arrangements or understandings with any prospective target businesses
concerning an initial business combination and may be unable to complete an
initial business combination. We will not generate any revenues from operations
until, at the earliest, after completing an initial business combination. We
cannot assure you as to when, or if, an initial business combination will occur.
If we expend all of the $500,000 in proceeds from our initial public offering
not held in trust and interest income earned of up to $3.25 million on the
balance of the Trust Account that may be released to us to fund our working
capital requirements in seeking an initial business combination, but fail to
complete such an initial combination, we may be forced to liquidate.
We may not be able to consummate an initial business combination within the
required time frame, in which case we would be forced to liquidate.
We must complete an initial business combination with a fair market value
of at least 80% of the amount held in our Trust Account at the time of the
initial business combination (excluding deferred underwriting discounts and
commissions of $7.37 million) by January 30, 2009. If we fail to consummate a
business combination within the required time frame, we will be forced to
liquidate the Trust Account. We may not be able to find suitable target
businesses within the required time frame. In addition, our negotiating position
and our ability to conduct adequate due diligence on any potential target may be
reduced as we approach the deadline for the consummation of an initial business
combination.
11
If we liquidate before concluding an initial business combination, our public
stockholders will receive less than $10.00 per share from the distribution of
Trust Account funds and our warrants will expire worthless.
If we are unable to complete an initial business combination and must
liquidate our assets, the per-share liquidation distribution will be less than
$10.00 because of the expenses associated with our initial public offering, our
general and administrative expenses and the planned costs of seeking an initial
business combination. Furthermore, our outstanding warrants are not entitled to
participate in a liquidation distribution and the warrants will therefore expire
worthless if we liquidate before completing an initial business combination. For
a more complete discussion of the effects on our stockholders if we are unable
to complete an initial business combination, please see "Business--Effecting a
Business Combination--Dissolution And Liquidation If No Business Combination"
above.
An effective registration statement must be in place in order for a warrant
holder to be able to exercise the warrants.
No warrants will be exercisable and we will not be obligated to issue
shares of common stock upon exercise of warrants by a holder unless, at the time
of such exercise, we have a registration statement under the Securities Act in
effect covering the shares of common stock issuable upon exercise of the
warrants. Although we have undertaken in the warrant agreement, and therefore
have a contractual obligation, to use our best efforts to have a registration
statement in effect covering shares of common stock issuable upon exercise of
the warrants from the date the warrants become exercisable and to maintain a
current prospectus relating to that common stock until the warrants expire or
are redeemed, and we intend to comply with our undertaking, we cannot assure you
that we will be able to do so. Holders of warrants may not be able to exercise
their warrants, the market for the warrants may be limited and the warrants may
be deprived of any value if there is no registration statement in effect
covering the shares of common stock issuable upon exercise of the warrants or
the prospectus relating to the common stock issuable upon the exercise of the
warrants is not current. Holders of warrants will not be entitled to a cash
settlement for their warrants if we fail to have a registration statement in
effect or a current prospectus available relating to the common stock issuable
upon exercise of the warrants, and holders' only remedies in such event will be
those available if we are found by a court of law to have breached our
contractual obligation to them by failing to do so.
So long as the founders' warrants are held by any of our founders or their
permitted transferees, those warrants will be exercisable even if, at the time
of exercise, a registration statement relating to the common stock issuable upon
exercise of such warrants is not in effect or a related current prospectus is
not available. As a result, so long as they are held by any of our founders or
their permitted transferees, the restrictions applicable to the exercise of the
founders' warrants will not be the same as those applicable to the exercise of
our public warrants. The holders of the warrants issued in our initial public
offering will not be able to exercise those warrants unless we have a
registration statement covering the shares issuable upon their exercise in
effect and a related current prospectus available.
You will not be entitled to protections normally afforded to investors in blank
check companies.
Since the net proceeds of our initial public offering are intended to be
used to complete a business combination with a target business that has not been
identified, we may be deemed a "blank check" company under the United States
securities laws. However, because upon consummation of our initial public
offering we had net tangible assets in excess of $5,000,000, we are exempt from
SEC rules that are designed to protect investors in blank check companies, such
as Rule 419 under the Securities Act. Among other things, this means we will
have a longer period of time to complete a business combination in some
circumstances than do companies subject to Rule 419. Moreover, offerings subject
to Rule 419 would prohibit the release to us of any interest earned on funds
held in the Trust Account unless and until the funds in the Trust Account were
released to us in connection with our consummation of an initial business
combination.
Under Delaware law, a court could invalidate the requirement that certain
provisions of our second amended and restated certificate of incorporation be
amended only by unanimous consent of our stockholders; amendment of those
provisions could reduce or eliminate the protections they afford to our
stockholders.
Our second amended and restated certificate of incorporation contains
certain requirements and restrictions relating to our initial public offering
that will apply to us until the consummation of our initial business
combination. Specifically, our second amended and restated certificate of
incorporation provides, among other things, that:
12
o upon the consummation of our initial public offering, $240,124,168
consisting of (i) $234,274,168 of the net proceeds of our initial public
offering, including $7.37 million of deferred underwriting discounts and
commissions and (ii) $5,850,000 of proceeds from the sale of the founders'
securities, was placed into the Trust Account;
o prior to the consummation of our initial business combination, we shall
submit the initial business combination to our stockholders for approval;
o we may consummate our initial business combination if approved by a
majority of the shares of common stock voted by our public stockholders at
a duly held stockholders meeting, and public stockholders owning less than
20% of the shares sold or currently issued (excluding founder, officers
and directors) in the offering validly exercise their conversion rights;
o if a proposed initial business combination is approved and consummated,
public stockholders who exercised their conversion rights and voted
against the initial business combination may convert their shares into
cash at the conversion price;
o if our initial business combination is not consummated by January 30,
2009, then our existence will terminate and we will distribute all amounts
in the Trust Account on a pro rata basis to all of our public
stockholders;
o we may not consummate any other business combination, merger, capital
stock exchange, asset acquisition, stock purchase, reorganization or
similar transaction prior to our initial business combination;
o we may not consummate our initial business combination with a person or
entity affiliated with any of our officers or directors or any of their
respective affiliates nor with any of the underwriters or selling group
members or their respective affiliates;
o prior to our initial business combination, we may not issue stock that
participates in any manner in the proceeds of the Trust Account, or that
votes as a class with the common stock sold in the initial public offering
on a business combination;
o our audit committee monitors compliance on a quarterly basis with the
terms of our initial public offering and, if any noncompliance is
identified, the audit committee is charged with the immediate
responsibility to take all action necessary to rectify such noncompliance
or otherwise cause compliance with the terms of our initial public
offering; and
o the audit committee shall review and approve all payments made to our
officers, directors and our and their affiliates, and any payments made to
members of our audit committee will be reviewed and approved by our board
of directors, with any interested director abstaining from such review and
approval.
Our second amended and restated certificate of incorporation requires that
prior to the consummation of our initial business combination we obtain
unanimous consent of our stockholders to amend these provisions. However, the
validity of unanimous consent provisions under Delaware law has not been
settled. A court could conclude that the unanimous consent requirement
constitutes a practical prohibition on amendment in violation of the
stockholders' statutory rights to amend the corporate charter. In that case,
these provisions could be amended without unanimous consent, and any such
amendment could reduce or eliminate the protection these provisions afford to
our stockholders. However, we view all of the foregoing provisions, including
the requirement that public stockholders owning less than 20% of the shares sold
in our initial public offering exercise their conversion rights in order for us
to consummate our initial business combination, as obligations to our
stockholders, and neither we nor our board of directors will propose any
amendment to these provisions, or support, endorse or recommend any proposal
that stockholders amend any of these provisions at any time prior to the
consummation of our initial business combination.
If third parties bring claims against us, or if we go bankrupt, the proceeds
held in trust could be reduced and the per-share liquidation price received by
you will be less than $9.78 per share.
Our placing of funds in the Trust Account may not protect those funds from
third-party claims against us. Although prior to completion of our initial
business combination, we will seek to have all third parties (including any
vendors or other entities we engage ) and any prospective target businesses
enter into valid and enforceable agreements with us waiving any right, title,
interest or claim of any kind in or to any monies held in the Trust Account,
there is no guarantee that they will execute such agreements. However, to the
extent we have engaged with certain third parties, we have asked for and have
obtained such waiver agreements at this time. It is also possible that such
waiver agreements would be held unenforceable and there is no guarantee that the
third parties would not otherwise challenge the agreements and later bring
13
claims against the Trust Account for monies owed them. In the case of such a
challenge, we will be responsible for the cost associated with defending the
validity of the challenged waiver agreement. In addition, there is no guarantee
that such entities will agree to waive any claims they may have in the future as
a result of, or arising out of, any negotiations, contracts or agreements with
us and will not seek recourse against the Trust Account for any reason.
Accordingly, the proceeds held in trust could be subject to claims that would
take priority over the claims of our public stockholders and, as a result, the
per-share liquidation price could be less than $9.78.
Mr. Gilliam, Mr. Hantke, Mrs. Hendricks, Mr. Ortale and Mr. Rodriguez have
agreed that they will be personally liable on a joint and several basis to the
Company if and to the extent claims by third parties reduce the amounts in the
Trust Account available for payment to our stockholders in the event of a
liquidation and the claims are made by a vendor for services rendered, or
products sold, to us or by a prospective business target. However, the
agreements entered into by each of Mr. Gilliam, Mr. Hantke, Mrs. Hendricks, Mr.
Ortale and Mr. Rodriguez specifically provide for two exceptions to the personal
indemnity each has given: none will have any personal liability (1) as to any
claimed amounts owed to a third party who executed a legally enforceable waiver,
or (2) as to any claims under our indemnity of the underwriters of our initial
public offering against certain liabilities, including liabilities under the
Securities Act. These individuals' personal liability does not extend to claims
of third parties who executed a legally enforceable waiver because we believe
that acceptance by a company's officers and directors of personal liability for
claims against that company is an extraordinary measure and that it would be
unfair to these officers and directors if they remained personally liable
despite having taken such steps as are available to them, such as obtaining
legally enforceable waivers, to prevent such claims from arising against that
company. Based on the information in the director and officer questionnaires
provided to us in connection with our initial public offering as well as
representations as to their accredited investor status (as such term is defined
in Regulation D under the Securities Act), we currently believe that each of Mr.
Gilliam, Mr. Hantke, Mrs. Hendricks, Mr. Ortale and Mr. Rodriguez is of
substantial means and capable of funding his or her indemnity obligations, even
though we have not asked any of them to reserve for such an eventuality. We
cannot assure you, however, that they would be able to satisfy those
obligations.
In addition, if we are forced to file a bankruptcy case or an involuntary
bankruptcy case is filed against us that is not dismissed, the proceeds held in
the Trust Account could be subject to applicable bankruptcy law, and may be
included in our bankruptcy estate and subject to the claims of third parties
with priority over the claims of our stockholders. To the extent any bankruptcy
claims deplete the Trust Account, we cannot assure you that we will be able to
return at least $9.78 per share to our public stockholders.
Our stockholders may be held liable for third parties' claims against us to the
extent of distributions received by them following our dissolution.
Our second amended and restated certificate of incorporation provides that
we will continue in existence only until January 30, 2009. If we consummate our
initial business combination prior to that date, we will amend this provision to
permit our continued existence. If we have not completed our initial business
combination by that date, our corporate existence will cease except for the
purposes of winding up our affairs and liquidating pursuant to Section 278 of
the Delaware General Corporation Law. Under the Delaware General Corporation
Law, stockholders may be held liable for claims by third parties against a
corporation to the extent of distributions received by those stockholders in a
dissolution. However, if the corporation complies with certain procedures
intended to ensure that it makes reasonable provision for all claims against it,
the liability of stockholders with respect to any claim against the corporation
is limited to the lesser of such stockholder's pro rata share of the claim or
the amount distributed to the stockholder. In addition, if the corporation
undertakes additional specified procedures, including a 60-day notice period
during which any third-party claims can be brought against the corporation, a
90-day period during which the corporation may reject any claims brought, and an
additional 150-day waiting period before any liquidation distributions are made
to stockholders, any liability of stockholders would be barred after the third
anniversary of the dissolution. While we intend to adopt a plan of dissolution
and distribution making reasonable provision for claims against the company in
compliance with the Delaware General Corporation Law, we do not intend to comply
with these additional procedures, as we instead intend to distribute the balance
in the Trust Account to our public stockholders as promptly as practicable
following termination of our corporate existence. Accordingly, any liability our
stockholders may have could extend beyond the third anniversary of our
dissolution. We cannot assure you that any reserves for claims and liabilities
that we believe to be reasonably adequate when we adopt our plan of dissolution
and distribution will suffice. If such reserves are insufficient, stockholders
who receive liquidation distributions may subsequently be held liable for claims
by creditors of the Company to the extent of such distributions.
14
Since we have not yet acquired any target business, we are unable to currently
ascertain the merits or risks of the target business's operations.
Since we have not yet identified a prospective target business, there is
no current basis for you to evaluate the possible merits or risks of our
resulting target business's operations. To the extent we complete our initial
business combination with a financially unstable company or an entity in its
development stage, we may be affected by numerous risks inherent in the business
operations of those entities. 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 of the significant risk factors. We also
cannot assure you that an investment in our units, common stock or warrants will
not ultimately prove to be less favorable to stockholders than a direct
investment, if an opportunity were available, in a target business. For a more
complete discussion of our selection of a target business, please see
"Business--Effecting A Business Combination--We Have Not Identified A Target
Business" above.
We will depend on the limited funds available outside of the Trust Account and a
portion of the interest earned on the Trust Account balance to fund our search
for a target business or businesses and to complete our initial business
combination.
