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Business Combination Marketing Agreement

At the time of the IPO, most SPACs anticipate that the founding shares will be converted into common shares after the conclusion of a first business combination on a 1-to-1 basis. However, some SPACs allow the conversion ratio to be adjusted to achieve a minimum percentage of ownership (usually 20%). by the founding shareholders after the initial merger is completed. Unless it is waived, this adjustment prevents a dilution of ownership of the founding shares beyond a certain threshold, even if additional common shares are issued to facilitate the consolidation of companies. Dilution mechanisms generally exclude shares or securities related to shares issued to sellers in such a business combination. The NASDAQ rules provide that the initial combination of a CAPS and one or more target companies that together have a fair value of at least 80% of the fiduciary account balance (deducted from deferred insurance commissions and taxes payable on interest earned) at the time of signing a final agreement. SPAC IPO prospectuses are prudent to prevent management from extending a shareholder offer to meet their requirement to offer an opportunity to withdraw to public shareholders if shareholder approval is not required for a particular business combination. As a general rule, asset acquisitions and share purchases do not require shareholder approval, but direct mergers in which the entity will not survive, changes in a company`s by-office and transactions in which the company issues 20% or more of its issued and outstanding shares are subject to shareholder approval. In practice, most SPACs ultimately seek shareholder agreement for corporate mergers, although maintaining the money available in the receiver account is often a much greater obstacle than any shareholder approval threshold.

SPAC insurers generally receive a portion of all insurance commissions at the time of the IPO and part in the form of deferred insurance commissions after the conclusion of a first business combination. These funds are in the trust account, while a PACS is seeking its initial merger and, if none is completed by the liquidation date of a business, it is returned to shareholders along with the rest of the fiduciary account.

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