As filed with the U.S. Securities and Exchange Commission on April 22, 2022.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Monterey Capital Acquisition Corporation
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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6770
(Primary Standard Industrial
Classification Code Number)
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87-2898342
(I.R.S. Employer
Identification Number)
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419 Webster Street
Monterey, California 93940
Telephone: (831) 649-7388
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Bala Padmakumar
Chief Executive Officer
419 Webster Street
Monterey, California 93940
Telephone: (831) 649-7388
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
Copies to:
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Thomas R. Burton, III, Esq.
Jeffrey P. Schultz, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
(617) 542-6000
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Keith J. Billotti, Esq.
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
(212) 574-1200
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED APRIL 22, 2022
$100,000,000
Monterey Capital Acquisition Corporation
10,000,000 Units
Monterey Capital Acquisition Corporation is a newly organized blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this prospectus as our initial business combination. We have not selected any specific business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. While we may pursue an initial business combination target in any business, industry, or geographical location, we intend to focus our search on businesses in the clean transition sector. We shall not undertake our initial business combination with any entity with its principal business operations in China (including Hong Kong and Macau).
This is an initial public offering of our securities. Each unit has an offering price of $10.00 and consists of one share of our Class A common stock, one redeemable warrant and one right to receive one-tenth (1/10) of one share of our Class A common stock upon consummation of our initial business combination, as described in more detail in this prospectus. Each redeemable warrant entitles the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share, subject to adjustment as described herein, and each ten rights entitle the holder thereof to receive one share of our Class A common stock upon consummation of our initial business combination. We will not issue fractional shares in connection with the exchange of rights. As a result, you must hold rights in multiples of 10 in order to receive shares for all of your rights upon consummation of our initial business combination. The underwriters have a 45-day option from the date of this prospectus to purchase up to an additional 1,500,000 units to cover over-allotments, if any.
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of our Class A common stock upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account described below as of two business days prior to the consummation of our initial business combination, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, divided by the number of then outstanding shares of Class A common stock that were sold as part of the units in this offering, which we refer to throughout this prospectus collectively as our public shares, subject to the limitations and on the conditions described herein. If we are unable to complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months (the “extension option”), from the closing of this offering, we will redeem 100% of the public shares at a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, subject to applicable law and certain conditions as further described herein. In the event we decide to exercise the extension option, investors will not have voting rights nor redemption rights in connection with such additional three-month extensions.
Our sponsor, Monterrey Acquisition Sponsor, LLC, has agreed to purchase an aggregate of 3,200,000 placement warrants (or 3,500,000 placement warrants if the over-allotment option is exercised in full) at a price of $1.00 per warrant, for an aggregate purchase price of $3,200,000 ($3,500,000 if the over-allotment option is exercised in full). Each placement warrant will be identical to the warrants sold in this offering, except as described in this prospectus. The placement warrants will be sold in a private placement that will close simultaneously with the closing of this offering.
Our sponsor owns an aggregate of 2,875,000 shares of our Class B common stock (up to 375,000 shares of which are subject to forfeiture depending on the extent to which the underwriters’ over-allotment option is exercised), which will automatically convert into shares of Class A common stock at the time of the consummation of our initial business combination, on a one-for-one basis, subject to adjustment as described herein.
Up to ten qualified institutional buyers or institutional accredited investors which are not affiliated with us, our sponsor, our directors or any member of our management, and which we refer to as the anchor investors throughout this prospectus, have each expressed to us an interest in purchasing up to 990,000 units in this offering at the offering price of $10.00, and such allocations will be determined by the underwriters. The anchor investors as a group may purchase no more than 9,900,000 units in the aggregate (or 11,385,000 units in the aggregate if the underwriters’ over-allotment option is exercised in full), up to 99.0% of the units issued in this offering. Such amounts will be allocated among the anchor investors proportionally based on their expression of interest. We expect that the number of units the anchor investors will purchase would, in general, be increased or decreased proportionately in the event the number of units offered hereby is increased or decreased, respectively. There can be no assurance that the anchor investors will acquire any units in this offering, or as to the amount of such units the anchor investors will retain, if any, prior to or upon the consummation of our initial business combination. There is also no guarantee that all ten anchor investors will participate in the offering. Subject to each anchor investor purchasing 100% of the units allocated to it, in connection with the closing of this offering our sponsor will sell 75,000 founder shares to each anchor investor at their original purchase price of approximately $0.009. If the anchor investors purchase all of the units which may be allocated to them, the substantial majority of units purchased in this offering will be held by the anchor investors and these investors will potentially have different interests than our other public shareholders, as further discussed in this prospectus. The anchor investors will also have the potential to realize enhanced economic returns and overall economic outcome from their investment in us in comparison to our other public shareholders who are not making anchor investments and purchasing founder shares. Since our sponsor is transferring founder shares held by it to the anchor investors and we are not issuing any new shares, there will be no dilutive impact on the other investors in this offering. However, if the anchor investors purchase all of the units which may be allocated to them, such purchases would reduce the available public float for our securities. Any such reduction in our available public float may consequently reduce the trading volume, volatility and liquidity of our securities relative to what they would have been had such units been purchased by public investors and could result in our securities being delisted from The Nasdaq Global Market, or Nasdaq. For a discussion of certain additional arrangements with the anchor investors, see “Summary — The Offering — Expressions of Interest.”
Currently, there is no public market for our units, Class A common stock, rights or warrants. We have applied to list our units on Nasdaq under the symbol “MCACU.” We expect that our units will be listed on Nasdaq on or promptly after the date of this prospectus. We cannot guarantee that our securities will be approved for listing on Nasdaq. We expect the Class A common stock, rights and warrants comprising the units will begin separate trading on the 52nd business day following the date of this prospectus unless EF Hutton, division of Benchmark Investments, LLC, or EF Hutton, the representative of the underwriters, informs us of its decision to allow earlier separate trading, subject to our satisfaction of certain conditions. Once the securities comprising the units begin separate trading, we expect that the Class A common stock, rights and warrants will be listed on Nasdaq under the symbols “MCAC,” “MCACR,” and “MCACW,” respectively.
We are an “emerging growth company” and a “smaller reporting company” under applicable federal securities laws and will be subject to reduced public company reporting requirements. Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 41 for a discussion of information that should be considered in connection with an investment in our securities. Investors will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
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Per Unit
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Total
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Public offering price
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10.00 |
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100,000,000 |
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Underwriting discounts and commissions(1)
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0.50 |
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5,000,000 |
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Proceeds, before expenses, to Monterey Capital Acquisition Corporation
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$ |
9.50 |
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$ |
95,000,000 |
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(1)
Includes $0.40 per unit, or $4,000,000 (or $4,600,000 if the over-allotment option is exercised in full) in the aggregate, payable to the underwriters for deferred underwriting commissions to be placed in a trust account located in the United States as described herein. The deferred commissions will be released to the representative of the underwriters only on completion of an initial business combination, as described in this prospectus. Does not include certain fees and expenses payable to the underwriters in connection with this offering. In addition, we will issue EF Hutton and/or its designees 150,000 shares of Class A common stock (172,500 if the over-allotment option is exercised in full), which we refer to herein as the “representative shares” as underwriter compensation in connection with this offering. See the section of this prospectus entitled “Underwriting” beginning on page 175 for a description of compensation and other items of value payable to the underwriters.
