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Joel L. Rubinstein
Attorney at Law
jrubinstein@mwe.com
+1 212 547 5336
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March 21, 2011
VIA EDGAR AND HAND DELIVERY
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
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Attention:
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Michael Clampitt, Staff Attorney
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Chris Harley, Staff Accountant
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Hugh West, Branch Chief
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Chris Windsor, Staff Attorney
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Division of Corporation Finance
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Re:
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Global Eagle Acquisition Corp.
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Registration Statement on Form S-1
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Registration No. 333-172267 (the “Registration Statement”)
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Ladies and Gentlemen:
On behalf of our client, Global Eagle Acquisition Corp. (the “Company”), set forth below are the Company’s responses to the comments of the staff (“Staff”) of the Securities and Exchange Commission (“SEC”), dated March 11, 2011, concerning the Registration Statement and the Company’s initial public offering of securities. For your convenience, the responses by the Company follow the bolded text of the applicable SEC comment. In addition to the responses below, the Company has filed today Amendment No. 1 (“Amendment No. 1”) to the Registration Statement to address the Staff’s comments, and is supplementally providing you with six copies of Amendment No. 1, three of which are marked to show changes from the initial filing.
General
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1.
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A number of your material contracts or corporate documents have not been filed at this time. Please file the contracts, your charter, and a form of your underwriting agreement, and the trust agreement as soon a possible so that the staff can complete its review of your filing in an expeditious manner.
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Response: The Company has filed with Amendment No. 1 all of the exhibits to the Registration Statement that were not filed with the initial filing.
U.S. practice conducted through McDermott Will & Emery LLP.
340 Madison Avenue New York New York 10173-1922 Telephone: +1 212 547 5400 Facsimile: +1 212 547 5444 www.mwe.com
Securities and Exchange Commission
March 21, 2011
Page 2
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2.
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Please provide the staff with your analysis regarding the exemption that you intend to use in order to issue common stock upon the cashless exercise of the warrants issued as part of the units.
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Response: Section 7.4 of the warrant agreement filed as Exhibit 4.4 to the Registration Statement allows holders of warrants to exercise their warrants on a cashless “net exercise” basis in the event that a registration statement covering the shares issuable upon exercise of the warrants is not filed or does not become effective at the time of a business combination or, after becoming effective, ceases to be effective.
Section 3(a)(9) of the Securities Act of 1933, as amended, exempts from registration the issuance of common stock upon a cashless “net exercise” of the Company’s public warrants because it exempts “any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.”
In the case of a cashless “net exercise” of the Company’s public warrants, (a) the securities will be exchanged for securities of the same issuer (the Company); (b) the exchange will be available only to existing security (warrant) holders of the issuer; (c) the terms of the cashless exchange provide that the warrant holder is not required to pay any commission or other remuneration at the time of the exchange (other than the securities being exchanged); and (d) the exchange will not involve the payment of compensation for soliciting the exchange. Accordingly, the exemption under Section 3(a)(9) is available for the cashless “net exercise” of the warrants. The Subcommittee on Securities Law Opinions, Committee on Federal Regulation of Securities, ABA Section of Business Law, explicitly
reached this conclusion in its recent report on No Registration Opinions.1 In addition, the common stock issuable upon such cashless “net exercise” would not be restricted because the warrants for which the common stock is exchanged, which were originally issued in the Company’s initial public offering, would not be restricted. See Compliance and Disclosure Interpretation, Securities Act Sections, Question 125.08.
The same Section 3(a)(9) analysis applies to the conversion of convertible preferred stock or convertible debentures into common stock. See Compliance and Disclosure Interpretation, Securities Act Sections, Questions 125.03, 125.04 and 125.09.
1 Reprinted in The Business Lawyer, Vol. 63, November 2007. The report states that an opinion that no registration is required based on the Section 3(a)(9) exemption “may be given based on ‘net’ exercise (i.e., part of the Common Stock issuable on exercise is used to pay the exercise price) where net exercise is required by the terms of the warrants, or it is permitted and the opinion is limited to cases in which it is employed.”