Of the net proceeds of our initial public offering, $500,000 is available
to us initially outside the Trust Account to fund our working capital
requirements. As of March 28, 2007, there was $209,210 available to us outside
the Trust Account. We will depend on sufficient interest being earned on the
proceeds held in the Trust Account to provide us with the additional working
capital we will need to identify one or more target businesses and to complete
our initial business combination. While we are entitled to have released to us
for such purposes interest income of up to a maximum of $3.25 million, a
substantial decline in interest rates may result in our having insufficient
funds available with which to structure, negotiate or close an initial business
combination. In such event, we could seek to borrow funds or raise additional
investments from our officers and directors or others to operate, although our
officers and directors are under no obligation to advance funds to, or to invest
in, us. If we have insufficient funds available, we may be forced to liquidate.
Because of our limited resources and the significant competition for business
combination opportunities, we may not be able to consummate an attractive
initial business combination.
We encounter intense competition from other entities having a business
objective similar to ours, including venture capital funds, leveraged buyout
funds and operating businesses in the energy or other industries competing for
acquisitions. Many of these entities are well established and have extensive
experience in identifying and effecting business combinations directly or
through affiliates. Many of these competitors possess greater technical, human
and other resources than we do and our financial resources will be relatively
limited when contrasted with those of many of these competitors. While we
believe that there are numerous potential target businesses that we could
acquire, our ability to compete in acquiring certain sizable target businesses
will be limited by our available financial resources. This inherent competitive
limitation gives others an advantage in pursuing the acquisition of certain
target businesses. Further:
o our obligation to seek stockholder approval of a business combination may
materially delay the consummation of a transaction;
o our obligation to convert into cash up to 20% of the shares of common
stock held by public stockholders less one share in certain instances may
materially reduce the resources available for a business combination; and
o our outstanding warrants, and the future dilution they potentially
represent, may not be viewed favorably by certain target businesses.
Any of these obligations may place us at a competitive disadvantage in
successfully negotiating a business combination. We cannot assure you that we
will be able to successfully compete for an attractive business combination.
Additionally, because of these factors, we cannot assure you that we will be
able to effectuate a business combination within the required time periods. If
we are unable to find a suitable target business within the required time
periods, we will be forced to liquidate.
We face significant competition from numerous companies with a business plan
similar to ours seeking to effectuate a business combination.
There are numerous other blank check companies like ours that have
recently completed initial public offerings and numerous others that have filed
registration statements with the SEC seeking to go public. On the basis of
publicly available information, we believe that, of these companies, only a
limited number have consummated a business combination. Accordingly, there are a
significant number of blank check companies similar to ours that are seeking to
15
carry out a business plan similar to our business plan. While, like us, some of
those companies have specific industries that they must complete a business
combination in, a number of them may consummate a business combination in any
industry they choose. We may therefore be subject to competition from these and
other companies seeking to consummate a business plan similar to ours, which
will, as a result, increase demand for privately held companies to combine with
companies such as ours. Further, the fact that only a limited number of such
companies have completed a business combination may be an indication that there
are only a limited number of attractive target businesses available to such
entities or that many privately held target businesses may not be inclined to
enter into business combinations with publicly held blank check companies like
us. We cannot assure you that we will be able to successfully compete for an
attractive business combination. Additionally, because of this competition, we
cannot assure you that we will be able to effectuate a business combination by
January 30, 2009. If we are unable to find a suitable target business by that
date, we will be forced to liquidate.
We may be unable to obtain additional financing if necessary to complete our
initial business combination or to fund the operations and growth of a target
business, which could compel us to restructure or abandon a particular business
combination.
We believe that the net proceeds of our initial public offering will be
sufficient to allow us to consummate our initial business combination. However,
because we have no oral or written agreements or letters of intent to engage in
a business combination with any entity, we cannot assure you that we will be
able to complete our initial business combination or that we will have
sufficient capital with which to complete a combination with a particular target
business. We will be required to seek additional financing if the net proceeds
of our initial public offering are not sufficient to facilitate a particular
business combination because:
o of the size of the target business;
o the initial public offering proceeds not in trust and funds available to
us from interest earned on the Trust Account balance are insufficient to
fund our search for and negotiations with a target business; or
o we must convert into cash a significant number of shares of common stock
owned by public stockholders who elect to exercise their conversion rights
and vote against the proposed business combination.
In addition, we cannot assure you that such financing will be available on
acceptable terms, if at all. If additional financing is unavailable to
consummate a particular business combination, we would be compelled to
restructure or abandon the combination and seek an alternative target business.
In addition, it is possible that we could use a portion of the funds not
in the Trust Account (including amounts we borrow, if any) to make a deposit,
down payment or fund a "no-shop" provision with respect to a particular proposed
business combination, although we do not have any current intention to do so. In
the event that we were ultimately required to forfeit such funds, and we had
already used up the funds allocated to due diligence and related expenses in
connection with the aborted transaction, we could be left with insufficient
funds to continue searching for, or conduct due diligence with respect to, other
potential target businesses.
Even if we do not need additional financing to consummate a business
combination, we may require additional capital--in the form of debt, equity, or
a combination of both--to operate, grow or complete an upgrade of any potential
refinery we may acquire. There can be no assurance that we will be able to
obtain such additional capital if it is required. If we fail to secure such
financing, this failure could have a material adverse effect on the operations
or growth of the target business. None of our officers or directors or any other
party is required to provide any financing to us in connection with, or
following, our initial business combination.
We may issue capital stock or convertible debt securities to complete our
initial business combination, which would reduce the equity interest of our
stockholders and likely cause a change in control of our ownership.
Our second amended and restated certificate of incorporation authorizes
the issuance of up to 200,000,000 shares of common stock, par value $0.001 per
share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. As
of March 31, 2007, there are 163,192,795 authorized but unissued shares of our
common stock available for issuance (after appropriate reservation for the
issuance of shares upon full exercise of our outstanding warrants, including the
founders' warrants), and all of the shares of preferred stock available for
issuance. Although we have no commitments as of March 31, 2007, to issue any
additional securities, we were formed to acquire a business through merger,
capital stock exchange, or a combination of both, including through convertible
debt securities, to complete a business combination. Our issuance of additional
shares of common stock or any preferred stock:
o may significantly reduce the equity interest of our current stockholders;
16
o may subordinate the rights of holders of common stock if we issue
preferred stock with rights senior to those afforded to our common stock;
o will likely cause a change in control if a substantial number of our
shares of common stock are issued, which may among other things limit our
ability to use any net operating loss carry forwards we have, and may
result in the resignation or removal of our officers and directors; and
o may adversely affect the then-prevailing market price for our common
stock.
If we issue debt securities to acquire or finance a target business, our
liquidity may be adversely affected and the combined business may face
significant interest expense.
We may elect to enter into a business combination that requires us to
issue debt securities as part of the purchase price for a target business. In
addition, the energy industry is capital intensive, traditionally using
substantial amounts of indebtedness to finance acquisitions, capital
expenditures and working capital. If we issue debt securities, such issuances
may result in an increase in interest expense for the post-combination business
and may adversely affect our liquidity in the event of:
o a default and foreclosure on our assets if our operating cash flow after a
business combination were insufficient to pay principal and interest
obligations on our debt;
o an acceleration of our obligations to repay the indebtedness, which could
occur even if we are then current in our debt service obligations if the
debt securities have covenants that require us to meet certain financial
ratios or maintain designated reserves, and such covenants are breached
without waiver or renegotiation;
o a required immediate payment of all principal and accrued interest, if
any, if the debt securities are payable on demand; or
o our inability to obtain any additional financing, if necessary, if the
debt securities contain covenants restricting our ability to incur
indebtedness.
For a more complete discussion of alternative structures for a business
combination and the possibility that we may incur debt to finance our initial
business combination, please see "Proposed Business--Effecting a Business
Combination--Selection Of A Target Business And Structuring Of A Business
Combination" above.
Our founders may influence certain actions requiring a stockholder vote.
Our officers and directors collectively own 19.6% of our issued and
outstanding shares of common stock. Each of our founders has agreed, in
connection with the stockholder vote required to approve our initial business
combination, to vote any initial founders' shares such founder holds in
accordance with a majority of the shares of common stock voted by the public
stockholders, and each has agreed that for additional shares of common stock
acquired during or following our initial public offering, it will vote all such
acquired shares in favor of our initial business combination. Accordingly,
shares of common stock owned by our founders will not have the same voting or
conversion rights as those held by our public stockholders with respect to a
potential business combination, and none of our founders will be eligible to
exercise conversion rights for those shares if our initial business combination
is approved by a majority of our public stockholders who vote in connection with
our initial business combination.
In addition, until we consummate an initial business combination, our
board of directors 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 consummate an initial business combination
before there is an annual meeting of stockholders to elect new directors, in
which case all of the current directors will continue in office at least until
the consummation of our initial business combination. If there is an annual
meeting of stockholders, as a consequence of our "staggered" board of directors,
only a minority of the board of directors will be considered for election and
our founders will have considerable influence on the outcome of that election.
Accordingly, our founders will continue to exert control at least until the
consummation of the initial business combination. None of our founders is
prohibited from purchasing our common stock in the aftermarket. If they do so,
they will have a greater influence on the vote taken in connection with our
initial business combination.
Some of our current officers and directors may resign upon consummation of our
initial business combination.
Our ability to effect our initial business combination successfully will
be largely dependent upon the efforts of our officers and directors. However,
while it is possible that some of our officers and directors will remain
associated with us in various capacities following our initial business
combination, some of them may resign and some or all of the management of the
target business may remain in place.
17
We may have only limited ability to evaluate the management of the target
business.
We may have only limited ability to evaluate the management of the target
business. Although we intend to closely scrutinize the management of a
prospective target business in connection with evaluating the desirability of
effecting a business combination, we cannot assure you that our assessment of
management will prove to be correct. These individuals may be unfamiliar with
the requirements of operating a public company and the securities laws, which
could increase the time and resources we must expend to assist them in becoming
familiar with the complex disclosure and financial reporting requirements
imposed on U.S. public companies. This could be expensive and time-consuming and
could lead to various regulatory issues that may adversely affect the price of
our stock.
None of our officers or directors has ever been associated with a blank check
company, which could adversely affect our ability to consummate our initial
business combination.
None of our officers or directors has ever been associated with a blank
check company. Accordingly, you may not have sufficient information with which
to evaluate the ability of our management team and our board of directors to
identify, approve and complete our initial business combination. Our
management's lack of experience in operating a blank check company could
adversely affect our ability to consummate a business combination and force us
to liquidate.
We may seek to effect our initial business combination with one or more
privately held companies, which may present certain challenges to us, including
the lack of available information about these companies.
In pursuing our acquisition strategy, we may seek to effect our initial
business combination with one or more privately held companies. By definition,
very little public information exists about these companies, and we could be
required to make our decision on whether to pursue a potential initial business
combination on the basis of limited information.
Our officers and directors are or may in the future become affiliated with
entities engaged in business activities similar to those intended to be
conducted by us, and may have conflicts of interest in allocating their time and
business opportunities.
Although our officers and directors have entered into non-compete
agreements with us, they may in the future become affiliated with entities,
including other "blank check" companies, engaged in business activities similar
to those intended to be conducted by us. None of our officers or directors is
obligated to expend a specific number of hours per week or month on our affairs.
Additionally, our officers and directors may become aware of business
opportunities that may be appropriate for us as well as the other entities with
which they are or may be affiliated. Due to these existing or future
affiliations, our officers and directors may have fiduciary obligations to
present potential business opportunities to those entities prior to presenting
them to us, which could cause additional conflicts of interest. Accordingly, our
officers or directors may have conflicts of interest in determining to which
entity a particular business opportunity should be presented. 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--Directors and Executive Officers" below. We cannot assure you that
these conflicts will be resolved in our favor.
We may use resources in researching acquisitions that are not consummated, which
could materially and adversely affect subsequent attempts to effect our initial
business combination.
We expect that the investigation of each specific target business and the
negotiation, drafting, and execution of relevant agreements, disclosure
documents, and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys, and others. If a
decision is made not to complete a specific business combination, the costs
incurred up to that point for the proposed transaction likely would not be
recoverable. Furthermore, even if an agreement is reached relating to a specific
target business, we may fail to consummate the transaction for any number of
reasons, including reasons beyond our control, such as that 20% or more of our
public stockholders vote against the transaction and opt to convert their stock
into a pro rata share of the Trust Account even if a majority of our
stockholders approve the transaction. Any such event will result in a loss to us
of the related costs incurred, which could materially and adversely affect
subsequent attempts to consummate an initial business combination.
18
Because the shares of common stock owned by our founders will not participate in
liquidation distributions by us, our founders may have a conflict of interest in
deciding if a particular target business is a good candidate for a business
combination.
Each holder of initial founders' shares has waived the right to receive
distributions with respect to the shares they acquired before the initial public
offering upon our liquidation if we fail to complete a business combination.
Those shares of common stock and all of the founders' warrants will be worthless
if we do not consummate our initial business combination. Because our directors
directly or indirectly have an ownership interest in all of the outstanding
founders' securities, their personal and financial interests may influence the
identification and selection of a target business, and may affect how or when we
complete our initial business combination. The exercise of discretion by our
officers and directors in identifying and selecting one or more suitable target
businesses may result in a conflict of interest when determining whether the
terms, conditions and timing of a particular business combination are
appropriate and in our stockholders' best interest.
Our officers' and directors' interests in obtaining reimbursement for any
out-of-pocket expenses incurred by them may lead to a conflict of interest in
determining whether a particular target business is appropriate for a business
combination and in the public stockholders' best interest.