Of the proceeds we receive from this offering and the sale of the placement warrants described in this prospectus, $101,000,000 or $116,150,000 if the underwriters’ over-allotment option is exercised in full ($10.10 per unit in either case) will be deposited into a trust account in the United States with Continental Stock Transfer & Trust Company acting as trustee and J.P. Morgan Securities LLC acting as investment manager.
The underwriters are offering the units for sale on a firm commitment basis. The underwriters expect to deliver the units to the purchasers on or about , 2022.
EF HUTTON
division of Benchmark Investments, LLC
, 2022
TABLE OF CONTENTS
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1 |
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41 |
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80 |
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81 |
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86 |
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87 |
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90 |
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92 |
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99 |
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133 |
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143 |
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147 |
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150 |
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166 |
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175 |
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184 |
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184 |
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184 |
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F-1
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We are responsible for the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with different information, and neither we nor the underwriters take responsibility for any other information others may give to you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.
This prospectus includes estimates regarding market and industry data and forecasts which are based on publicly available information, industry reports and publications, reports from government agencies and management’s estimates based on third-party data. Third-party industry publications and forecasts generally state that the information contained therein has been obtained from sources generally believed to be reliable. We have not independently verified such third-party information, nor have we ascertained the underlying economic assumptions relied upon in those sources, and we cannot assure you of the accuracy or completeness of such information contained in this prospectus. Industry and market data could be inaccurate because of the method by which sources obtained their data and because information cannot be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. Such data and estimates are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.”
This prospectus contains trademarks, service marks and trade names of other companies which are the property of their respective owners. We do not intend our use or display of such names or marks to imply relationships with, or endorsements of us by, any other company.
SUMMARY
This summary only highlights the more detailed information appearing elsewhere in this prospectus. You should read this entire prospectus carefully, including the information under the section of this prospectus entitled “Risk Factors” and our financial statements and the related notes included elsewhere in this prospectus, before investing.
Unless otherwise stated in this prospectus, or the context otherwise requires, references to:
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“anchor investors” are up to ten qualified institutional buyers or institutional accredited investors which are not affiliated with us, our sponsor, our directors or any member of our management and that have each expressed to us an interest in purchasing up to 990,000 units in this offering and have each agreed to purchase from our sponsor up to 75,000 founder shares (up to 750,000 founder shares in the aggregate) at their original purchase price of approximately $0.009 per share, subject to each anchor investor purchasing 100% of the units allocated to it, as further described in this prospectus;
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“common stock” are to our Class A common stock and our Class B common stock, collectively;
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“extension option” are to our option to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months if we are unable to complete our initial business combination within 12 months from the closing of this offering.
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“equity-linked securities” are to any debt or equity securities that are convertible, exercisable or exchangeable for shares of Class A common stock issued in a financing transaction in connection with our initial business combination, including but not limited to a private placement of equity or debt.
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“founder shares” are to shares of our Class B common stock initially purchased by our sponsor in a private placement prior to this offering, and the shares of our Class A common stock issuable upon the conversion thereof as provided herein;
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“initial stockholders” are to our sponsor and any other holders of our founder shares prior to this offering (or their permitted transferees) not including the anchor investors who purchase units in the offering, if any;
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“management” or our “management team” are to our officers and directors;
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“placement warrants” are to the warrants issued to our sponsor in the private placement simultaneously with the closing of this offering, which placement warrants are identical to the warrants sold in this offering, subject to certain limited exceptions as described in this prospectus;
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“prescribed time frame” are to the period following the completion of this offering at the end of which, if we have not completed our initial business combination, we will redeem 100% of the public shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, subject to applicable law and certain conditions and as further described in this prospectus.
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“private placement” are to the private placement of 3,200,000 placement warrants (up to 3,500,000 placement warrants if the over-allotment option is exercised in full) at a price of $1.00 per warrant, for an aggregate purchase price of $3,200,000 (up to $3,500,000 if the over-allotment option is exercised in full), which will occur simultaneously with the completion of this offering;
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“public shares” are to shares of our Class A common stock sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market);
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“public stockholders” are to the holders of our public shares, including our initial stockholders and management team to the extent our initial stockholders and/or members of our management team purchase public shares, provided that each initial stockholder’s and member of our management team’s status as a “public stockholder” shall only exist with respect to such public shares;
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“public warrants” are to our redeemable warrants sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market, including warrants that may be acquired by our sponsor or its affiliates in this offering or thereafter in the open market);
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“representative” are to EF Hutton, division of Benchmark Investments, LLC, who is the representative of the underwriters in this offering;
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“representative shares” are to the 150,000 shares of Class A common stock issued to the representative or its designee (172,500 if the over-allotment option is exercised in full);
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“rights” are to the rights sold as part of the units in this offering (whether they are purchased in this offering or thereafter in the open market), each to receive one-tenth (1/10) of one Class A common stock upon consummation of an initial business combination;
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“sponsor” are to Monterrey Acquisition Sponsor, LLC, a Delaware limited liability company;
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“SEC” are to the U.S. Securities and Exchange Commission;
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“underwriters” are to the underwriters of this offering, for which the representative is acting as representative;
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“units” are to units sold in this offering, each consisting of one Class A common stock, one redeemable warrant and one right;
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“warrants” are to our redeemable warrants, which includes the public warrants as well as the placement warrants and any warrants issued upon conversion of working capital loans; and
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“we,” “us,” “company” or “our company” are to Monterey Capital Acquisition Corporation, a Delaware corporation.
Unless we tell you otherwise, the information in this prospectus assumes that the underwriters will not exercise their over-allotment option. Unless otherwise stated in this prospectus, or the context otherwise requires, the information presented herein assumes that none of the anchor investors purchased 100% of the units that may be allocated to them. For a detailed discussion of the arrangements with the anchor investors, please see “Principal Stockholders — Expressions of Interest.”
Our Company
We are a newly organized blank check company formed under the laws of the State of Delaware on September 23, 2021. We were formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which we refer to as a “target business.” We may pursue a business combination opportunity in any business or industry we choose and intend to target businesses with enterprise values of approximately $250 million to $1 billion. We shall not undertake our initial business combination with any entity with its principal business operations in China (including Hong Kong and Macau). Throughout this prospectus we will refer to this as our initial business combination. To date, our efforts have been limited to organizational activities, as well as activities related to this offering. We have generated no operating revenues to date and do not expect to generate operating revenues until after we consummate our initial business combination. None of our officers, directors, promoters or other affiliates have engaged in any substantive discussions on our behalf with representatives of other companies regarding the possibility of a potential merger, capital stock exchange, asset acquisition or other similar business combination with us.