Securities and Exchange Commission
March 21, 2011
Page 3
As required by the warrant agreement, the Company intends to file a registration statement at the time the warrants become exercisable which would cover the issuance of shares of common stock upon exercise of the public warrants. Such exercise is required to be made for cash except in limited circumstances, such as pursuant to Section 7.4 of the warrant agreement which allows the warrants to be exercised on a cashless “net exercise” basis in the event the registration statement ceases to be effective as described above. We believe that the filing of a registration statement would not have any effect on the subsequent availability of the Section 3(a)(9) exemption if the registration statement ceases to be effective. We recognize that under the integration doctrine, the
filing of a registration statement could have an effect on a subsequent attempt to use a private placement exemption under Section 4(2) of the Securities Act, because the filing of the registration statement could be considered a general solicitation. The availability of Section 3(a)(9), however, is not affected by a prior general solicitation because Section 3(a)(9) is available even when the securities are publicly offered. As opposed to issuances pursuant to Section 4(2), an issuance of securities in a Section 3(a)(9) exchange is not limited to being conducted on private basis, but instead may be conducted via a general solicitation. We are not aware of any situation where the Staff has taken the position that a Section 3(a)(9) exchange cannot follow a registered offering.2 Similarly, we understand that, when shares are covered in a current resale registration
statement, the Staff permits the selling shareholders to sell those shares outside the registration statement in a privately negotiated transaction.
Compliance and Disclosure Interpretation, Securities Act Sections, Question 125.09 states that where a registration statement covers convertible debentures as well as the common stock underlying the debentures, there is no need to keep the registration statement effective for sales of the underlying common stock under Rule 415 because the issuances are exempt from registration pursuant to Section 3(a)(9). Only if Section 3(a)(9) is not available (for example, where securities are convertible into securities of another issuer, where conversion terms require that the shareholder pay consideration at the time of conversion, or where conversion arrangements involve the payment of compensation for soliciting the conversion) does the issuer need to rely on Rule 415.
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3.
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You state that you will list your shares on the Over the Counter Bulletin Board. Please tell us whether you have received any commitments from brokers to act as market makers in your stock. Please consider revising your disclosure based upon your response, including risk factors on the potential liquidity of your shares.
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Response: Citigroup Global Markets Inc. has informed us that it intends to act as a market maker of the Company’s securities on the Over-the-Counter Bulletin Board (OTCBB) until the earlier of (i) the completion of the Company’s initial business combination and (ii) the redemption of all of the Company’s public shares if the Company fails to complete a business combination in the prescribed time frame, though it may cease doing so at any time. The Company has added a statement to this effect on page 120 of Amendment No. 1. In addition, the Company has added a Risk Factor on page 26 of Amendment No. 1 to describe the risk that, if Citigroup Global Markets Inc. ceases to act as a
market maker and there is no other market maker, the Company’s securities would no longer be quoted on the OTCBB.
2 For example, in the case of a registration statement covering convertible preferred stock and the common stock underlying the convertible preferred stock, if the registration statement subsequently lapses, we understand that the Staff has not objected to the issuer relying on Section 3(a)(9) for the conversion of the preferred stock into common stock.
Securities and Exchange Commission
March 21, 2011
Page 4
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4.
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Your trust agreement limits the types of instruments that the funds in the trust can be invested. Please provide the staff with your analysis supporting your conclusion that you had a reasonable belief that those securities will yield sufficient interest in order to provide the $1.75 million that you are entitled to use to fund your search for an acquisition target and pay ongoing expenses.
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Response: The Company has revised the Registration Statement on pages 28 and 50 of Amendment No. 1 to clarify that in the current interest rate environment, the interest income on the amounts in the trust account would be significantly less than $1.75 million, which could require the Company to seek additional capital.
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5.
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You state throughout the registration statement, that if you do not seek shareholder approval for the business combination, you will conduct a tender offer under Regulation 14E. Please revise your disclosure throughout the document to discuss the impact of conducting the tender offer. In particular, please address the impact of cash or liquidity requirements upon your ability to pay for all tendered securities and meet other obligations including liquidity requirements included in your business combination agreement. Please address issues revolving the potential application of proration in the event that you have more shares tendered than you have cash available to pay for the shares, or if the value of the non-tendering shares is less than $5 million.