Unless we consummate our initial business combination, our officers and
directors will not receive reimbursement for any out-of-pocket expenses incurred
by them to the extent that such expenses exceed the amount of available proceeds
not deposited in the Trust Account and the amount of interest income from the
Trust Account up to a maximum of $3.25 million that may be released to us as
working capital. These amounts are based on management's estimates of the funds
needed to finance our operations until January 30, 2009 and consummate our
initial business combination. Those estimates may prove to be inaccurate,
especially if a portion of the available proceeds is used to make a down payment
in connection with our initial business combination or pay exclusivity or
similar fees or if we expend a significant portion in pursuit of an initial
business combination that is not consummated. Our officers and directors may, as
part of any business combination, negotiate the repayment of some or all of any
such expenses. If the target business' owners do not agree to such repayment,
this could cause our management to view such potential business combination
unfavorably, thereby resulting in a conflict of interest. The financial interest
of our officers and directors could influence their motivation in selecting a
target business and therefore there may be a conflict of interest when
determining whether a particular business combination is in the stockholders'
best interest.
We will probably complete only one business combination with the proceeds of our
initial public offering, meaning our operations will depend on a single
business.
Our initial business combination must involve a target business or
businesses with a fair market value of at least 80% of the amount held in our
Trust Account at the time of such business combination (excluding deferred
underwriting discounts and commissions ). We may not be able to acquire more
than one target business because of various factors, including the existence of
complex accounting issues and the requirement that we prepare and file pro forma
financial statements with the SEC that present operating results and the
financial condition of several target businesses as if they had been operated on
a combined basis. Additionally, we may encounter numerous logistical issues if
we pursue multiple target businesses, including the difficulty of coordinating
the timing of negotiations, proxy statement disclosure and closings. We may also
be exposed to the risk that our inability to satisfy conditions to closing with
one or more target businesses would reduce the fair market value of the
remaining target businesses in the combination below the required threshold of
80% of the amount held in our Trust Account (excluding deferred underwriting
discounts and commissions). Due to these added risks, we are more likely to
choose a single target business with which to pursue a business combination than
multiple target businesses. Unless we combine with a target business in a
transaction in which the purchase price consists substantially of common stock
and/or preferred stock, it is likely we will complete only our initial business
combination with the proceeds of our initial public offering. Accordingly, the
prospects for our success may depend solely on the performance of a single
business. If this occurs, our operations will be highly concentrated and we will
be exposed to higher risk than other entities that have the resources to
complete several business combinations, or that operate in, diversified
industries or industry segments.
19
If we do not conduct an adequate due diligence investigation of a target
business with which we combine, we may be required subsequently to take
write-downs or write-offs, restructuring, and impairment or other charges that
could have a significant negative effect on our financial condition, results of
operations and our stock price, which could cause you to lose some or all of
your investment.
In order to meet our disclosure and financial reporting obligations under
the federal securities laws, and in order to develop and seek to execute
strategic plans for how we can increase the profitability of a target business,
realize operating synergies or capitalize on market opportunities, we must
conduct a due diligence investigation of one or more target businesses.
Intensive due diligence is time consuming and expensive due to the operations,
accounting, finance and legal professionals who must be involved in the due
diligence process. Even if we conduct extensive due diligence on a target
business with which we combine, we cannot assure you that this diligence will
uncover all material issues relating to a particular target business, or that
factors outside of the target business and outside of our control will not later
arise. If our diligence fails to identify issues specific to a target business
or the environment in which the target business operates, we may be forced to
write-down or write-off assets, restructure our operations, or incur impairment
or other charges that could result in our reporting losses. Even though these
charges may be non-cash items and not have an immediate impact on our liquidity,
the fact that we report charges of this nature could contribute to negative
market perceptions about us or our common stock. In addition, charges of this
nature may cause us to violate net worth or other covenants to which we may be
subject as a result of assuming pre-existing debt held by a target business or
by virtue of our obtaining post-combination debt financing.
Our outstanding warrants may adversely affect the market price of our common
stock and make it more difficult to effect our initial business combination.
We have issued warrants to purchase 24,557,205 shares of common stock as
part of the units offered in our initial public offering (including the over
allotment) and the founders warrants to purchase 5,850,000 shares of common
stock. If we issue common stock to complete our initial business combination,
the potential issuance of additional shares of common stock on exercise of these
warrants could make us a less attractive acquisition vehicle to some target
businesses. This is because exercise of any warrants will increase the number of
issued and outstanding shares of our common stock and reduce the value of the
shares issued to complete our initial business combination. Our warrants may
make it more difficult to complete our initial business combination or increase
the purchase price sought by one or more target businesses. Additionally, the
sale or possibility of the sale of the shares underlying the warrants could have
an adverse effect on the market price for our common stock or our units, or on
our ability to obtain other financing. If and to the extent these warrants are
exercised, you may experience dilution to your holdings.
The grant of registration rights to the holders of the founders' securities may
make it more difficult to complete our initial business combination, and the
future exercise of such rights may adversely affect the market price of our
common stock.
Each holder of founders' securities is entitled to make a demand that we
register the resale of the initial founders' shares, the founders' warrants and
the shares of common stock issuable upon exercise of the founders' warrants, as
applicable. The registration rights will be exercisable with respect to the
initial founders' shares at any time after the date on which the relevant
securities are no longer subject to transfer restrictions, and with respect to
the warrants and the underlying shares of common stock after the warrants become
exercisable by their terms. We will bear the cost of registering these
securities. If these registration rights are exercised in full, there will be an
additional 6,000,000 shares of common stock and up to 5,850,000 shares of common
stock issuable on exercise of the warrants eligible for trading in the public
market. The registration and availability of such a significant number of
securities for trading in the public market may have an adverse effect on the
market price of our common stock. In addition, the existence of the registration
rights may make our initial business combination more costly or difficult to
conclude. This is because the stockholders of the target business may increase
the equity stake they seek in the combined entity or ask for more cash
consideration to offset the negative impact on the market price of our common
stock that is expected when the founders' securities are registered.
A market for our securities may not develop, which would adversely affect the
liquidity and price of our securities.
The price of our securities may vary significantly due to our reports of
operating losses, one or more potential business combinations, the filing of
periodic reports with the SEC, 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 developed and sustained.
20
If we are deemed to be an investment company, we must meet burdensome compliance
requirements and restrictions on our activities, which may increase the
difficulty of completing a business combination.
If we are deemed to be an investment company under the Investment Company
Act of 1940 (the "Investment Company Act"), the nature of our investments and
the issuance of our securities may be subject to various restrictions. These
restrictions may make it difficult for us to complete our initial business
combination. In addition, we may be subject to burdensome compliance
requirements and may have to:
o register as an investment company;
o adopt a specific form of corporate structure; and
o report, maintain records and adhere to voting, proxy, disclosure and other
requirements.
We do not believe that our planned principal activities will subject us to
the Investment Company Act. In this regard, our agreement with the Trustee
states that proceeds in the Trust Account will be invested only in "government
securities" and one or more money market funds, selected by us, which invest
principally in either short-term securities issued or guaranteed by the United
States having a rating in the highest investment category granted thereby by a
recognized credit rating agency at the time of acquisition or tax exempt
municipal bonds issued by governmental entities located within the United
States. This investment restriction is intended to facilitate our not being
considered an investment company under the Investment Company Act. If we are
deemed to be subject to the Investment Company Act, compliance with these
additional regulatory burdens would increase our operating expenses and could
make our initial business combination more difficult to complete.
The loss of key officers could adversely affect us.
We are dependent upon a relatively small group of key officers and, in
particular, upon our chief executive officer, our principal financial officer
and our chief operating officer. We believe that our success depends on the
continued service of our key officers, at least until we have consummated our
initial business combination. We cannot assure you that such individuals will
remain with us for the immediate or foreseeable future. We do not have
employment agreements with any of our current officers. The unexpected loss of
the services of one or more of these officers could have a detrimental effect on
us.
The American Stock Exchange may delist our securities, which could limit
investors' ability to transact in our securities and subject us to additional
trading restrictions.
Our securities are listed on the American Stock Exchange. We cannot assure
you that our securities will continue to be listed on the American Stock
Exchange. Additionally, it is likely that the American Stock Exchange would
require us to file a new initial listing application and meet its initial
listing requirements, as opposed to its more lenient continued listing
requirements, at the time of our initial business combination. We cannot assure
you that we will be able to meet those initial listing requirements at that
time. If the American Stock Exchange delists our securities from trading, we
could face significant consequences, including:
o a limited availability for market quotations for our securities;
o reduced liquidity with respect to our securities;
o a determination that our common stock is a "penny stock," which will
require brokers trading in our common stock to adhere to more stringent
rules and possibly result in a reduced level of trading activity in the
secondary trading market for our common stock;
o limited amount of news and analyst coverage for our company; and
o a decreased ability to issue additional securities or obtain additional
financing in the future.
In addition, we would no longer be subject to American Stock Exchange
rules, including rules requiring us to have a certain number of independent
directors and to meet other corporate governance standards.
The determination of the offering price of our units was arbitrary.
Prior to the initial public offering, there was no public market for any
of our securities. Accordingly, the public offering price of the units, the
terms of the warrants, the aggregate proceeds we raised and the amount placed in
the Trust Account were the results of a negotiation between the underwriters and
us. In addition, management's assessment of the financial requirements necessary
21
to complete our initial business combination may prove to be inaccurate, in
which case we may not have sufficient funds to consummate our initial business
combination and we would be forced to either find additional financing or
liquidate, or we may have too great an amount in the Trust Account to identify a
prospect having a fair market value of at least 80% of the amount held in our
Trust Account.
If we acquire a target business with operations located outside the Unites
States, we may encounter risks specific to other countries in which such target
business operates.
If we acquire a company that has operations outside the United States, we
will be exposed to risks that could negatively impact our future results of
operations following our initial business combination. The additional risks we
may be exposed to in these cases include, but are not limited to:
o tariffs and trade barriers;
o regulations related to customs and import/export matters;
o tax issues, such as tax law changes and variations in tax laws as compared
to the United States;
o cultural and language differences;
o foreign exchange controls;
o crime, strikes, riots, civil disturbances, terrorist attacks and wars;
o deterioration of political relations with the United States; and
o new or more extensive environmental regulation.
Risks associated with our acquisition of a target
business in the energy industry
The energy industry is highly competitive.
There is intense competition in the energy industry, including in the
petroleum refining, distribution, marketing and related industries. Fully
integrated companies engaged on a national and international basis compete in
many segments of the energy industry, on scales that may be much larger than
ours. Large oil companies, because of the diversity and integration of their
operations, larger capitalization and greater resources, may be better able to
withstand volatile market conditions, compete on the basis of price, and more
readily obtain crude oil and feedstocks in times of shortage and to bear the
economic risks inherent in all phases of the energy industry.
The price volatility of crude oil, other feedstocks and refined products depends
upon many factors that are beyond our control and could adversely affect our
profitability.
If we consummate a business combination with a target company in the
business of refining crude oil, we anticipate that our earnings, profitability
and cash flows will depend on the margin above fixed and variable expenses
(including the cost of refinery feedstocks, such as crude oil) at which we are
able to sell refined products. Refining margins historically have been volatile,
and are likely to continue to be volatile, as a result of a variety of factors,
including fluctuations in the prices of crude oil. Prices of crude oil, other
feedstocks and refined products depend on numerous factors beyond our control,
including:
o changes in global and local economic conditions;
o demand for fuel products, especially in the United States, China and
India;
o U.S. government regulations;
o worldwide political conditions, particularly in significant oil-producing
regions such as the Middle East, West Africa and Venezuela;
o terrorist attacks;
o utilization rates of U.S. refineries;
o the level of foreign and domestic production of crude oil and refined
products;
o development and marketing of alternative and competing fuels; and
o local factors, including market conditions, weather conditions and the
level of operations of other refineries and pipelines in our markets.
22
A large, rapid increase in crude oil prices could adversely affect our
operating margins if the increased cost of raw materials could not be passed to
our customers on a timely basis, and would adversely affect our sales volumes if
consumption of refined products, particularly transportation fuels, were to
decline as a result of such price increases. The prices which we may obtain for
refined products are also affected by regional factors, such as local market
conditions and the operations of competing refiners of petroleum products, as
well as seasonal factors influencing demand for such products.
If our expectations about trends in the prices of crude oil relative to refined
products are inaccurate, our ability to implement our business plan profitably
could be negatively affected.
The price differential between crude oil and refined products, which is
referred to as the crack spread, has been widening above historical levels since
2000, partly due to relatively high demand for refined products and limited
refining capacity. We will evaluate opportunities in the energy industry, and in
particular in the refining and marketing sectors, based in part on our
expectations regarding trends in the price of crude oil relative to the price of
refined products. Should our expectations about these trends be inaccurate, our
ability to implement our business plan could be negatively affected.
If the price differential between heavy, sour crude oil and light, sweet crude
oil returns to historical levels, our ability to implement our business plan
could be negatively affected.
Heavy, sour crude oils generally provide more profitable refining margins
than light, sweet crude oils. Since 2000, the price differential between light,
sweet crude oil and heavy, sour crude oil has been widening from historical
levels due to the relatively high demand for light crude oil and an increased
supply of heavy crude oil. We believe that this widening is part of a
fundamental shift in both the light/heavy and sweet/sour differentials, and that
these differentials are likely to remain above levels seen prior to 2000 because
of increased global production of heavier, higher-sulfur crude oil combined with
the fact that the industry does not have adequate refining capacity capable of
processing these heavier, higher-sulfur crude oils. Our business plan is based
on our expectation that the light/heavy and sweet/sour differentials will
continue to exceed historical levels. However, should actual price trends differ
and light/heavy and sweet/sour differentials revert to levels observed prior to
2000, our ability to implement our business plan could be negatively affected.
Significant declines in the price of crude oil may disrupt the supply of heavy,
sour crude oil and cause a narrowing of the price differentials between heavy,
sour crude oil and light, sweet crude oil.