We plan to initially target companies in the clean transition economy. Our management team and board of directors are very active in the clean transition ecosystem and connected to well over 300 clean transition companies, a majority of which are in the United States, where “connected” means having direct investment, holding a board seat, or, at a minimum, having vetted a company’s business plan. Each member of our management team and board of directors thus has a network of talented people who will help evaluate potential target businesses.
Climate change and impact are a major concern for most countries across the globe. Greenhouse gases trap heat and make the planet warmer. Climate catastrophes have been prevalent in recent months. In June 2021, an unprecedented heatwave blasted the Pacific Northwest, creating the conditions for devastating wildfires that followed. In July 2021, extreme floods in central China killed more than 30 people. Since August 2021, deadly fires have been blazing across Turkey and Greece. The sixth assessment report by the Intergovernmental Panel on Climate Change (IPCC) was issued on August 9, 2021. The IPCC report states, “It is unequivocal that the increase of carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) in the atmosphere over the industrial era is the result of human activities and that human influence is the principal driver of many changes observed across the atmosphere, ocean, cryosphere and biosphere.” According to the report, it is only possible to avoid warming of 1.5 °C or 2 °C if massive and immediate cuts in greenhouse gas emissions are made.
The major sources of the greenhouse gas emissions globally are associated with the use of fossil fuel-based energy and industrial processes. According to the U.S. Environmental Protection Agency, these two sectors by themselves account for about 75% of the global greenhouse gas (GHG) emissions. In order to mitigate the climate challenges, we believe it is important to reduce and control the carbon emissions in all human activities without compromising the growth of all economies. To mitigate the potential impacts of climate change, as a global society we believe that we have to transition from one that is heavily dependent on fossil fuel-based energy and material resources with high GHG emissions to one that uses energy sources and materials with much lower or no GHG emissions. Therefore, there is a huge focus on the clean transition in the energy and industrial sectors for all countries to collectively achieve the climate targets. It is this clean transition that we believe will create huge business opportunities for decades.
Decarbonization and clean transition from legacy fossil fuel use in global economies is a high priority and is impacting all aspects of life, which we believe makes it an attractive area for potential business combination targets. According to Bloomberg’s New Energy Finance report in January 2021, “in 2020, global investment in the low-carbon energy transition totaled $501.3 billion, up from $458.6 billion in 2019 and just $235.4 billion in 2010. This figure includes investment in projects, such as renewable power, clean transition, electrical vehicle charging infrastructure, hydrogen production and carbon capture and storage (CCS) projects — as well as end-user purchases of low-carbon energy devices, such as small-scale solar systems, heat pumps and zero-emission vehicles.” According to a report by the International Energy Agency in May 2021, “total annual energy investment surges to $5 trillion by 2030 in the net zero pathway, adding an extra 0.4 percentage points a year to global GDP growth, based on a joint analysis with the International Monetary Fund.”
We are confident that our established investment team, broad industry relationships and deal-making capabilities give us a distinct advantage to capitalize on the long-term opportunities created by the ongoing transition toward a clean energy economy.
Our Leadership
Executive Team
Monterey Capital Acquisition Corporation’s management team has unique experience in identifying potential targets, structuring acquisitions and growth effectively, and growing businesses in the energy markets. We believe our management team is distinctively-positioned to identify and evaluate businesses in the clean transition sector due to extensive experience executing and building opportunities across the broader energy transition and sustainability arena. Additionally, we believe our management team has created a reputation as knowledgeable operators, value-added investors and strategic partners in the clean transition sector that may help identify attractive investment opportunities whereby we can leverage our expertise and deep industry network to assist target businesses’ growth and value.
Bala Padmakumar, Chief Executive Officer and Chairman of the Board
Mr. Padmakumar, our Chief Executive Officer and the Chairman of our board of directors since September 2021, is a broad based entrepreneur and technologist with a strong background in strategic partnerships, product and business development, technology and operations, private equity, and venture capital environments. Since August 2020, Mr. Padmakumar has been a partner at Advantary LLC, where he specializes in business development and advises on strategic matters. Since January 2021, he has been actively partnering with the Asia practice of FocalPoint Partners LLC, a boutique investment bank on deal flow diligence in the clean transition space in Asia. Since June 2021, he has been an advisor to the Chief Executive Officer of NTherma Corporation on strategic relationships and capital raising activities. From July 2016 through December 2021, Mr. Padmakumar has also advised on deal flow and provided operational support to portfolio companies for a fund set up to support SK Telecom Co., Ltd.’s strategic interests. From 2007 through 2010, Mr. Padmakumar was a Venture Partner at X/Seed Capital Management, LLC, where he focused on transactions in the cleantech and materials sectors. Additionally, from 2011 to October 2020, Mr. Padmakumar was the Chief Executive Officer at Amperics, Inc., a developer and vendor of high energy density ultracap hybrid storage systems. Mr. Padmakumar also has extensive experience in the clean energy sectors, having been an advisor to Lionrock Batteries Ltd., which creates flexible batteries and high performance separator technology since 2019, an advisor to the board and CEO of Hyperscale Data Center Company, a company focused on energy usage efficiency in hyperscale data centers from 2018 to 2020, and an advisor to the chairman of Advanced Systems Automation Limited in Singapore, where he advised on issues surrounding urban transportation, High Energy Density Li Ion battery (NMC technology) and 3D printing technology from 2017 to 2019. Mr. Padmakumar also has broad experience advising on capital raising and corporate strategy, serving as a mentor to OneValley Inc., a global entrepreneurship platform for individuals, startups, and corporations seeking innovation and accelerated growth, and as an advisor to several early stage companies from audio technologies to SaaS products.
Mr. Padmakumar has a Bachelor’s Degree in Technology from the University of Madras in Chemical Engineering and a Master of Science Degree in Chemical Engineering from Stanford University.
We believe Mr. Padmakumar’s extensive industry and management experience makes him well suited to serve as our Chief Executive Officer and as a member of our board of directors.