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Response: In response to the Staff’s comment, the Company has revised the Registration Statement on pages 15 and 69 of Amendment No. 1 to clarify that (i) the Company’s tender offer to purchase public shares will be conditioned on public shareholders not tendering more than a specified number of public shares, which number will be based on the requirement that the Company may not redeem public shares in an amount that would cause its net tangible assets to be less than $5,000,001 (so that it is not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to the Company’s initial business combination and (ii) if public
stockholders tender more shares than the Company has offered to purchase, the Company would withdraw its tender offer and not complete the initial business combination. It is a hallmark feature of a SPAC that any shareholder who wishes to redeem any or all of its shares for a pro rata portion of the cash in the trust account at the time the SPAC completes its business combination has the right to do so. To satisfy this expectation, the Company would withdraw its tender offer completely if public stockholders tender more shares than the Company has offered to purchase. Furthermore, if public stockholders tender more shares than the Company has offered to purchase, the Company would not prorate its purchases in the tender offer among the tendering shareholders, which would have the effect of vitiating this feature, and instead would withdraw
the tender offer and not complete the business combination.
Securities and Exchange Commission
March 21, 2011
Page 5
The Company does not believe that the proration requirements in Rule 13e-4(f)(3) under the Securities Exchange Act of 1934, as amended, would apply to its tender offer in connection with its business combination. Rule 13e-4(f)(3) provides that if a company conducts a partial tender offer, and more shares are tendered than the Company is prepared to take up and pay for, “the securities taken up and paid for shall be taken up and paid for” pro rata, i.e. the company cannot purchase a greater percentage of tendered shares from one shareholder as compared with another shareholder. When the Company conducts its tender offer in connection with its initial business
combination, if more shares are tendered than the Company is prepared to take up and pay for, it will not take up and pay for any shares, and instead will withdraw the tender offer and not complete the business combination. Accordingly, Rule 13e-4(f)(3), which applies only if the Company takes up and pays for shares, would not apply.
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6.
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Please identify for the staff any requirement in your charter, bylaws, the trust agreement, underwriting agreement or in the registration statement that identifies the amount that you will pay, on a per-share basis, for shares redeemed in the tender offer.
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Response: Section 9.2(b) of the Company’s amended and restated certificate of incorporation requires that in the event that shares are redeemed in a tender offer, the price paid per share shall be equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the trust account as of two days prior to the date of the commencement of the tender offer plus interest accrued from the date of the commencement of such tender offer until two business days prior to the consummation of the initial business combination, less franchise and income taxes payable, by (ii) the total number of then outstanding shares of the Company’s common stock included as part of the units sold in the Company’s initial public
offering. Pursuant to a letter agreement (the form of which has been filed as an exhibit to Amendment No. 1), the Company’s initial stockholders have agreed to waive their redemption rights in connection with a business combination with respect to their founder shares. Accordingly, the founder shares are excluded from the pro rata calculation used to determine the per-share redemption price.
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7.
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Please advise the staff regarding your intention to appoint additional members to your board of directors. Please revise your registration statement based upon your response.
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Response: The Company intends to appoint two additional members to its board of directors effective upon the closing of its initial public offering. The Registration Statement has been revised on pages 8, 39, 59, 89, 90 and 93 of Amendment No. 1 to state the names of such director nominees and provide information regarding their background and experience.
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8.
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Please advise the staff regarding any limits, in your charter, the trust agreement, the underwriting agreement or your bylaws that would limit the total number of sponsor warrants that can be issued.
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Response: The Company advises the Staff that there are no limitations in the Company’s charter, trust agreement, underwriting agreement or bylaws limiting the total number of sponsor warrants that can be issued. We note, however, that the Registration Statement states on pages 51, 58, 60 and 99 that up to $500,000 of loans made by the Company’s insiders to finance transaction costs in connection with an intended initial business combination may be convertible into sponsor warrants at the option of the lender.
Securities and Exchange Commission
March 21, 2011
Page 6
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9.