Heavy, sour crude oil is generally costlier to extract and process than
light, sweet crude oil. Significant declines in the overall price of crude oil
could disrupt the supply of certain heavy, sour crude oils should the price
declines be large enough that continuing to produce those heavy, sour crude oils
becomes unprofitable. In addition, any resulting scarcity of supply of certain
types of heavy, sour crudes could cause light/heavy and sweet/sour differentials
to narrow. If we effect a business combination with a target whose operations
are dependent on access to heavy, sour crudes, such a disruption could
negatively affect our business.
If adequate infrastructure does not exist or is not built to provide us access
to heavy, sour crude oil, our ability to implement our business plan could be
negatively affected.
If we consummate a business combination with a target company in the oil
refining or a related industry, the profitability of any business we acquire may
be dependent upon the availability of existing or future infrastructure
providing uninterrupted access to supplies of heavy, sour crude oil. This could
include, but is not limited to, existing and proposed pipelines for the
conveyance of heavy crude oils between producing areas in Canada and refineries
in the United States. Furthermore, if infrastructure were proposed that would
provide our facilities with access to heavy, sour crude oil, we might choose to
upgrade or expand our facilities in order to process or otherwise use this heavy
crude oil. If a subsequent delay or a failure to build the proposed
infrastructure then prevented us from obtaining adequate supplies of heavy crude
oil, our ability to implement our business plan could be negatively affected.
We may be subject to interruptions of supply as a result of relying on pipelines
for transportation of crude oil and refined products.
If we consummate our initial business combination with a target business
in the refining industry, our business may rely heavily on pipelines to receive
and transport crude oil and refined products. We could experience an
interruption of supply or delivery, or an increased cost of receiving and
transporting crude oil and refined products if operation of these pipelines is
disrupted because of accidents, natural disasters, governmental regulation,
terrorism, other third-party action or other events beyond our control. Our
prolonged inability to use any of the pipelines that transport crude oil or
refined products could have a material adverse effect on our business, financial
condition and results of operations. Furthermore, the nature of our business or
our business plan may require that we upgrade or supplement inbound pipelines,
which could require us to make substantial additional capital expenditures.
23
Our profitability may be limited if we cannot obtain necessary permits and
authorizations to modify our purchased assets.
If we consummate our initial business combination with a target company in
the business of refining crude oil, our profitability may be linked to our
ability to upgrade the refinery to process a heavier, higher-sulfur content
crude oil or to yield lighter, higher-margin products. Our profitability also
may be dependent on our ability to expand the capacity of the refinery. If we
are unable to obtain the necessary permits and authorizations to effect an
upgrade or expansion, or if the costs of making changes to or obtaining these
permits or authorizations exceed our estimates, our profitability could be
negatively affected.
The profitability of the target business we acquire may be limited if we cannot
secure an engineering, procurement and construction ("EPC") contractor to
perform upgrades or expansions.
The profitability of the target business we acquire may be linked to our
ability to upgrade and expand its business. In order to implement an upgrade or
expansion, we expect to hire an EPC contractor. Due to a recent surge in
construction projects across the energy industry, we may experience difficulties
in securing an EPC contractor in a timely fashion to execute our proposed
projects. If we are unable to contract an EPC contractor to effect an upgrade or
expansion in a timely fashion, our profitability could be negatively affected.
Our profitability may be limited if we experience cost overruns on any
construction project or capital improvements we undertake in connection with our
acquired business.
Our business plan is based on capturing the cost advantage of heavy, sour
crude oil relative to light, sweet crude oil as a raw material to manufacture
refined products. Complex refineries that are able to process heavy, sour crude
oils use additional processing equipment that requires a substantial capital
investment. The Company believes that the capital investments to upgrade a small
refinery may range between approximately $100 million and approximately $300
million, although the cost to upgrade any particular refinery may be outside of
this range depending on various factors, including the refinery's size, current
configuration, available infrastructure, geographic location, the technology
being used, construction costs and availability of qualified construction
personnel, and there can be no assurance that the cost of any upgrade we may
undertake would actually fall within this range. Those investments will be
profitable only if the higher capital cost of this processing equipment is more
than offset by the increased margins between the price at which a refinery will
be able to purchase raw materials and the price at which it will be able to sell
its refined products. If we underestimate the capital investments that will be
required to add the necessary processing equipment to permit our acquired
business to benefit from the light/heavy, sweet/sour price differentials, or
otherwise experience cost overruns on any construction project we undertake in
connection with our acquired business, our profitability would be negatively
affected.
If we consummate our initial business combination with a target business in the
refining industry, we may experience difficulties in marketing some of our
products.
Our ability to market the products of a target business we acquire may
depend on:
o obtaining the financing necessary to develop our feedstock, such as crude
oil, to the point where production is suitable for sale;
o the proximity, capacity and cost of pipelines and other facilities for the
transportation of crude oil and refined products;
o the quantity and quality of the refined products produced; and
o the availability of viable purchasers willing to buy our refined products.
If we experienced a catastrophic loss and our insurance was not adequate to
cover such loss, it could have a material adverse affect on our operations.
If we consummate our initial business combination and acquire ownership
and operation of refineries or related storage and other facilities, our
business could be affected by a number of risks, including mechanical failure,
personal injury, loss or damage, business interruption due to political
conditions in foreign countries, hostilities, labor strikes, adverse weather
conditions and catastrophic disasters, including environmental accidents. All of
these risks could result in liability, loss of revenues, increased costs and
24
loss of reputation. We intend to maintain insurance, consistent with industry
standards, against these risks on business assets we may acquire upon completion
of our initial business combination. However, we cannot assure you that we will
be able to adequately insure against all risks, that any particular claim will
be paid out of our insurance, or that we will be able to procure adequate
insurance coverage at commercially reasonable rates in the future. Our insurers
will also require us to pay certain deductible amounts, before they will pay
claims, and insurance policies will contain limitations and exclusions, which,
although we believe will be standard for the refining industry, may nevertheless
increase our costs and lower our profitability.
Additionally, any changes to environmental and other regulations or
changes in the insurance market may also result in increased costs for, or
decreased availability of, insurance we would currently anticipate purchasing
against the risks of environmental damage, pollution and other claims for
damages that may be asserted against us.
Our inability to obtain insurance sufficient to cover potential claims or the
failure of insurers to pay any significant claims, could have a material adverse
effect on our profitability and operations.
The dangers inherent in the refining and marketing of petroleum products
could cause disruptions and could expose us to potentially significant losses,
costs or liabilities.
Businesses involved in the refining, distribution and marketing of
petroleum products and related activities are subject to significant hazards and
risks inherent in refining operations and in transporting and storing crude oil,
intermediate products and refined products. These hazards and risks include, but
are not limited to, the following:
o natural disasters, fires, or explosions;
o spills and pipeline ruptures;
o third-party interference;
o disruptions of electricity deliveries; and
o mechanical failure of equipment at our refinery or third-party facilities.
Any of the foregoing could result in production and distribution
difficulties and disruptions, environmental pollution, personal injury or
wrongful death claims and other damage to our property and the property of
others. There is also risk of mechanical failure and equipment shutdowns both in
the ordinary course of operations and following unforeseen events.
We may have environmental liabilities as a result of our ownership or operation
of contaminated properties or relating to exposure to hazardous or toxic
materials.
We could be subject to claims and may incur costs arising out of human
exposure to hazardous or toxic substances relating to our operations, our
properties, our buildings or to the sale, distribution or disposal of any
products containing any hazardous or toxic substances and produced in connection
with our business.
Properties or facilities owned, leased or operated in conjunction with the
energy industry may be contaminated due to energy or other historical industrial
uses at or near the property. Regulators may impose clean-up obligations if
contamination is identified on a property, and third parties or regulators may
make claims against owners or operators of properties for personal injuries,
property damage or natural resource damage associated with releases of hazardous
or toxic substances. Even if the business we purchase did not cause the
contamination or release, certain environmental laws hold current and previous
owners or operators of real property liable for the costs of cleaning up
contamination regardless of whether they knew of or were responsible for the
contamination. These environmental laws also may impose liability on any person
who arranges for the disposal or treatment of hazardous substances, regardless
of whether the affected site is or was ever owned or operated by such person.
Finally, it is possible that a target business we purchase may have
historical liabilities relating to previous operations or the previous ownership
of real property or facilities. While we may be able to structure a transaction
to leave those types of liabilities with the seller, it may not be possible to
do so as a legal or practical matter. As a result, we may ultimately have
liability for environmental matters that do not relate to businesses we operate.
We will be subject to significant environmental, safety and other governmental
regulations and may incur significant costs to comply with these regulations.
The oil refining, distribution and marketing industry and related
activities are subject to extensive and increasingly stringent environmental
protection, safety and other related federal, state and local laws, rules,
regulations and treaties. We cannot assure you that we will be able to comply
with all laws, rules, regulations and treaties following a business combination.
25
If we are unable to adhere to these requirements, or if we are unable to obtain
or maintain compliance with our environmental permits we could be subject to
civil or criminal penalties and fines and to material restrictions on our
business and operations. The costs of complying with these requirements and any
adverse operational impact of compliance could have a material adverse effect on
our profitability and operations. Certain segments of the energy industry are
also subject to the payment of royalties, and the level of taxation of the
energy industry tends to be high compared with that of other commercial
activities.
Hazards inherent in refining operations will require continual oversight and
control.
If we consummate our initial business combination, we may be engaged in
transporting and refining potentially toxic materials in the course of our
business. There is a risk of leaks or spills of crude oil, petroleum products
and other potentially hazardous materials at operating sites and during
transportation. If operational risks materialized, it could result in loss of
life, damage to the environment or loss of production. We will attempt to
conduct our activities in such a manner that there is no or minimal damage to
the environment. However, these risks will require continual oversight and
control.
Conservation measures and technological advances could reduce demand for crude
oil and refined products.
Fuel conservation measures, alternative fuel requirements, increasing
consumer demand for alternatives to oil and gas, technological advances in fuel
economy and energy generation devices could reduce demand for crude oil and
refined petroleum products. We cannot predict when or whether there will be any
change in demand for these products, and any major changes may have a material
adverse effect on our business, financial condition, results of operations and
cash flows. In addition, we may be adversely affected to the extent we are
unable to address any perceived trade-off between the increasing demand for
global access to energy and the protection or improvement of the natural
environment.
If the increasing demand for alternative fuels lowers the demand for
transportation fuels, our profitability could be negatively affected.
Rising crude oil and refined products prices are increasing the economic
feasibility and demand for alternative fuels like ethanol and bio-diesel. New
technologies are being developed to further increase the feasibility and enhance
the performance of these fuels. Additionally, energy security concerns,
agricultural interests, environmental activists, and others are increasing the
visibility of alternative fuels as a substitute for transportation fuels. Should
these trends continue and the demand for alternative fuels continue to rise,
consequently lowering the demand for petroleum-based transportation fuels, our
profitability could be negatively affected.
Foreign currency fluctuations could adversely affect our business and financial
results.
Crude oil prices are generally set in U.S. dollars while sales of refined
products may be in a variety of currencies. If we consummate a business
combination with a target business with operations outside of the United States,
our business will be subject to risks of fluctuations in foreign currency
exchange rates. In certain markets, we may also experience difficulty in
converting local currencies to U.S. dollars, or the market for conversion of
local currency into other currencies may deteriorate or cease to exist.
In addition, a target business with which we combine may do business and
generate sales within other countries. Foreign currency fluctuations may affect
the costs that we incur in such international operations. It is also possible
that some or all of our operating expenses may be incurred in non-U.S. dollar
currencies. The appreciation of non-U.S. dollar currencies in those countries
where we have operations against the U.S. dollar would increase our costs and
could harm our results of operations and financial condition.
Following our initial business combination, we may engage in hedging
transactions in an attempt to mitigate exposure to price fluctuations in oil and
other petroleum products; these attempts may not be successful.
Following our initial business combination, we may engage in short sales
and utilize derivative instruments such as options, futures, forward contracts,
interest rate swaps, caps and floors, to hedge against exposure to fluctuations
in the price of crude oil, refined petroleum products and other energy portfolio
positions, as well as foreign currency exchange and interest rates. Hedging
transactions may not be as effective as we intend in reducing our exposure to
these fluctuations and any resulting volatility in our cash flows, and if we
incorrectly assess market trends and risks, may result in a poorer overall
performance than if we had not engaged in any such hedging transactions.
Item 1B. Unresolved Staff Comments.
None.
26
Item 2. Properties.
Our executive offices are currently located at 100 Mill Plain Road, Suite
320, Danbury, Connecticut, 06811. We consider our current office space adequate
for our current operations.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of our stockholders during the quarter
ended December 31, 2006.
27
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
Market Information for Common Stock
Our units, common stock and warrants are listed on the American Stock
Exchange under the symbols "NTQ.U," "NTQ" and "NTQ.WS," respectively. The
following table set forth the high and low sales information for the Company's
Units for the period from February 5, 2007 through March 31, 2007 and the
Company's Common Stock and Warrants for the period from February 23, 2007
through March 31, 2007.
--------------------------------------------------------------------------------
Common Stock Warrants Units
------------ -------- -----
--------------------------------------------------------------------------------
BY QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
--------------------------------------------------------------------------------
December 31, 2006 -- -- -- -- -- --
--------------------------------------------------------------------------------
March 31, 2007 9.34 9.11 0.70 0.66 9.84 9.70
--------------------------------------------------------------------------------
Holders
On December 31, 2006, the total number of stockholders of record of our
common stock was one. As of March 31, 2007, there was one stockholder of record
of our common stock.
Dividend Policy
We have not paid any dividends on our common stock to date and will not
pay cash dividends prior to the completion of our initial business combination.
After we complete our initial business combination, the payment of dividends
will depend on our revenues and earnings, if any, our capital requirements and
our general financial condition. The payment of dividends after our initial
business combination will be within the discretion of our board of directors at
that time. Our board of directors currently intends to retain any earnings for
use in our business operations and, accordingly, we do not anticipate that our
board will declare any dividends in the foreseeable future.