Vivek Soni, Executive Vice President and Director
Dr. Soni, our Executive Vice President and a member of our board of directors since September 2021, has held board and crucial managerial positions at numerous businesses within the cleantech and venture space. Dr. Soni has been a member of Prithvi Ventures LLC since January 2021, a fund for investments in innovative cleantech companies, and has been a member of S CAP ClimateTech Opportunity Fund, LP, since July 2021, which is a late stage Climatech fund. With these funds, he has played a vital role in investing $22 million in 2021 in the clean transition sector that includes investments in energy storage, electrical vehicle (EV) technology, renewable energy, and novel materials companies. Since September 2017, Dr. Soni has
been on the Advisory Board of Reading Municipal Light Department, the largest municipal electric utility in Massachusetts and currently is the Vice Chair. Since 2016, he has also been a Managing Director for TiE Boston Angels, where he created a robust process for syndication and due diligence, and also grew investments threefold over five years. From 2007 to 2011, he was a Venture Advisor to Nomura International plc’s New and Clean Energy Technology Ventures fund, a late stage Cleantech VC fund. Since 2006, Dr. Soni has also been the Managing Partner of Boston Cleantech, a company that enables investors and entrepreneurs to grow businesses in cleantech, energy, chemicals, materials and manufacturing. His responsibilities include promoting early-stage companies and impact investing in cleantech, carbon capture and sequestration, and solar energy. Dr. Soni is also a member of the boards of directors of A.T.E Private Limited, A.T.E. Enterprises Private Limited and A.T.E. Huber Envirotech Private Limited, where he provides expertise on governance, technology, innovation, cleantech, fundraising, acquisitions and global expansion.
Dr. Soni holds a Bachelor’s Degree in Technology from the Indian Institute of Technology, New Delhi, India, a Master of Science Degree in Polymer Science & Engineering from the University of Massachusetts, Amherst, a Ph.D. in Polymer Science & Engineering from the University of Massachusetts, Amherst, and an Executive Development Program certificate from the Kellogg School of Management at Northwestern University.
We believe Dr. Soni’s broad experience advising investors and companies in the cleantech sectors makes him well suited to serve as our Executive Vice President and as a member of our board of directors.
Daniel Davis, Chief Financial Officer
Mr. Davis, our Chief Financial Officer since 2021, is a skilled financial executive with a proven background in managing and growing companies. Mr. Davis has served as the Chief Administrative Officer of SeQure Dx, Inc., a company focused on providing off-target diagnostics in gene editing since April 2021. Prior to that, from 2007 through April 2020, Mr. Davis was a Director in the Life Sciences and Technology Practice at Accounting Management Solutions (“AMS”), and subsequently, following its acquisition, at CliftonLarsonAllen LLP, an accountancy firm. At AMS, Mr. Davis founded and managed the life sciences practice and provided strategic consulting on complex engagements surrounding fundraising and mergers and acquisitions strategies. Mr. Davis is also co-founder, acting Chief Financial Officer and Director of AngioWave Imaging, LLC, where he led an over-subscribed seed round, and was a key contributor to the strategic plan and drove the forecasting for the five-year plan.
Mr. Davis received his B.A. in Political Science from Brown University and his M.B.A from the University of Pennsylvania, Wharton School of Business.
We believe Mr. Davis’ financial expertise and private sector experience makes him well suited to serve as our Chief Financial Officer.
Independent Directors
We intend to be actively involved in the strategy and operations of our target companies and have assembled a number of seasoned corporate executives and professional advisors to serve as Monterey Capital Acquisition Corporation’s independent directors. These executives have been chosen for their extensive sector experience — within mergers and acquisitions, venture capital/private equity and technology sectors — or for their extensive executive and legal experience in managing successful and disruptive high-growth companies and financial strategies. Our independent directors will provide a broad network of operational experience, various industry perspectives, and management capabilities to supplement our management’s network of potential target opportunities.
Leela Gray, Director
Ms. Gray, a member of our board of directors since 2021, is a retired Brigadier General with 30 years in the U.S. Army, including seven in the U.S. Army Reserve while in corporate positions developing business expertise. Between November 2018 and May 2019, Ms. Gray served as Strategic Advisor to United States Army Cyber Command, playing a key role in innovating and modernizing cyber policy shaped by her market
and stakeholder insights, including her tenure at the Department of State, where she created interagency and international partner initiatives in Cyber/Information Warfare. Prior to that, from August 2016 to July 2018, Ms. Gray served as a Deputy Commanding General at the U.S. Army Central Command guiding strategies to transform operations and logistics. As a National Security senior executive with Top Secret clearance, Ms. Gray represented the United States internationally, shaped policy, and advised logistics and governance, building on a global perspective that also included two combat operations and one peacekeeping mission. Since June 2020, Ms. Gray has been a mentor at Tampa Bay WAVE’s Tech Accelerator programs. From July 2019 to June 2021, Ms. Gray served on the Executive Board of Alpha Omicron Pi Fraternity, a $100 million international nonprofit with over 100,000 members. Ms. Gray currently serves on the Advisory Board of Empower Rideshare, SaaS ridesharing company alternative to Uber and Lyft and holds the National Association of Corporate Directors (NACD) Directorship Certification™.
Ms. Gray earned a Master of Strategic Studies from the United States Army War College, an M.A. in Journalism from Ball State University, and a B.A. in Communications from Elon University.
We believe Ms. Gray’s leadership and cybersecurity experience makers her well suited to serve as a member of our board of directors.
Kathy Cuocolo, CPA, Director
Ms. Cuocolo, a member of our board of directors since 2021, is a versatile executive and director with demonstrated success in developing and managing financial services operations on a global basis. Ms. Cuocolo is currently a director and Audit Chair of Greenbacker Renewable Energy Company LLC and a director at Syntax ETF Trust. Her prior directorships include President and Director of The China Fund, Inc., which invests primarily in private placements in mainland China, Chairperson of Select Sector ETF Trust, and director of Guardian Life family of funds. From 2014 through March 2020, Ms. Cuocolo was the president of Syntax Advisors, LLC where she was responsible for all aspects of business operations and the development of its financial management products. Prior to that, from 2008 until 2013, Ms. Cuocolo was a Managing Director and Division Head for the Mutual Fund and global ETF Services for The Bank of New York Mellon Corporation, where she was responsible for the operations and strategic planning for these business lines. Prior to that, from 1982 until 2003, Ms. Cuocolo served in various roles at State Street Corporation, including as an Executive Vice President, Division Head of Investor Products and Services, where she was responsible for operations and strategic planning. Ms. Cuocolo was a member of the corporations’ Executive Operating Committee responsible for all aspects of business strategy. During her 22 years at State Street, Ms. Cuocolo led the firm to become the largest fund administrator in the U.S., with over $1.2 trillion in assets. Prior to State Street, Ms. Cuocolo was an auditor at PriceWaterhouseCoopers LLP.
Ms. Cuocolo received her B.A. in Accounting, summa cum laude, from Boston College, and holds a Masters Professional Director Certificate from the American College of Corporate Governance. Ms. Cuocolo received her CPA license in the Commonwealth of Massachusetts in 1981.
We believe Ms. Cuocolo’s financial expertise and executive experience makes her well suited to serve as a member of our board of directors.