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Advise the staff regarding any requirement in your charter or other material corporate document or contract requiring you to provide shareholders with the opportunity to redeem their shares in the event that you seek shareholder approval rather than conduct a tender offer. Please revise your registration statement based upon your response.
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Response: The Company advises the Staff that Article IX of the Company’s amended and restated certificate of incorporation requires that the Company provide stockholders with the opportunity to redeem their public shares at the time of a business combination in the event that the Company seeks stockholder approval of the business combination. The Company has revised the Registration Statement on pages 15 and 70 of Amendment No. 1 in response to the Staff’s comments to state that this requirement is contained in its amended and restated certificate of incorporation.
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10.
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Please confirm that any changes to the amounts held in the trust, or the amounts that will not be held in the trust will be revised in a pre- or post effective amendment to this registration statement.
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Response: The Company confirms to the Staff that any changes to the amounts held in the trust account, or the amounts that will not be held in the trust, will be included in a pre- or post-effective amendment to the Registration Statement, except to the extent that the overall size of the offering changes in a manner that does not require a pre- or post-effective amendment to the Registration Statement under applicable SEC rules and the amounts held in the trust account or the amounts held outside the trust account change ratably.
Summary, page 1
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11.
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Revise your presentation regarding Mr. Sloan and Mr. Sagansky’s business experience to clarify, prominently; their prior experience with SPAC’s and blank check companies, and, that you have no obligation to explore business opportunities in any of these target markets, and that due to the significant incentives to engage in a business combination, you may seek to acquire a business that falls outside the business experience of your management.
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Response: We respectfully note to the Staff that Mr. Sloan and Mr. Sagansky do not have prior experience with SPACs and blank check companies, and therefore no such experience is disclosed. They do have significant acquisition and operating experience as disclosed in the Registration Statement. The Company does not view their lack experience with respect to SPACs or blank check companies as material disclosure such that it need be disclosed to investors in the Summary. In response to the Staff’s comment, the Company has, however, added a Risk Factor on page 34 of Amendment No. 1 with the heading “None of our officers or directors has ever been associated with a blank check company
…”
Securities and Exchange Commission
March 21, 2011
Page 7
With respect to the second part of the Staff’s comment, we respectfully note to the Staff that the second paragraph of the Summary states that although the Company will seek to capitalize on its management’s experience and acquire media or entertainment businesses, it “may pursue acquisition opportunities in other sectors.” We further note that the Registration Statement contains a Risk Factor on page 34 of Amendment No. 1 with the heading “We make seek investment opportunities in industries outside of the media or entertainment industries …” concerning the risks of acquisitions outside of the media and entertainment industries, as well as a Risk Factor on page 39 of Amendment No. 1 with the heading “Since our sponsor will lose its entire
investment …” concerning the incentives of management to engage in a business combination.
In response to the Staff’s comment, the Company has added disclosure on pages 3 and 62 of Amendment No. 1 concerning the obligations of the Company to initially seek a target in the media and entertainment industries.
Summary
Initial Business Combination, page 2
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12.
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Revise to disclose whether or not you will seek or require a fairness opinion with regards to any business combination.
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Response: The Company has revised the disclosure on pages 4, 63, 66 and 93 in response to the Staff’s comments.
Source of Potential Acquisition Targets, page 3
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13.
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Revise to disclose affirmatively any “pre-existing fiduciary or contractual obligations” for enterprises with values above $100 million related to any officer or director.
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Response: The Company respectfully notes to the Staff that all entities to which the Company’s officers and directors (other than the Company’s independent director nominees, who are not obligated to present potential targets to the Company) are listed in the table on page 92 of the Registration Statement. The $100 million figure relates to the enterprise value of a potential target business, which has not yet been identified.
The Offering
Permitted purchases of public shares…, page 12
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14.
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Revise to disclose the 4 conditions of Rule 10b-18. In addition, describe to whom any excess of the then per share trust amount over the purchase price will accrue. Finally, provide the staff with a legal analysis of why such purchases would not constitute a tender or solicitation.
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Response: The Company has revised the Registration Statement on pages 12, 23, 51 and 67 to describe the conditions of Rule 10b-18.