Recent Sales of Unregistered Securities.
On June 20, 2006, NTR Partners LLC purchased 7,812,500 shares of our
common stock and 4.25 million warrants to purchase shares of our common stock
(comprising 2.5 million initial founders' warrants and 1.75 million performance
warrants) for a purchase price of $2,525,000. On December 15, 2006, we
reacquired for nominal consideration 1,562,500 of those shares for retirement as
well as all 1,750,000 of the performance warrants for cancellation. This sale
was deemed to be exempt from registration under the Securities Act of 1933 in
reliance on Section 4(2) of the Securities Act as a transaction by an issuer not
involving a public offering. In the transaction, the purchaser represented its
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the instruments representing the securities issued in the
transaction.
Immediately prior to the issuance and sale of the securities in our
initial public offering, NTR Partners LLC, our director Mr. Ortale, Sewanee
Partners III, L.P. (affiliated with Mr. Ortale), Hendricks Family LLLP
(affiliated with our director Mrs. Hendricks), Gilliam Enterprises LLC
(affiliated with our Chairman Mr. Gilliam) and our director Mr. Quarles
collectively purchased 3,350,000 warrants directly from us at a price of $1.00
per warrant, for an aggregate purchase price of $3.35 million in a private
placement. This sale of warrants was also deemed to be exempt from registration
under the Securities Act of 1933 in reliance on Section 4(2) of the Securities
Act as a transaction by an issuer not involving a public offering. In the
transaction, each of the aforementioned purchasers represented its intention to
acquire the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed to
the instruments representing the securities issued in the transaction.
Use of Proceeds from Sales of Registered Securities.
On February 5, 2007, we closed our initial public offering of 24,000,000
units with each unit consisting of one share of our common stock and one
28
warrant, each to purchase one share of our common stock at an exercise price of
$7.50 per share. On February 22, 2007, we consummated the closing of an
additional 557,205 units which were subject to the over-allotment option. The
units from the initial public offering (including the over-allotment option)
were sold at an offering price of $10.00 per unit, generating total gross
proceeds of $245.57 million (excluding the proceeds from the offering of $3.35
million founders' warrants received upon consummation of our initial public
offering). Citigroup Global Markets Inc. acted as lead managing underwriter for
the initial public offering. The securities sold in the offering were registered
under the Securities Act of 1933 on registration statement Form S-1 (No.
333-135394). The Securities and Exchange Commission declared the registration
statements effective on January 29, 2007. We paid a total of $9.82 million in
underwriting discounts and commissions and $975,000 for other costs and expenses
related to the offering and the over-allotment option. After deducting the
underwriting discounts and commissions and the offering expenses, the total net
proceeds to us from the offering were $240,624,168, of which $240,124,168 was
deposited into the Trust Account and the remaining proceeds of $500,000 became
available to be used to provide for business, legal and accounting due diligence
on prospective business combinations and continuing general and administrative
expenses.
As of March 31, 2007, there was approximately $241,697,789 in the Trust
Account.
Repurchases of Equity Securities by the Registrant and Affiliated Purchasers.
None.
29
Item 6. Selected Financial Data.
Results of Operations
The following table sets forth selected historical financial information
derived from our audited consolidated financial statements included elsewhere in
this Report for the period from June 2, 2006 (inception) to December 31, 2006
and as of December 31, 2006. The following data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements including the notes
thereto, included elsewhere in this Annual Report on Form 10-K.
NTR ACQUISITION CO.
(A development stage company)
Statement of Operations Information:
June 2, 2006
(inception) to
December 31, 2006
Operating expenses: $ 341,469
Professional services 18,430
Rent and facilities 47,921
-----------
Formation and operating 407,820
-----------
Loss from operations before other income and income tax expense (407,820)
Other income and expense:
Interest income 71,019
Other state taxes (29,067)
-----------
Other income 41,952
-----------
Loss before income tax expense (365,868)
Income tax expense:
Current --
Deferred --
-----------
Income tax expense --
-----------
Net loss $ (365,868)
===========
Loss per share:
Basic $ (0.05)
Diluted (0.05)
Weighted average shares outstanding:
Basic 7,694,575
Diluted 7,694,573
30
NTR ACQUISITION CO.
(A development stage company)
Balance Sheet Information:
December 31, 2006
-----------------
ASSETS
Cash and cash equivalents $ 2,423,747
Other assets 1,737
-----------
Total current assets 2,425,484
-----------
Deferred Offering Costs 815,343
Other assets 4,240
-----------
Total assets $ 3,245,067
===========
LIABILITIES
Accrued liabilities $ 1,002,336
Accrued taxes 29,067
Notes payable to initial founders 49,534
-----------
Total current liabilities 1,080,937
-----------
STOCKHOLDERS' EQUITY:
Preferred stock $.0001 par value, none authorized --
at December 31, 2006
Common stock $.001 par value, 200,000,000 shares authorized; 6,250
6,250,000 issued and outstanding as of December 31, 2006
Additional paid-in capital 2,523,749
Deficit accumulated during the development stage (365,868)
-----------
Total stockholders' equity 2,164,130
-----------
Total liabilities and stockholders' equity $ 3,245,067
===========
31
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
You should read the following discussion and analysis of our financial condition
and results of operations together with "Selected Consolidated Financial Data"
and our consolidated financial statements and notes thereto that appear
elsewhere in this Annual Report on Form 10-K. This discussion and analysis
contains forward-looking statements that involve risks, uncertainties, and
assumptions. Actual results may differ materially from those anticipated in
these forward-looking statements as a result of various factors, including, but
not limited to, those presented under "Risks Related To Our Business" included
in Item 1A and elsewhere in this Annual Report on Form 10-K.
Overview
We were formed on June 2, 2006 for the purpose of effecting a merger,
capital stock exchange, asset acquisition or other similar business combination
with one or more businesses, or assets in the energy industry, with a particular
focus on businesses or assets involved in the refining, distribution and
marketing of petroleum products in North America.
Our initial public offering, in which we sold 24,000,000 units, was
completed on February 5, 2007. On February 22, 2007, we completed the closing of
an additional 557,205 units that were subject to the underwriter's
over-allotment option. Each Unit consists of one share of our common stock and
one warrant entitling the holder to purchase one share of our common stock at a
price of $7.50. The public offering price of each unit was $10.00, and we
generated gross proceeds of $245.57 million in the initial public offering
(including proceeds from the exercise of the over-allotment option and excluding
the proceeds from the offering of $3.35 million founders' warrants received upon
consummation of our initial public offering). Of the gross proceeds: (i) we
deposited $234,274,168 into a Trust Account (the "Trust Account") at Morgan
Stanley & Co. Inc., maintained by American Stock Transfer & Trust Company as
Trustee, which included $7.37 million of deferred underwriting fees; (ii) the
underwriters received $9.82 million as underwriting fees (excluding the deferred
underwriting fees); (iii) we retained $975,000 for offering expenses; and (iv)
we also retained $500,000 for initial working capital. In addition, we deposited
into the Trust Account $5,850,000 that we received from the issuance and sale of
3,350,000 warrants to certain officers and directors and affiliates of officers
and directors of the Company, which was consummated concurrently with the
closing of the initial public offering, and the issuance and sale of 2,500,000
founders' warrants to certain officers and directors and affiliates of officers
and directors of the Company, which was consummated prior to the closing of the
initial public offering.
We had not commenced any operations as of December 31, 2006 and had no
contractual obligations at that time.
We intend to utilize cash derived from the proceeds from our initial
public offering, our capital stock, debt or a combination of cash, capital stock
and debt, in effecting a business combination. The issuance of additional shares
of our capital stock:
o may significantly reduce the equity interest of our stockholders;
o will likely cause a change in control if a substantial number of our
shares of common stock are issued, which may affect, among other things,
our ability to use our net operating loss carry forwards, if any, and may
also result in the resignation or removal of one or more of our current
officers and directors; and
o may adversely affect prevailing market prices for our common stock.
Similarly, if we issue debt securities, it could result in:
o default and foreclosure on our assets if our operating revenues after a
business combination were insufficient to pay our debt obligations;
o acceleration of our obligations to repay the indebtedness even if we have
made all principal and interest payments when due if the debt security
contained covenants that require the maintenance of certain financial
ratios or reserves and any such covenant were breached without a waiver or
renegotiation of that covenant;
o our immediate payment of all principal and accrued interest, if any, if
the debt security were payable on demand; and
o our inability to obtain additional financing, if necessary, if the debt
security contained covenants restricting our ability to do so.
We intend to use substantially all of the net proceeds of our initial
public offering, including the funds held in the Trust Account (excluding
deferred underwriting discounts and commissions), to acquire a target business.
To the extent that our capital stock is used in whole or in part as
32
consideration to effect a business combination, the remaining proceeds held in
the Trust Account as well as any other net proceeds not expended will be used as
working capital to finance the operations of the target business. Such working
capital funds could be used in a variety of ways including continuing or
expanding the target business' operations, for strategic acquisitions and for
marketing, research and development of existing or new products. Such funds
could also be used to repay any operating expenses or finders' fees which we had
incurred prior to the completion of our business combination if the funds
available to us outside of the trust fund were insufficient to cover such
expenses.
We believe that the funds available to us outside of the Trust Account,
together with the interest earned on the Trust Account balance that may be
released to us, will be sufficient to allow us to operate until January 30,
2009, assuming that a business combination is not consummated during that time.
Over this time period, we will be using these funds for identifying and
evaluating prospective acquisition candidates, performing business due diligence
on prospective target businesses, traveling to and from the offices, plants or
similar locations of prospective target businesses, reviewing corporate
documents and material agreements of prospective target businesses, selecting
the target business to acquire and structuring, negotiating and consummating the
business combination. We anticipate that, during the period following our
initial public offering, we will incur approximately:
o $1,000,000 of expenses for legal, accounting and other third party
expenses attendant to the due diligence investigation, structuring and
negotiating of a business combination;
o $180,000 of expenses for the payment for office space, administrative and
support services (approximately $7,500 per month for up to two years);
o $100,000 of expenses in legal and accounting fees relating to our SEC
reporting obligations; and
o $2,470,000 for general working capital that will be used for miscellaneous
expenses and reserves, including director and officer liability insurance
premiums.
The amount of available proceeds is based on management's estimates of the
costs needed to fund our operations until January 30, 2009 and consummate a
business combination. Those estimates may prove inaccurate, especially if a
portion of the available proceeds is used to make a down payment or pay
exclusivity or similar fees in connection with a business combination or if we
expend a significant portion of the available proceeds in pursuit of a business
combination that is not consummated. Nevertheless, we do not believe we will
need to raise additional funds following the initial public offering in order to
meet the expenditures required for operating our business. However, we may need
to raise additional funds if such funds are required to consummate a business
combination that is presented to us, although we have not entered into any such
arrangement and have no current intention of doing so.
Since completing our initial public offering, we have identified and
entered into preliminary, confidential discussions with certain target
businesses with respect to which we may pursue an initial business combination.
These target businesses are not discussing opportunities exclusively with us and
are accepting offers from competitive bidders. Our discussions may or may not
result in the consummation of our initial business combination and any such
transaction or transactions would only occur after completing financial,
operational, environmental and legal due diligence, and will be subject to the
negotiation and execution of definitive agreements governing the terms and
conditions of such transactions, as well as compliance with other terms and
conditions (including obtaining shareholder approval) for the business
combination as set forth in our Prospectus. We have not engaged or retained any
agent or representative to identify a suitable acquisition candidate, to conduct
any research or take any measures, directly or indirectly, to locate or contact
a target business. Should our negotiations with the present target businesses
fail to produce an initial business combination, we will continue to pursue
other potential candidates for a potential acquisition. We may also seek out
other potential targets during the course of our negotiations with these or any
other target company, subject to any applicable restrictions on our ability to
do so in any preliminary agreement we may enter into as part of the current
discussions.
Impact of Recently Issued Accounting Pronouncements
Reference is made to Note 2 of our Financial Statements for a discussion
of recently issued accounting pronouncements that could potentially impact us.
In September 2006, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 155 Accounting for Certain Hybrid Financial Instruments, which
permits fair value re-measurement for any hybrid financial instrument that
contains an embedded derivative that otherwise would require bifurcation.
Management does not believe that SFAS No. 155 will have a material effect on the
Company's consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
33
value measurements. SFAS 157 is effective in fiscal years beginning after
November 15, 2007. Management is currently evaluating the impact that the
adoption of this statement may have on the Company's consolidated financial
statements.
In June 2006, the FASB issued Interpretation No. ("FIN") 48, Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS 109 and prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and
transition. FIN 48 is effective for fiscal years beginning after December 15,
2006.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Market risk is the sensitivity of income to changes in interest rates,
foreign exchanges, commodity prices, equity prices, and other market-driven
rates or prices. We are not presently engaged in and, if we do not consummate a
suitable business combination prior to the prescribed liquidation date of the
trust fund, we may not engage in, any substantive commercial business.
Accordingly, we are not and, until such time as we consummate a business
combination, we will not be, exposed to risks associated with foreign exchange
rates, commodity prices, equity prices or other market-driven rates or prices.
The net proceeds of our initial public offering held in the trust fund may be
invested by the Trustee only in United States "government securities" within the
meaning of Section 2(a)(16) of the Investment Company Act of 1940 having a
maturity of 180 days or less, or in money market funds meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940.
Given our limited risk in our exposure to government securities and money market
funds, we do not view the interest rate risk to be significant.