Stephen Markscheid, Director
Mr. Markscheid, a member of our board of directors since 2021, is currently the Chairman of Still Waters Green Technology Limited, a UK based renewable energy developer since December 2019 and currently serves as a director of Fanhua, Inc. (Nasdaq: FANH), JinkoSolar Holding Co., Ltd. (NYSE: JKS), Zhongjin Technology Services Group Company Limited (HKEX: Stock Code 08295), Xiaobai Maimai Inc. (Nasdaq: HX), UGE International Ltd. (TSXV: UGE.V), and the Global Corporate Social Responsibility Foundation. In addition, Mr. Markscheid is currently the Chief Financial Officer of ChildWise International Corporation and serves as a Board Advisor to several companies, including NanoGraf Corporation, Intelligent Generation LLC, SeedVantage LLC, Clean Energy Trust, and Kearsarge Energy L.P. Mr. Markscheid also serves as a trustee emeritus of Princeton-in-Asia. From 1998 until 2006, Mr. Markscheid served as a Director of Business Development and Senior Vice President and led GE Capital’s business development activities in China and the Asia Pacific region, primarily focusing on
acquisitions and direct investments. Prior to GE, Mr. Markscheid worked with the Boston Consulting Group throughout Asia. Mr. Markscheid was a banker for ten years in London, Chicago, New York, Hong Kong and Beijing with Chase Manhattan Bank and First National Bank of Chicago. Mr. Markscheid began his career with the US-China Business Council, in Washington D.C. and Beijing.
Mr. Markscheid earned a B.A. in East Asian Studies from Princeton University in 1976, an M.A. in international affairs from Johns Hopkins University in 1980, and an MBA from Columbia University in 1991, where he was class valedictorian.
We believe Mr. Markscheid’s significant public and private sector experience makes him well suited to serve as a member of our board of directors.
Past experience or performance of our management team is not a guarantee (i) of success with respect to any business combination we may consummate or (ii) that we will be able to identify a suitable candidate for our initial business combination. You should not rely on the historical performance record of our management team or any affiliates as indicative of our future performance. Additionally, in the course of their respective careers, members of our management team have been involved in businesses and deals that were unsuccessful. Our officers and directors have little to no experience with blank check companies or special purpose acquisition companies. In addition, our executive officers and directors may have conflicts of interest with other entities to which they owe fiduciary duties or contractual obligations with respect to initial business combination opportunities.
Industry Opportunity
Decarbonization and clean transition from legacy fossil fuel use are high priorities that are impacting all aspects of the global economy. Some of the major opportunities that we find very attractive are:
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EV charging infrastructure, advanced battery chemistries and fuel cells and hydrogen infrastructure;
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Advanced powertrain and battery management and vehicle-to-grid solutions;
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Distributed energy resource management, demand response and transactive energy solutions, and artificial intelligence (AI) and machine learning (ML) approaches;
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Drone and remote sensing solutions; and
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Novel materials and processes for decarbonization of industrial processes, transportation and built infrastructure.
Advances in AI and ML are driving advances in many of the energy sectors and we are aware of tremendous value creation at the intersection of the clean transition, the electric grid, mobility and data. We believe that there are many attractive acquisition targets, which, with appropriate capital infusion in a SPAC process can yield transactions with a final enterprise value between, approximately, $250 million to $1 billion with a strong potential for growth in the next decade. Through our network and domain expertise, we have a pipeline of numerous opportunities, several of which are proprietary.
Business Strategy
One of our business theses is that the time-proven IPO process imposes avoidable delays and costs on both new companies and investors. We believe the increase in SPAC IPO issuance and merger activity in 2020 and 2021 validates the SPAC structure’s ability to address some of the problems with the IPO process, which are commonly discussed among public technology investors today. Fundamental technology investors find it difficult to own stock in new technology companies during their pre-revenue and/or pre-profit phases because technology companies are typically required by most investment banks to produce a string of revenue growth quarters with profit or near-profit before they are allowed to do an IPO. We may offer earlier access to a technology company that is reporting milestones as opposed to revenue or profits, but we will certainly also consider companies on the IPO track, with growing revenue on the path to profitability.
Our team has seen new technology companies face these issues in the context of a traditional IPO:
1.
Late-stage public funding expensive and hard to source. In the period just prior to profitability, a company may need large amounts of working capital or more capacity or to exploit a research and development, or R&D, breakthrough, which are all good signs. Unfortunately, this cash drain is often funded with significant dilution by venture capital or high-coupon debt. We intend to facilitate earlier public investment in a private company earlier in the process.
2.
Pre-IPO R&D stall. Prior to its IPO, a company is incentivized to depress its operating expenses, including R&D expenses, to bolster its profitability. This may delay second-product introduction and other investments that put the company at a disadvantage relative to its more mature competitors for a period of a year or more (i.e., for the time needed to create the consecutive series of profitable quarters often mandated by investment banks).
3.
Low corporate visibility. Privately held companies can certainly become prominent in the era of the “unicorn”, but we believe there is nothing like open debate in the market over a company’s prospects to make the public — not to mention prospective customers and business partners — aware of an important new company.
4.
Missed opportunities for target size. Consistent with our investment thesis as described above, we plan to target businesses with total enterprise values ranging from $250 million to $1 billion in the clean transition sector. We believe the traditional underwritten initial public offering process and many other special purpose acquisition companies are focused on target businesses with valuations in the higher end of the range, and that there are many missed high growth opportunities in the clean transition sector with more modest enterprise valuations of $250 million to $600 million that are not being served.
The use of SPACs to effect public offerings earlier can bring on potential new problems caused by the accelerated entry of immature companies into public markets. For our target candidate, we intend to address the following common problems and mitigate them to the best of our ability.
1.
Incomplete or inaccurate financial reports may lead to unsound internal business decisions which may necessitate future restatements of financial reports. We will work to install Sarbanes-Oxley-compatible systems in our target company as early as possible.
2.
Second product stall (R&D based). We have observed that R&D product pipelines can also stall if a startup company relies solely on a group of very good engineers whose skill allows them to develop a new product with informal new-product documentation and scheduling systems. When some of those engineers move on or move up, the company’s R&D pipeline may suffer from repeated rework delays. We have direct experience with new product development processes and tools that will help ameliorate and address second product stall.
3.
Revenue over-forecasting. The use of third-party customer relationship management (CRM) software is now common, but we have observed that poor quality control of the funnel data input, and the use of simplistic algorithms to create revenue estimates from sales funnel data often lead to inflated revenue predictions. We are sensitive to the importance of accurate revenue projections and will work to ensure responsible revenue projections based on products and customer contracts.
4.
High manufacturing costs. Manufacturing creates many high-quality blue-collar jobs, but America’s manufacturing sector has been shrinking, which in turn has diminished the hiring pool. This forces companies to automate manufacturing.
5.
Poor product quality. Quality should be a way of life in all corporate activities, not just a mathematical system to measure and eliminate product defects. For example, we view Sarbanes-Oxley practices as financial quality-assurance systems. Several members of our management team and board of directors have worked personally for years on corporate-level quality systems and quality culture development processes, and we can leverage their experience to help integrate quality management into an organization that needs to improve product quality.
6.
Inadequate planning often shows up in public reports, for example, as late new products, long product lead times, quarterly revenue misses and unanticipated competitor success. We often see emerging companies plan poorly or even do no planning in some disciplines. While we certainly cannot promise to fix all of the formalities listed above, we can share excellent planning tools in multiple disciplines with our top-few prospective target companies.
We expect to leverage the full resources of the management team to help optimize business strategies, drive operational improvements and cultivate managerial talent on behalf of our initial business combination.
Business Process
The mission of Monterey Capital Acquisition Corporation is to provide fundamental public technology investors with early access to an attractive clean transition company. After our top-few prospective target companies are identified, we will analyze their business processes, systems, and disciplines relative to what we believe is required for stable and predictable performance. Then, if the target desires to partner with us, we will offer our help.
Finally, we will offer our target company consulting support from our internal and external experts. Given that strategy, some of our key directors may remain on the board of the combined company.
Although we have not yet selected a business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, we are not prohibited from pursuing an initial business combination with a company that is affiliated with one or more of our officers or directors. In the event we seek to complete our initial business combination with an affiliated company, we, or a committee of our independent directors, will obtain outside opinions to assess the fairness of the combination from an independent investment banking firm that is a member of the Financial Industry Regulatory Authority, or FINRA, or an independent accounting firm that commonly renders valuation opinions to ensure that our initial business combination is fair to our shareholders prior to their vote to on our initial business combination.
Following this offering, members of our management team will directly or indirectly own our common stock and may also own our placement warrants. This may also lead to individual conflicts of interest when we determine whether a particular target business is appropriate for our initial business combination or when we choose directors for the combined company. Any conflicts will be disclosed to shareholders prior to their vote on the initial business combination. Please see the Risk Factor titled, “We may engage in an initial business combination with one or more target businesses that have relationships with entities that may be affiliated with our sponsor, officers, directors or existing holders which may raise potential conflicts of interest.”
Acquisition Process
We believe our management team’s operational and investment track record in the clean transition, decarbonization, and related sectors provides us with a deep understanding of challenges faced by business operators and owners in this sector. We expect that our diligence may include assessments of the potential target company’s competitive advantages through meetings with management and key employees, key customers, interactions with consultants and experts within our network, visits to key operating facilities and a review of financial, legal and operational documents. We intend to utilize our ability to formulate creative solutions from operational experience, capital structure, growth and vision to unlock shareholder value.
In addition, we expect to retain and work with financial advisors and legal counsel as well as industry consultants to conduct due diligence, develop strategic plans and implement operational strategies. We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with such a company, we would obtain an opinion from an independent investment banking firm or from an independent accounting firm, that such an initial business combination is fair to our company from a financial point of view. Certain of our officers and directors presently have, and any of them in the future may have, additional, fiduciary duties or contractual obligations to other entities pursuant to which such officer or director is or
will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity that is suitable for an entity to which he or she has then-current fiduciary duties or contractual obligations, he or she may need to honor these fiduciary duties or contractual obligations to present such business combination opportunity to such entity, subject to their fiduciary duties under Delaware law. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our initial business combination.
Competitive Advantages
We intend to capitalize on the following competitive advantages in our pursuit of a target company:
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Leadership of an Experienced Management Team. Our management team has decades of experience in the clean energy sector, having a long track record of attaining opportunities through proprietary transaction sources and a wide network of relationships. Additionally, we believe that the operational experience of our management team should enable us to enhance the strategic vision and operational performance of the assets and businesses that we acquire in order to maximize value for shareholders. We believe our expertise in identifying and sourcing compelling investment opportunities combined with our strategic and operational proficiency in creating value provides a competitive advantage relative to other strategic and financial buyers.
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Established Deal Sourcing Network. We believe the strong track record of our management team and board of directors will provide access to quality initial business combination partners. In addition, through our management team and board of directors, we believe we have contacts and sources from which to generate acquisition opportunities and possibly seek complementary follow-on business arrangements. These contacts and sources include those in government, private and public companies, private equity and venture capital funds, investment bankers, attorneys and accountants.
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Status as a Publicly Listed Acquisition Company. We believe our structure will make us an attractive business combination partner to prospective target businesses. As a publicly listed company, we will offer a target business an alternative to the traditional initial public offering process. We believe that some target businesses will favor this alternative, which we believe is less expensive, while offering greater certainty of execution, than the traditional initial public offering process. During an initial public offering, there are typically underwriting fees and marketing expenses, which would be costlier than a business combination with us. Furthermore, once a proposed business combination is approved by our stockholders (if applicable) and the transaction is consummated, the target business will have effectively become a publicly listed company, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions that could prevent the offering from occurring. Once publicly traded, we believe our target business would have greater access to capital and additional means of creating management incentives that are better aligned with stockholders’ interests than it would as a private company. This can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented management staffs.
Acquisition Criteria
Consistent with our strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We will use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines.
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Target Size: Consistent with our investment thesis as described above, we plan to target businesses with total enterprise values ranging from $250 million to $1 billion in the clean transition sector.
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Companies that operate in clean transition and carbon emission industries and sectors that are ripe for technological disruption or are currently undergoing fundamental transformations. We plan to focus on companies that replace dirty carbon emission processes or enable a cleaner solution or process.
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Companies with an attractive and defensible competitive position. We will target companies with defensible market positions that we believe offer long-term competitive advantages. These could
include proprietary technology, a leading product suite, strong market share or an actionable path to gaining significant market share or creative use of existing technology that we believe is enduring and unique.
•
Businesses with Revenue and Earnings Growth Potential. We will seek to acquire one or more businesses that are addressing large addressable markets and have the potential for significant revenue and earnings growth through a combination of both existing and new product development, increased production capacity, expense reduction and synergistic follow-on acquisitions resulting in increased operating leverage.
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Businesses with Potential for Strong Free Cash Flow Generation. We will seek to acquire one or more businesses that have the potential to generate strong, stable and increasing free cash flow. We intend to focus on one or more businesses that have predictable revenue streams and definable low working capital and capital expenditure requirements. We may also seek to prudently leverage this cash flow in order to enhance stockholder value.
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Significant operating advantage. We will seek to invest in companies that we believe possess not only proven business models and sustainable competitive advantages, but also unit economics that will yield significant economies of scale with continued growth.
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Strong Management. We will seek companies with strong management teams already in place. We will spend significant time assessing a company’s leadership and human fabric, and maximizing its efficiency over time.