34
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements:
Report of Independent Registered Public Accounting Firm
Balance Sheet as of December 31, 2006
Statement of Income from June 2, 2006 (date of inception) to
December 31, 2006
Statement of Stockholders' Equity from June 2, 2006 (date of
inception) through December 31, 2006
Statements of Cash Flows from June 2, 2006 (date of inception)
to December 31, 2006
Notes to Financial Statements
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
Item 9A(T). Controls and Procedures.
Not Applicable.
Item 9B. Other Information.
None.
35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
NTR Acquisition Co.
We have audited the accompanying balance sheet of NTR Acquisition Co. (a
corporation in the development stage) as of December 31, 2006, and the related
statements of operations, stockholders' equity and cash flows for the period
from June 2, 2006 (date of inception) through December 31, 2006. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NTR Acquisition Co. (a
corporation in the development stage) as of December 31, 2006, and the results
of its operations and its cash flows for the period from June 2, 2006 (date of
inception) through December 31, 2006 in conformity with U.S. generally accepted
accounting principles.
/s/ KPMG, LLP
Houston, Texas
February 23, 2007
36
NTR ACQUISITION CO.
(A Corporation in Development Stage)
Balance Sheet
December 31, 2006
Assets
Cash and cash equivalents $ 2,423,747
Other assets 1,737
-----------
Total current assets 2,425,484
-----------
Deferred offering costs 815,343
Other assets 4,240
-----------
Total assets $ 3,245,067
===========
Liabilities and Stockholder's Equity
Accrued liabilities $ 1,002,336
Accrued taxes 29,067
Notes payable to initial founders 49,534
-----------
Total current liabilities 1,080,937
-----------
Common stock, $0.001 par value. Authorized 200,000,000, shares;
issued and outstanding 6,250,000 shares at December 31, 2006 6,250
Additional paid-in capital 2,523,748
Deficit accumulated during the development stage (365,868)
-----------
Total stockholder's equity 2,164,130
-----------
Total liabilities and stockholder's equity $ 3,245,067
===========
See accompanying notes to financial statements.
37
NTR ACQUISITION CO.
(A Corporation in Development Stage)
Statement of Operations
Period from June 2, 2006 (date of inception) through December 31, 2006
Operating expenses:
Professional services $ 341,469
Rent and facilities 18,430
Formation and operating 47,921
-----------
407,820
-----------
Loss from operations before other income and income tax expense (407,820)
Other income and expense:
Interest income 71,019
Other state taxes (29,067)
-----------
Other income 41,952
-----------
Loss before income tax expense (365,868)
Income tax expense:
Current --
Deferred --
-----------
Income tax expense --
-----------
Net loss $ (365,868)
===========
Loss per share:
Basic $ (0.05)
Diluted (0.05)
Weighted average shares outstanding:
Basic 7,694,575
Diluted 7,694,573
See accompanying notes to financial statements.
38
NTR ACQUISITION CO.
(A Corporation in Development Stage)
Statement of Changes in Stockholder's Equity
Period from June 2, 2006 (date of inception) through December 31, 2006
Deficit
accumulated
Common stock Additional during the
---------------------------- paid in development
Shares Values capital stage Total
---------- ---------- ---------- ---------- ----------
Balance at June 2, 2006 (inception) -- $ -- -- -- --
Sale of common shares to initial
founders 7,812,500 7,813 2,267,085 -- 2,274,898
Sale of 4,250,000 warrants to initial
founders -- -- 250,101 -- 250,101
Cash contribution made by initial
founders -- -- 5,000 -- 5,000
Common stock repurchased and
performance warrants from
initial founders for $1.00 (1,562,500) (1,563) 1,562 -- (1)
Net loss -- -- -- (365,868) (365,868)
---------- ---------- ---------- ---------- ----------
Balances at December 31, 2006 6,250,000 $ 6,250 2,523,748 (365,868) 2,164,130
========== ========== ========== ========== ==========
See accompanying notes to financial statements.
39
NTR ACQUISITION CO.
(A Corporation in Development Stage)
Statement of Cash Flows
Period from June 2, 2006 (date of inception) through December 31, 2006
Cash flows from operating activities:
Net loss $ (365,868)
Adjustments to reconcile net loss to net provided by (used in) operating activities:
Changes in assets and liabilities:
Other assets (5,977)
Accrued taxes 29,067
Accrued liabilities 255,488
Notes payable to initial founders 49,534
-----------
Net cash used in operating activities (37,756)
-----------
Cash flows from investing activities:
Cash held in trust account --
Marketable securities held in trust --
-----------
Net cash used in investing activities --
-----------
Cash flows from financing activities:
Proceeds from sale of common stock to initial founders, net of offering costs 2,211,403
Proceeds from sale of warrants to initial founders 250,101
Repurchase of common stock and performance warrants (1)
-----------
Net cash provided by financing activities 2,461,503
-----------
Net increase in cash 2,423,747
Cash and cash equivalents, beginning of period --
-----------
Cash and cash equivalents, end of period $ 2,423,747
===========
Noncash financing activities:
Accrual of deferred offering costs $ 746,848
See accompanying notes to financial statements.
40
NTR ACQUISITION CO.
(A Corporation in the Development Stage)
Notes to Financial Statements
December 31, 2006
(1) Organization and Nature of Business Operations
NTR Acquisition Co. (the Company) was organized under the laws of the
State of Delaware on June 2, 2006. The Company was formed to acquire,
through merger, capital stock exchange, asset acquisition or other similar
business combination, one or more businesses or assets in the energy
industry, with a particular focus on businesses or assets involved in the
refining, distribution and marketing of petroleum products in North
America. The Company has selected December 31st as its fiscal year end.
The Company has neither engaged in any operations nor generated any
revenue to date. The activity from June 2, 2006 (inception) to December
31, 2006 relates to the Company's formation described in Note 6 and
initial public offering described in Note 7. The Company is considered to
be in the development stage and is subject to the risks associated with
activities of development stage companies.
(2) Summary of Significant Accounting Policies
(a) Cash Equivalents and Concentrations
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased, to be cash
equivalents. Such cash and cash equivalents, at times, may exceed
federally insured limits. The Company maintains its accounts with
financial institutions with high credit ratings.
(b) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. 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 earnings in
the period that includes the enactment date.
(c) Loss Per Common Share
Basic loss per share is computed using the weighted average number
of common shares outstanding. Diluted loss per share gives effect to
the potential dilution of earnings which could occur if securities
or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that
then shared in earnings, if dilutive.
The 2,500,000 warrants to purchase common stock were anti-dilutive
and excluded from the calculation of diluted loss per share for the
period ended December 31, 2006.
(d) Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of expenses during
the reporting period. Actual results could differ from those
estimates.
41
NTR ACQUISITION CO.
(A Corporation in the Development Stage)
Notes to Financial Statements
December 31, 2006
(3) Deferred Offering Costs
Deferred offering costs consist primarily of legal fees related to the
initial public offering and will be charged to additional paid-in capital
at closing of the initial public offering.
(4) Notes Payable - Related-Party
The Company issued unsecured promissory notes totaling $49,534, to initial
founders related primarily to operating, formation, and facility costs
incurred on behalf of the Company. The notes do not bear interest.
(5) Income Taxes
The Company recorded a deferred income tax asset for the tax effect of
temporary differences and a net operating loss carryforward of $124,395.
Management does not believe it is more likely than not that the benefit
associated with this net operating loss carryforward will be realized and,
therefore, a full valuation allowance was recorded.
The effective tax rate differs from the statutory rate of 34% due to the
increase in the valuation allowance.
(6) Formation of the Company
On June 20, 2006, NTR Partners LLC purchased 7,812,500 initial founders'
shares of common stock, 2,500,000 initial founders' warrants, and
1,750,000 performance warrants for a purchase price of $2,525,000 in a
private placement in connection with the formation of NTR Acquisition Co.
These initial founders' shares of common stock are identical to the shares
included in the units issued in connection with the initial public
offering, except that each holder of the initial founders' shares has
agreed (i) in connection with the stockholder vote required to approve an
initial business combination, to vote the initial founders' shares in
accordance with a majority of the shares of common stock voted by the
public stockholders, and (ii) to waive its the right to participate in any
liquidation distribution with respect to the initial founders' shares if
we fail to consummate a business combination.
Each holder of initial founders' shares has also agreed that it will not
to sell or transfer the initial founders' shares for a period of one year
from the date the Company completes its initial business combination,
other than to permitted transferees who agree to be subject to these
transfer restrictions to waive their rights to participate in a
liquidation if the Company does not consummate its initial business
combination and to vote with the majority of public stockholders who vote
in connection with the Company's initial business combination. In
addition, the initial founders' shares will be entitled to registration
rights commencing on the date on which they become transferable under a
warrant agreement.
The initial founders' warrants are identical to those being issued in the
initial public offering, except that the initial founders' warrants will
be nonredeemable so long as they are held by NTR Partners LLC or any of
the Company's founders or their permitted transferees.
42
NTR ACQUISITION CO.
(A Corporation in the Development Stage)
Notes to Financial Statements
December 31, 2006
Each of the Company's founders has agreed that it will not to sell or
transfer the any founders' warrants such founder holds until after the
Company completes its initial business combination, other than to
permitted transferees who agree to be subject to these transfer
restrictions. In addition, commencing on the date on which they become
exercisable, the initial founders' warrants and the shares of common stock
issuable upon exercise of the warrants will be entitled to registration
rights under a registration rights agreement dated January 30, 2007.
On December 15, 2006, the Company purchased from its initial stockholder
an aggregate of 1,562,500 outstanding common shares for retirement and all
1,750,000 outstanding performance warrants for cancellation for aggregate
nominal consideration of $1.00. These transactions were effected to ensure
that the shares included in the units sold in the initial public offering
(as described in Note 7) represented approximately 80% of the Company's
outstanding share capital.
(7) Subsequent Events
On January 30, 2007, the Company purchased from its initial stockholder
250,000 outstanding common shares for nominal consideration of $1.00.
On January 29, 2007, the registration statement for the Company's initial
public offering was declared effective and on February 5, 2007 the Company
sold to the public 24,000,000 units (Units) at a price of $10.00.
Subsequently, on February 20, 2007, the underwriters for the Company's
initial public offering exercised a portion of their over-allotment option
and subsequently purchased on February 22, 2007 an additional 557,205
units at $10.00 per unit. Each unit consists of one share of the Company's
common stock, $0.001 par value and one warrant (Warrant).
Each Warrant entitles the holder to purchase from the Company one share of
common stock at a price of $7.50 on the later of the completion of the
initial business combination or thirteen months from the closing of the
initial public offering, in each case, provided that the Company has a
registration statement in effect covering the shares of common stock
issuable upon exercise of the Warrants. The Warrants expire January 30,
2011 unless earlier redeemed.
Pursuant to the warrant agreement (Warrant Agreement), the Company is
required to use its best efforts to effect the registration of the shares
of common stock under the Warrants. The Company will not be obligated to
deliver securities, and there are no contractual penalties for failure to
deliver securities, if a registration statement is not effective at the
time of the exercise. Also, in the event that a registration statement is
not effective at the time of exercise, the holder of such Warrant shall
not be entitled to exercise such Warrant and in no event (whether in the
case of a registration statement not being effective or otherwise) will
the Company be required to net cash settle the warrant exercise.
Consequently, the Warrants may expire unexercised and unredeemed.
A total of approximately $240,124,000, including the net proceeds of the
initial public offering, the sale of the initial founder' securities and
the deferred underwriting discounts and commissions has been placed in a
trust account at Morgan Stanley & Co. Inc., with the American Stock
Transfer & Trust Company as trustee. Except for a portion of the interest
income to be released to the Company, the proceeds held in trust will not
be released from the trust account until the earlier of the completion of
the Company's initial business combination or the liquidation of NTR
Acquisition Co. Under the terms of the investment management trust
agreement, up to $3.25 million of interest (net of taxes payable) may be
released to the Company, subject to availability.
43
NTR ACQUISITION CO.
(A Corporation in the Development Stage)
Notes to Financial Statements
December 31, 2006
The initial target business or businesses with which the Company combines
must have a collective fair market value equal to at least 80% of the
balance in the trust account (excluding deferred underwriting discounts
and commissions of $7.4 million at the time of the initial business
combination).
An initial business combination will be consummated only if a majority of
the shares of common stock voted by the public stockholders are voted in
favor of the initial business combination and public stockholders owning
less than 20% of the shares sold in the initial public offering exercise
their conversion rights.
Public stockholders voting against the initial business combination will
be entitled to convert their shares of common stock into a pro rata share
of the aggregate amount then on deposit in the trust account (before
payment of the deferred underwriting discounts and commissions and
including interest earning on their pro rata portion of the trust account,
net of income taxes payable on such interest and net of interest income of
up to $3.25 million on the trust account balance previously released to
the Company to fund working capital requirements) if the initial business
combination is approved and completed. If the initial business combination
is not approved or completed for any reason, then public stockholders
voting against the initial business combination who exercised their
conversion rights would not be entitled to convert their shares of common
stock into a pro rata share of the aggregate amount then on deposit in the
trust account.
If the Company is unable to complete a business combination by January 30,
2009, it will automatically dissolve and as promptly as practicable
thereafter adopt a plan of dissolution and distribution. Upon its receipt
of notice from counsel that the Company has been dissolved, the trustee
will commence liquidating the investments constituting the trust account
and distribute the proceeds to the public stockholders. The Company's
initial founders have waived their right to participate in any liquidation
distribution with respect to any initial bounders' shares. There will be
no distribution from the trust account with respect to any of the warrants
which will expire worthless if the Company is liquidated.
On February 5, 2007, a group of the Company's initial founders purchased
an additional 3,350,000 warrants ($3.35 million in the aggregate) in a
private placement. These warrants are identical to the Warrants contained
in the Units except that they are not redeemable while held by any of the
founders or their permitted transferees. The warrants issued in connection
with the private placement are subject to certain transfer restrictions.
44
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Management
Directors and Executive Officers
Our current directors and executive officers are as follows:
Name Age(1) Position
D. Duane Gilliam 62 Chairman of the Board of Directors
Mario E. Rodriguez 40 Chief Executive Officer and Director
William E. Hantke 59 Vice Chairman of the Board of Directors
and Principal Financial Officer
Henry M. Kuchta 50 Director, President and Chief Operating
Officer
Maureen A. Hendricks 55 Director
Buford H. Ortale 45 Director
Randal K. Quarles 49 Director
(1) As of March 31, 2007
D. Duane Gilliam has been non-executive Chairman of the Board of Directors
of our company since its inception in June 2006. Mr. Gilliam has more than 38
years of experience in the petroleum industry. He served as executive vice
president of corporate affairs of Marathon Ashland Petroleum LLC, a refining,
marketing and transportation company from 2001 to 2003, when he retired. From
1998 to 2001, he was executive vice president of Marathon Ashland Petroleum LLC,
Findlay, Ohio. Between 1993 and 1998, Mr. Gilliam served first as executive vice
president of petroleum operations at Ashland Petroleum Company, also a refining,
marketing and transportation company, and, thereafter, as senior vice president
for Ashland Inc. and president of Ashland Petroleum Company, where he had
previously served as group vice president in 1992. Mr. Gilliam started his
career at Ashland Inc. in 1967 as a process engineer, and was subsequently
promoted to positions of increasing responsibility, becoming executive
assistant, director and vice president of administration for Scurlock Oil
Company in 1984 and president of the newly combined Scurlock Permian Corporation
in 1991.
In addition, Mr. Gilliam is a member of the 25 Year Club of the Petroleum
Industry. He was a member and director of the American Petroleum Institute from
1996 to 2003. During that time, he also served on the API's downstream
committee. Mr. Gilliam served as chairman of the board of directors of the
National Petrochemical & Refiners Association, or NPRA, from 2002 to 2004, after
having served as vice chairman from 1999 to 2002. He was also a member of the
NPRA's executive committee and issues committee from 1999 to 2002. Furthermore,
he served as chairman of the owner representatives board of LOOP LLC from 2001
to 2003. From 2000 to 2003, he served on the board of directors of Colonial
Pipeline Company. Since January 2005, he has served on the board of directors of
VeraSun Energy.
Mr. Gilliam holds a B.S. in chemical engineering from the University of
Kentucky and is a graduate of Harvard University's Advanced Management Program.
He is a registered professional engineer in Kentucky, Louisiana and Texas. In
2003, Mr. Gilliam was inducted into the University of Kentucky Engineering Hall
of Distinction.
45
Mario E. Rodriguez has been a director of our company and Chief Executive
Officer since its inception in June 2006. From 2002 to 2006, Mr. Rodriguez was
managing director in the global energy group of the investment banking division
at Citigroup Global Markets, Inc., where he was responsible for the origination
and execution of mergers and acquisitions and capital markets transactions for
integrated oil companies, large capitalization exploration and production
companies, and refining and marketing companies. In addition, Mr. Rodriguez was
a member of the resource steering committee of Citigroup's investment banking
division since 2005. From 2001 to 2002, Mr. Rodriguez was director of the global
energy group of Citigroup's investment banking division, where he had previously
served as vice president from 1999 to 2001. As vice president, director and
subsequently managing director at Citigroup, Mr. Rodriguez advised many
integrated oil and refining companies like ExxonMobil Corporation, Chevron
Corporation, ConocoPhillips, Royal Dutch Shell, Premcor Inc., Sunoco and Repsol
YPF S.A. on mergers and acquisitions and selected capital markets transactions.
From 1996 to 1999, Mr. Rodriguez served as vice president of the natural
resources and power group of the investment banking division of J.P. Morgan &
Co. Incorporated, after having been an associate in the same group since 1994.
Mr. Rodriguez represented companies like Petroleos de Venezuela, S.A., the
Venezuelan national oil company, Saudi Aramco, the Saudi Arabian national oil
company, Repsol YPF S.A. and E. I. du Pont de Nemours & Co. in various mergers
and acquisitions transactions.
From 1990 to 1992, Mr. Rodriguez was a consultant in the international
energy directorate of Arthur D. Little, Inc. where he assisted several
international integrated oil companies in organizational restructuring, business
process redesign and development of performance measurement systems. From 1991
to 1992, he was also the team leader for the operations research group, which
was focused on refinery planning and distribution using linear programming
techniques. He completed assignments for Shell Oil, PetroCanada, Saudi Aramco,
British Petroleum and Yacimientos Petroliferos Fiscales.
Mr. Rodriguez holds a B.S. degree in mechanical engineering from
Universidad Simon Bolivar, Caracas, Venezuela, and a Master in Business
Administration degree from Harvard Business School.
William E. Hantke has been Vice Chairman of the Board and Principal
Financial Officer of our company since its inception in June 2006. Mr. Hantke
served as executive vice president and chief financial officer of Premcor, Inc.,
a growth refining company, from 2002 to 2005. Mr. Hantke was also corporate vice
president of development of Tosco Corporation, a growth refining and marketing
company, from 1999 until 2001, where he had previously served as corporate
controller from 1993 until 1999. As a senior executive at Tosco, Mr. Hantke
participated in the acquisition of ten oil refineries. Prior to working at
Tosco, Mr. Hantke was senior manager, mergers and acquisitions at Coopers &
Lybrand from 1989 to 1990. He also held various positions from 1975 to 1988 at
AMAX, Inc., including corporate vice president, operations analysis and senior
vice president, finance and administration, metals and mining. He was
staff/senior accountant at Arthur Young from 1970 to 1975. He is also currently
a director of NRG Energy and non-executive chairman of Process Energy Solutions.
Mr. Hantke holds a B.S. degree in accounting from Fordham University.
Henry M. Kuchta has been a director of our company since September 2006
and our President and Chief Operating Officer since December 2006. Mr. Kuchta
served as president of Premcor Inc., a growth refining and marketing company,
from 2003 until 2005 and as chief operating officer of Premcor Inc. from 2002
until 2005. Prior to that in 2002, Mr. Kuchta served as executive vice
president-refining of Premcor Inc. From 2001 until 2002, Mr. Kuchta served as
business development manager for Phillips 66 Company, following Phillips' 2001
acquisition of Tosco Corporation. Prior to joining Phillips, Mr. Kuchta served
in various corporate, commercial and refining positions at Tosco Corporation
from 1993 to 2001. Before joining Tosco, Mr. Kuchta spent 12 years at Exxon
Corporation in various refining, engineering and financial positions, including
assignments overseas. Mr. Kuchta holds a B.S. in chemical engineering from Wayne
State University.
Maureen A. Hendricks has been a director of our company since its
inception in June 2006. She is a retired investment banker with 30 years of
experience in domestic and international capital markets and relationship and
underwriting product management. During her career Mrs. Hendricks served on
various management committees, including credit policy, market risk, capital
allocation, and compensation. From 1997 until her retirement in 2001, Mrs.
Hendricks was the head of global energy and power at Salomon Smith Barney, where
she also acted as a senior advisory director until 2003.
46
Mrs. Hendricks started her career at J.P. Morgan & Co. Incorporated in
1973, where she held a variety of positions of increasing responsibility in both
client relationship and product management until 1997. For example, she served
as the head of global debt capital markets, the head of North American fixed
income, the head of European equities, and the co-head of global equity
derivatives.
Mrs. Hendricks has been a member of the board of directors of Millipore
Corporation since 1995 and has previously served as the chair of the audit
committee and the chair of the management development and compensation committee
of that firm. She is currently a member of the governance committee of
Millipore. In addition, Mrs. Hendricks has been the lead director, the chair of
the audit committee, and a member of the governance and compensation committees
of Opteum Inc. since 2003.
Mrs. Hendricks holds an AB degree magna cum laude from Smith College,
where she was elected to Phi Beta Kappa. She also completed the Harvard Business
School Program for Management Development.
Buford H. Ortale has been a director of our company since its inception in
June 2006. Mr. Ortale is currently president of Sewanee Ventures, a private
equity firm that he founded in 1996. Sewanee Ventures is the general partner of
Sewanee Partners III, L.P., a private investment partnership. He has been
involved in numerous private equity investments over the years, including
start-ups in which he was an original stockholder. Among others, his pre-initial
public offering investments include iPayment, Dr. Pepper/Seven Up, Premiere
Technologies, Texas Capital Bancshares, and Opteum Inc. Mr. Ortale began his
career as an associate with Merrill Lynch's Merchant Banking Group in New York
in 1987, and was a Vice President when he left in 1991. From 1991 to 1992, he
worked at Equitable Securities and formed BHO Associates, the predecessor to
Sewanee Ventures. In 1993, Mr. Ortale founded and was a director of
NationsBank's High Yield Bond Group, leaving in 1996 as a managing director.
Including a stint as a managing director in the Financial Sponsors Group of
Deutsche Bank Securities from 2001-2002, he has continued his private equity
endeavors through Sewanee Ventures from 1996 to the present.
Mr. Ortale has served on the board of directors of several companies,
including Ztel, Premiere Technologies, Phyve Corporation, and MusicTrust. He
currently sits on the boards of InkStop, TerraCerta, Enliven Partners, and
Opteum Inc., a NYSE-listed company of which he chairs the governance committee
and is a member of the audit committee.
Mr. Ortale received a B.A. from the University of the South, and a Masters
in Business Administration from Vanderbilt University.
Randal K. Quarles has been a director of our company since October 2006.
From August 2001 until October 2006, Mr. Quarles served in a variety of senior
roles at the U.S. Department of the Treasury: from August 2005 as Under
Secretary of the Treasury for Domestic Finance; from 2002 to 2005 as Assistant
Secretary of the Treasury for International Affairs; and from 2001 to 2002 as
the United States Executive Director at the International Monetary Fund. In
these roles, Mr. Quarles was responsible for a wide range of domestic and
international financial matters including exchange rate policy (including
Chinese currency flexibility), financial structure and stability (including IMF
lending to Turkey and Brazil), sovereign debt markets (including U.S. policy on
the Argentine debt default), cross-border investment policy (including the
proposed acquisition of Unocal by the Chinese National Offshore Oil
Corporation), financial market regulation (including policy on hedge funds and
derivatives), promotion of free trade in financial services (including
negotiation of the financial services provisions of six free trade agreements),
and development finance (including negotiation of the debt relief agreement for
the world's highly indebted poor countries at the London G7 meetings in 2005).
From 1984 to 1991 and from 1993 to 2001, Mr. Quarles practiced law in the
private sector at Davis Polk & Wardwell, where he was a partner from 1994 to
2001 and co-head of the firm's Financial Institutions Group from 1996 to 2001.
In the interval from 1991 to 1993, Mr. Quarles also served in the Treasury
Department: from 1992 to 1993 as Deputy Assistant Secretary for Financial
Institutions Policy, and from 1991 to 1992 as Special Assistant to the Secretary
of the Treasury.
47
Mr. Quarles holds an A.B. degree, summa cum laude, from Columbia College,
where he majored in Philosophy and Economics. He also received a J.D. degree
from the Yale Law School.
Number and Terms of Office of Directors
Our board of directors is divided into three classes with only one class
of directors being elected in each year and each class serving a three-year
term. The term of office of the first class of directors, consisting of Mr.
Ortale and Mr. Quarles, will expire at our first annual meeting of stockholders
following consummation of the initial public offering. The term of office of the
second class of directors, consisting of Mr. Hantke, Mr. Kuchta and Mr.
Rodriguez, will expire at the second annual meeting of stockholders following
consummation of the initial public offering. The term of office of the third
class of directors, consisting of Mr. Gilliam and Mrs. Hendricks, will expire at
the third annual meeting of stockholders following consummation of the initial
public offering.
These individuals will play a key role in identifying and evaluating
prospective acquisition candidates, selecting the target business, and
structuring, negotiating and consummating our initial business combination.
Through their positions described above, most of our directors have extensive
experience in the energy industry, and in the refining and marketing sector in
particular. However, none of these individuals has been a principal of or
affiliated with a blank check company that executed a business plan similar to
our business plan and none of these individuals is currently affiliated with any
such entity. Nevertheless, we believe that the skills and expertise of these
individuals, their collective access to potential target businesses, and their
ideas, contacts, and acquisition expertise should enable them to successfully
identify and assist us in completing our initial business combination. However,
there is no assurance such individuals will, in fact, be successful in doing so.
Director Independence
The American Stock Exchange requires that a majority of our board must be
composed of "independent directors," which 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. Mr. Gilliam, Mrs.
Hendricks, Mr. Ortale and Mr. Quarles are our independent directors,
constituting a majority of our board. Our independent directors have regularly
scheduled meetings at which only independent directors are present. Any
affiliated transactions will be on terms no less favorable to us than could be
obtained from independent parties. Any affiliated transactions must be approved
by a majority of our independent and disinterested directors.
Audit Committee
We have established an audit committee consisting of Mr. Gilliam, Mrs.