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Accretive use of proceeds. We will seek investment opportunities where our capital will help fund growth, not just provide shareholder liquidity. We believe it is important that our transaction will help create shareholder value by funding the development of new products, increasing investment in sales and marketing or capacity expansion.
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Benefit from Being a Public Company. We intend to acquire one or more businesses that will benefit from being publicly-traded and can effectively utilize the broader access to capital and the public profile that are associated with being a publicly traded company.
•
Appropriate Valuations and Upside Potential. We intend to apply rigorous, criteria-based, disciplined, and valuation-centric metrics. We intend to acquire a target on terms that we believe provide significant upside potential while seeking to limit risk to our investors.
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that from time to time our management may deem relevant. We shall not undertake our initial business combination with any entity with its principal business operations in China (including Hong Kong and Macau).
Initial Business Combination
So long as our securities are then listed on the Nasdaq, Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of directors will make the determination as to the fair market value of our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. Additionally, pursuant to Nasdaq rules, any initial business combination must be approved by a majority of our independent directors.
We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the prior owners of the target business, the target management team or stockholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock, shares or other equity interests of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our issued and outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses, and we will treat the target businesses together as our initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.
To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
In evaluating a prospective target business, we expect to conduct a thorough due diligence review which will encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial, operational, legal 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 our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.
Sourcing of Potential Initial Business Combination Targets
Certain members of our management team have spent significant portions of their careers working with businesses in the clean transition sector and have developed a wide network of professional services contacts and business relationships in that industry. The members of our board of directors also have significant executive management and public company experience and bring additional relationships that further broaden our network.
This network has provided our management team with a flow of referrals that have resulted in numerous past transactions. We believe that the network of contacts and relationships of our management team will provide us with an important source of acquisition opportunities. In addition, we anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment market participants, private equity groups, investment banks, consultants, accounting firms, law firms and large business enterprises.
Members of our management team and our independent directors will directly or indirectly own founder shares, rights and/or placement warrants following this offering and, accordingly, may have a
conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination.
In addition, each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our initial business combination.
In addition, our sponsor and our officers and directors may sponsor or form other special purpose acquisition companies similar to ours or may pursue other business or investment ventures during the period in which we are seeking an initial business combination. Similarly, our financial advisor may work with other special purpose acquisition companies. Any such companies, businesses or investments may present additional conflicts of interest in pursuing an initial business combination. However, we do not believe that any such potential conflicts would materially affect our ability to complete our initial business combination.
Corporate Information
Our executive offices are located at 419 Webster Street, Monterey, California, and our telephone number is (831) 649-7388.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to emerging growth company will have the meaning associated with it in the JOBS Act. Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the end of the prior June 30th, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30th.
THE OFFERING
In deciding whether to invest in our securities, you should take into account not only the backgrounds of the members of our management team, but also the special risks we face as a blank check company and the fact that this offering is not being conducted in compliance with Rule 419 promulgated under the Securities Act. You will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings. You should carefully consider these and the other risks set forth in the section of this prospectus entitled “Risk Factors.”
10,000,000 units (or 11,500,000 units if the underwriters’ over-allotment option is exercised in full), at $10.00 per unit, each unit consisting of:
•
one share of Class A common stock;
•
one redeemable warrant; and
•
one right (each right entitles the holder thereof to receive one-tenth (1/10) of one share of Class A common stock upon the consummation of a business combination)
Units: “MCACU”
Class A Common Stock: “MCAC”
Warrants: “MCACW”
Rights: “MCACR”
Trading commencement and separation of Class A common stock, rights and warrants
The units will begin trading on or promptly after the date of this prospectus. We expect the Class A common stock, rights and warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless the representative informs us of its decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. Once the shares of Class A common stock, rights and warrants commence separate trading, holders will have the option to continue to hold units or separate their units into the component securities. Holders will need to have their brokers contact our transfer agent in order to separate the units into shares of Class A common stock, rights and warrants. We will not issue fractional shares in connection with the exchange of rights. Accordingly, unless you hold rights in multiples of tens, you will not be able to receive or trade a whole share of Class A common stock.
Separate trading of the Class A common stock, rights and warrants is prohibited until we have filed a Current Report on Form 8-K
In no event will the Class A common stock, rights and warrants be traded separately until we have filed a Current Report on Form 8-K with the SEC containing an audited balance sheet reflecting our receipt of the gross proceeds at the closing of this offering. We will file the Current Report on Form 8-K promptly after the closing of this offering, which is anticipated to take place three business days from the date of this prospectus. If the underwriters’ over-allotment option is exercised following
the initial filing of such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the underwriters’ over-allotment option.
Units:
Number outstanding before this offering
0
Number outstanding after this offering
10,000,000(1)
Common stock:
Number outstanding before this offering and the private
placement
2,875,000 shares of Class B common stock(2)
Number outstanding after
this offering
12,650,000 shares of Class A common stock and Class B common stock(1)(3)
Warrants:
Number outstanding before this offering and the private
placement
0
Number of placement warrants to be sold in a private placement simultaneously with this offering
3,200,000(1)
Number of warrants to be outstanding after this offering and the private placement
13,200,000(4)
Each warrant is exercisable to purchase one share of our Class A common stock, subject to adjustment as provided herein.
(1)
Assumes no exercise of the underwriters’ over-allotment option and the forfeiture by our sponsor of 375,000 founder shares. Our sponsor has agreed to purchase an aggregate of 3,200,000 placement warrants (or 3,500,000 placement warrants if the over-allotment option is exercised in full) for an aggregate purchase price of $3,200,000 ($3,500,000 if the over-allotment option is exercised in full). Each placement warrant entitles the holder thereof to purchase one share of Class A common stock at $11.50 per share, subject to adjustment as provided herein. The placement warrants are not subject to forfeiture but will be subject to transfer restrictions as described in “Principal Stockholders — Transfers of Founder Shares and Placement Warrants (including securities contained therein).”
(2)
Represents 2,875,000 founders’ shares. The 2,875,000 founders’ shares include an aggregate of up to 375,000 founders’ shares that are subject to forfeiture by our sponsor depending on the extent to which the underwriters’ over-allotment option is exercised.
(3)
Comprised of 10,000,000 shares of Class A common stock, 2,500,000 shares of Class B common stock (or founder shares) and 150,000 representative shares issuable to the representative upon the consummation of this offering. The Class B common stock is convertible into shares of our Class A common stock on a one-for-one basis, subject to adjustment as described below adjacent to the caption “Founder shares conversion and anti-dilution rights.”
(4)
Comprised of 10,000,000 public warrants included in the units to be sold in this offering and 3,200,000 placement warrants to be sold in the private placement.