Hendricks and Mr. Ortale, with Mrs. Hendricks serving as chair. As required by
the rules of the American Stock Exchange, each of the members of our audit
committee is financially literate, and we consider Mrs. Hendricks to qualify as
an "audit committee financial expert" and "financially sophisticated" as defined
under SEC and American Stock Exchange rules, respectively. The responsibilities
of our audit committee include:
o meeting with our management periodically to consider the adequacy of our
internal control over financial reporting and the objectivity of our
financial reporting;
o appointing the independent registered public accounting firm, determining
the compensation of the independent registered public accounting firm and
pre-approving the engagement of the independent registered public
accounting firm for audit and non-audit services;
48
o overseeing the independent registered public accounting firm, including
reviewing independence and quality control procedures and experience and
qualifications of audit personnel that are providing us audit services;
o meeting with the independent registered public accounting firm and
reviewing the scope and significant findings of the audits performed by
them, and meeting with management and internal financial personnel
regarding these matters;
o reviewing our financing plans, the adequacy and sufficiency of our
financial and accounting controls, practices and procedures, the
activities and recommendations of the auditors and our reporting policies
and practices, and reporting recommendations to our full board of
directors for approval;
o establishing procedures for the receipt, retention and treatment of
complaints regarding internal accounting controls or auditing matters and
the confidential, anonymous submissions by employees of concerns regarding
questionable accounting or auditing matters;
o preparing the report required by the rules of the SEC to be included in
our annual proxy statement;
o monitoring compliance on a quarterly basis with the terms of our initial
public offering and, if any noncompliance is identified, immediately
taking all action necessary to rectify such noncompliance or otherwise
causing compliance with the terms of our initial public offering; and
o reviewing and approving all payments made to our officers, directors and
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.
Financial Experts on Audit Committee
The audit committee will at all times be composed exclusively of
"independent directors" who are "financially literate" as defined under the
American Stock Exchange listing standards. The American Stock Exchange listing
standards define "financially literate" as being able to read and understand
fundamental financial statements, including a company's balance sheet, income
statement and cash flow statement.
In addition, we must certify to the American Stock Exchange that the
committee has, and will continue to have, at least one member who has past
employment experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or background that
results in the individual's financial sophistication. The board of directors has
determined that Mrs. Hendricks satisfies the American Stock Exchange's
definition of financial sophistication and also qualifies as an "audit committee
financial expert," as defined under rules and regulations of the SEC.
Nominating and Governance Committee
We have established a governance and nominating committee consisting of
Mr. Gilliam, Mrs. Hendricks, Mr. Quarles and Mr. Ortale, with Mr. Gilliam
serving as chair. Each member of the governance and nominating committee is an
independent director under the American Stock Exchanges listing standards. The
functions of our governance and nominating committee include:
o recommending qualified candidates for election to our board of directors;
o evaluating and reviewing the performance of existing directors;
o making recommendations to our board of directors regarding governance
matters, including our certificate of incorporation, bylaws and charters
of our committees; and
o developing and recommending to our board of directors governance and
nominating guidelines and principles applicable to us.
49
Guidelines for Selecting Director Nominees
The guidelines for selecting nominees, which are specified in the
Governance and Nominating Committee Charter, generally provide that persons to
be nominated:
o should have demonstrated notable or significant achievements in business,
education or public service;
o 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
o should have the highest ethical standards, a strong sense of
professionalism and intense dedication to serving the interests of the
stockholders.
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. The nominating committee does not distinguish among
nominees recommended by stockholders and other persons.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
officers, directors and persons who own more than ten percent of a registered
class of our equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
ten percent stockholders are required by regulation to furnish us with copies of
all Section 16(a) forms they file. Based solely on copies of such forms received
or written representations from certain reporting persons that no Form 5s were
required for those persons, we believe that, during the fiscal year ended
December 31, 2006, no filings were required to be filed.
Code of Ethics
We have adopted a code of ethics that applies to all of our executive
officers, directors and employees. The code of ethics codifies the business and
ethical principles that govern all aspects of our business.
Item 11. Executive Compensation.
None of our executive officers or directors has received any compensation
for service rendered. After our initial business combination, our executive
officers and directors who remain with us may be paid consulting, management or
other fees from the combined company with any and all amounts being fully
disclosed to stockholders, to the extent then known, in the proxy solicitation
materials furnished to our stockholders. It is unlikely, however, that the
amount of such compensation will be known at the time of a stockholder meeting
held to consider an initial business combination, as it will be up to the
directors of the post-combination business to determine executive and director
compensation. Any compensation to be paid to our chief executive officer and
other 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, in accordance with the rules of the American Stock Exchange.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2007 by:
o each person known by us to be the beneficial owner of more than 5% of our
outstanding shares of common stock;
o each of our officers and directors; and
o all our officers and directors as a group.
50
Unless otherwise indicated, we believe that all persons named in the table have
sole voting and investment power with respect to all shares of common stock
beneficially owned by them.
Amount and Nature of Percent
Name and Address of Beneficial Owner (1) Beneficial Ownership of Class (2)
NTR Partners LLC 2,905,653 (3) 9.51%
Mario E. Rodriguez 2,905,653 (3) 9.51%
William E. Hantke 2,905,653 (3) 9.51%
Altamira Ventures I LP 2,905,653 (3)(4) 9.51%
Henry M. Kuchta 2,908,653 (3)(5) 9.52%
Highfields Capital Management III L.P. 1,777,179 (6) 5.82%
Fir Tree, Inc. 1,665,100 (7) 5.45%
HBK Management LLC 1,619,644 (8) 5.30%
Buford H. Ortale 1,282,051 4.20%
Sewanee Partners III, L.P. 423,718 (9) 1.39%
Randal K. Quarles 402,407 1.32%
Gilliam Enterprises LLC 398,177 (10) 1.30%
D. Duane Gilliam 0 0.00%
Hendricks Family LLLP 398,177 (11) 1.30%
Maureen A. Hendricks 189,816 0.62%
All executive officers and directors as a group
(7 individuals) 6,003,000 19.65%
----------
(1) Unless otherwise indicated, the business address of each of the individuals
is 100 Mill Plain Road, Suite 320, Danbury, CT 06811.
(2) Assumes the 6,000,000 initial founders' shares, 24,000,000 shares issued in
connection with the initial public offering and 557, 205 shares issued in
connection with the over-allotment options exercised by the underwriters, for a
total of 30,557,205 outstanding shares as of March 31, 2007.
(3) Other than the 3,000 shares directly owned by Mr. Kuchta (as described in
footnote 5 below), these shares are owned of record by NTR Partners LLC, and are
equivalent to a 9.51% interest in our common stock following the IPO. As of the
IPO, NTR Partners LLC is owned by Mr. Rodriguez (55.2%), Mr. Hantke (18.2%),
Altamira Ventures I LP (14.5%) and Mr. Kuchta (12.1%). The shares of our common
stock shown in the above table as being owned by each such individual reflect
the fact that due to the ownership interest of each in NTR Partners LLC, each
may be viewed as having or sharing dispositive or voting power over all of these
shares, although each of Altamira Ventures I LP, Mr. Rodriguez, Mr. Hantke and
Mr. Kuchta disclaims beneficial ownership of shares of our common stock in
excess of its or his percentage ownership of NTR Partners LLC.
(4) Altamira Ventures I LP is a New York limited partnership jointly controlled
by our Chief Executive Officer Mario E. Rodriguez and members of his family.
(5) Mr. Kuchta has direct ownership of 3,000 shares of the 2,908,653 total
shares beneficially owned by him.
(6) Highfields Capital III L.P. ("Capital III") beneficially owns 1,777,179
shares. Capital III, together with Highfields Capital I L.P. ("Capital I") and
Highfields Capital II L.P. ("Capital II") (collectively the "Funds"),
beneficially own 2,399,000 shares, or 8.0%. Therefore Capital I and Capital II
individually owns less than 5% of the shares. Highfields Capital Management
serves as an investment manager to each of the Funds. Each of Highfields Capital
Management, Highfields GP, Highfields Asssociates, Jonathon S. Jacobson and
Richard L. Grubman has the power to direct the dividends from or the proceeds of
the sale of the shares owned by the Funds. Information with respect to
beneficial ownership is based upon information furnished in a Schedule 13G filed
with the Securities and Exchange Commission on January 30, 2007.
51
(7) Fir Tree, Inc. is investment manager of both Sapling, LLC ("Sapling") and
Fir Tree Recovery Master Fund, L.P. ("Recovery"). Sapling and Recovery own
1,365,100 shares and 300,000 shares, respectively. Information with respect to
beneficial ownership is based upon information furnished in a Schedule 13G filed
with the Securities and Exchange Commission on February 15, 2007.
(8) HBK Management LLC beneficially owns 1,619,644 shares together with HBK
Investments L.P., HBK Services LLC, HBK Partners II L.P. and HBK Master Fund
L.P. Jamiel A. Akhtar, Richard L. Booth, David C. Haley, Larence H. Lebowitz and
William E. Rose are each managing members of HBK Management LLC and each
disclaim beneficial ownership of these shares. Information with respect to
beneficial ownership is based upon information furnished in a Schedule 13G filed
with the Securities and Exchange Commission on March 30, 2007.
(9) Sewanee Partners III, L.P. is an investment fund advised by Sewanee Ventures
LLC, a Tennessee limited liability company, of which our director Buford H.
Ortale is the president.
(10) Gilliam Enterprises LLC is a Delaware limited liability company jointly
controlled by our chairman, D. Duane Gilliam, and his wife.
(11) Hendricks Family LLLP is a Florida limited liability limited partnership
jointly controlled by our director Maureen A. Hendricks and her husband. The
business address of Hendricks Family LLLP is 217 Rudder Road, Vero Beach, FL
32963.
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
For a complete discussion regarding certain relationships and related
transactions, see the section entitled "Certain Transactions" contained in our
Prospectus dated January 30, 2007 and incorporated by reference herein.
Item 14. Principal Accountant Fees and Services.
The firm of KPMG LLP acts as our independent registered public accounting
firm. The following is a summary of fees paid to KPMG LLP for services rendered.
Audit Fees
During the fiscal year ended December 31, 2006, fees paid to our
independent registered public accounting firm were $244,800 for the services
they performed in connection with various audits (June 20, 2006, October 15,
2006, December 31, 2006, February 5, 2007 and February 22, 2007), and our
initial public offering, including the financial statements included in the Form
S-1 and amendments filed with the Securities and Exchange Commission through
December 31, 2006.
Audit-Related Fees
During 2006, our independent registered public accounting firm did not
render any non-audit services related to the Company.
Tax Fees
During 2006, our independent registered public accounting firm did not
render services to us for tax compliance, tax advice and tax planning.
52
All Other Fees
During 2006, there were no fees billed for products and services provided
by our independent registered public accounting firm other than those set forth
above.
Audit Committee Approval
Since our audit committee was not formed until our initial public
offering, the audit committee did not pre-approve all of the foregoing services
although any services rendered prior to the formation of our audit committee
were approved by our board of directors. However, in accordance with Section
10A(i) of the Securities Exchange Act of 1934, before we engage our independent
accountant to render audit or non-audit services on a going-forward basis, the
engagement will be approved by our audit committee.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(1) Financial Statements
See Item 8. Financial Statements and Supplementary Data.
(2) Financial Statement Schedules
All supplemental schedules have been omitted since the required
information is not present in amounts sufficient to require submission of the
schedule, or because the required information is included in the consolidated
financial statements or notes thereto.
(3) Exhibits
See Exhibit Index.
53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NTR Acquisition Co.
Dated: May 14, 2007 By: /s/ MARIO E. RODRIGUEZ
------------------------------------
Mario E. Rodriguez
Director and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Title Date
----------------------------------- ------------------------------------ ------------
/s/ MARIO E. RODRIGUEZ Director and Chief Executive Officer May 14, 2007
-----------------------------------
Mario E. Rodriguez
/S/ D. DUANE GILLIAM Chairman of the Board of Directors May 13, 2007
-----------------------------------
D. Duane Gilliam
/S/ WILLIAM E. HANTKE Vice Chairman of the Board of May 14, 2007
----------------------------------- Directors and Principal Financial
William E. Hantke Officer
/S/ HENRY M. KUCHTA Director, President and Chief May 14, 2007
----------------------------------- Operating Officer
Henry M. Kuchta
/S/ MAUREEN A. HENDRICKS Director May 11, 2007
-----------------------------------
Maureen A. Hendricks
/S/ BUFORD H. ORTALE Director May 10, 2007
-----------------------------------
Buford H. Ortale
/S/ RANDAL K. QUARLES Director May 14, 2007
-----------------------------------
Randal K. Quarles
54
EXHIBIT INDEX
Exhibit
No. Description
1.1+ Form of Underwriting Agreement
3.1+ Form of Second Amended and Restated Certificate of Incorporation
3.2+ Form of Amended and Restated Bylaws
4.1+ Specimen Unit Certificate
4.2+ Specimen Common Stock Certificate
4.3+ Form of Second Amended and Restated Warrant Agreement between the
Registrant and American Stock Transfer & Trust Company
4.4+ Amended Form of Founders' Warrant Certificate
4.7+ Amended Form of Warrant Certificate for Public Warrants
10.1+ Amended Form of Letter Agreement between the Registrant and founding
shareholders other than directors and officers
10.3+ Amended Form of Letter Agreement between the Registrant and each
director and officer
10.4+ Initial Founders' Securities Purchase Agreement, dated as of June
20, 2006, between the Registrant and NTR Partners LLC
10.5+ Form of Registration Rights Agreement among the Registrant, NTR
Partners LLC and the persons named therein
10.6+ Form of Indemnity Agreement between the Registrant and each of its
directors and executive officers
10.7+ Form of Investment Management Trust Agreement by and between the
Registrant and American Stock Transfer & Trust Company
10.8+ Form of Additional Founders' Warrant Purchase Agreement
14.1+ Form of Code of Conduct and Ethics
31.1 Certification of Chief Executive Officer and Principal Financial
Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a)
31.2 Certification of Chief Executive Officer and Principal Financial
Officer Pursuant to SEC Rule 13a-14(a)/15d-14(a)
32.1 Certification of Chief Executive Officer and Principal Financial
Officer Pursuant to 18 U.S.C. Section 1350
32.2 Certification of Chief Executive Officer and Principal Financial
Officer Pursuant to 18 U.S.C. Section 1350
99.1+ Form of Charter of Audit Committee
99.2+ Form of Charter of Governance and Nominating Committee
----------
+Incorporated by reference to the corresponding exhibit to the Registrant's
Registration Statement on Form S-1 (File No. 333-135394).
55