$11.50 per share, subject to adjustment as described herein. In addition, if (x) we issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by our board of directors and, in the case of any such issuance to our sponsor or its affiliates, without taking into account any founder shares held by our sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and (z) the volume weighted average trading price of our Class A common stock during the 20 trading day period starting on the trading day prior to the day on which we consummate our initial business combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under “Redemption of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.
The warrants will become exercisable on the later of:
•
the completion of our initial business combination, and
•
12 months from the closing of this offering;
provided in each case that we have an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or we permit holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement).
We are not registering the shares of Class A common stock issuable upon exercise of the warrants at this time. However, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective within 60 business days following our initial business combination and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we will have failed to maintain an effective
registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
The warrants will expire at 5:00 p.m., New York City time, five years after the completion of our initial business combination or earlier upon redemption or liquidation. On the exercise of any warrant, the warrant exercise price will be paid directly to us and not placed in the trust account.
Up to ten anchor investors have each expressed to us an interest in purchasing up to 990,000 units in this offering at the offering price of $10.00 per unit, and such allocations will be determined by the underwriters. The anchor investors as a group may purchase no more than 9,900,000 units in the aggregate (or 11,385,000 units in the aggregate if the underwriters' over-allotment option is exercised in full), up to 99.0% of the units issued in this offering. Such amounts will be allocated among the anchor investors proportionally based on their expression of interest. We expect that the number of units the anchor investors will purchase would, in general, be increased or decreased proportionately in the event the number of units offered hereby is increased or decreased, respectively.
Pursuant to such units, the anchor investors have not been granted any stockholder or other rights in addition to those afforded to our other public stockholders. Further, the anchor investors are not required to (i) other than as described in this prospectus, hold any units, shares of Class A common stock, rights or warrants they may purchase in this offering or thereafter for any amount of time, (ii) vote any shares of Class A common stock they may own (other than the founder shares) at the applicable time in favor of our initial business combination or (iii) refrain from exercising their right to redeem their public shares at the time of our initial business combination. The anchor investors will have the same rights to the funds held in the trust account with respect to the shares of Class A common stock underlying the units they may purchase in this offering as the rights afforded to our other public stockholders
There can be no assurance that the anchor investors will acquire any units in this offering, or as to the amount of such units the anchor investors will retain, if any, prior to or upon the consummation of our initial business combination. There is no guarantee that all ten anchor investors will participate in the offering. We will be required to meet certain minimum initial listing standards with respect to liquidity to list on the Nasdaq, which may result in a lower number of units being allocated to our anchor investors. In the event that the anchor investors purchase all of the units that they have expressed an interest in purchasing in this offering, hold all such units until prior to consummation of our initial business combination and vote their public shares in favor of our initial business combination, in addition to the founder shares, no affirmative votes from other public stockholders would be required to approve our initial
business combination. The anchor investors are not required to vote any of their public shares in favor of our initial business combination or for or against any other matter presented for a stockholder vote.
If the anchor investors purchase all of the units which may be allocated to them (99% of the units in this offering), the substantial majority of units purchased in this offering will be held by the anchor investors. These anchor investors will potentially have different interests than our other public stockholders, since, among other matters, their investments in the founder shares will generally be worthless if we do not consummate an initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, and these investors will benefit more than our public stockholders from our completion of an initial business combination and may benefit from an initial business combination even if our public stockholders experience a loss. Accordingly, these investors may be more likely to favor any proposed initial business combination transaction even if our public stockholders do not favor the transaction. The anchor investors will also have the potential to realize enhanced economic returns and overall economic outcome from their investment in us in comparison to our other public stockholders who are not making anchor investments and purchasing founder shares. As disclosed below, the anchor investors will agree, pursuant to the investment agreements, to vote any founder shares held by them in favor of our initial business combination, regardless of how our public stockholders vote. If the anchor investors purchase all of the units which may be allocated to them (99% of the units issued in this offering), such purchases would reduce the available public float for our securities. Any such reduction in our available public float may consequently reduce the trading volume, volatility and liquidity of our securities relative to what they would have been had such units been purchased by public investors and could result in our securities being delisted from Nasdaq.
Each anchor investor has entered into a separate investment agreement with us and our sponsor pursuant to which each anchor investor agreed to purchase 75,000 founder shares from our sponsor at the closing of this offering, subject to such anchor investor’s acquisition of 100% of the units allocated to it by the underwriters in this offering. Pursuant to the investment agreements, the anchor investors have agreed to (a) vote any founder shares held by them in favor of our initial business combination and (b) subject any founder shares held by them to the same lock-up restrictions as the founder shares held by our sponsor and independent directors. Since our sponsor is transferring founder shares held by it to the anchor investors and we are not issuing any new shares, there will be no dilutive impact on the other investors in this offering.
For information on how the anchor investors’ purchase of our units may impact our liquidity, see “Risk Factors — Potential participation in this offering by our anchor investors could reduce the public float for our shares.”
Once the warrants become exercisable, we may redeem the outstanding warrants:
•
in whole and not in part;
•
at a price of $0.01 per warrant;
•
upon not less than 30 days’ prior written notice of redemption given after the warrants become exercisable (the “30-day redemption period”) to each warrant holder; and
•
if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending three days before we send the notice of redemption to the warrant holders.
We will not redeem the warrants as described above unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in this offering.
If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of our warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for
this purpose shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third day prior to the date on which the notice of redemption is sent to the holders of warrants.
Please see the section of this prospectus entitled “Description of Securities — Redeemable Warrants — Public Stockholders’ Warrants” for additional information.
Rights:
Number outstanding before this offering and the private
placement
0 rights
Number of rights to be outstanding after this offering and the private placement
10,000,000 rights(5)
Each holder of a right will automatically receive one-tenth (1/10) of one Class A common stock upon consummation of our initial business combination. If we are unable to complete an initial business combination within the required prescribed time frame and we liquidate the funds held in the trust account, holders of rights will not receive any of such funds for their rights and the rights will expire worthless. We will not issue fractional shares in connection with an exchange of rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware General Corporation Law, or DGCL, and any rounding down and extinguishment may be done with or without any in lieu cash payment or other compensation being made to the holder of the relevant rights. As a result, you must hold rights in multiples of 10 in order to receive shares for all of your rights upon closing of a business combination.
On October 6, 2021, our sponsor purchased 2,875,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.009 per share. On October 28, 2021, our sponsor transferred 25,000 founder shares to each of Kathy Cuocolo, Leela Gray and Stephen Markscheid.
Prior to the initial investment in the company of $25,000 by our sponsor, the company had no assets, tangible or intangible. The per share purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the aggregate number of founder shares issued. The number of founder shares issued was determined based on the expectation that the founder shares would represent 20% of the outstanding shares after this offering (excluding the placement warrants and underlying Class A common stock and the representative shares). As such, our initial stockholders will collectively own approximately 20% of our issued and outstanding shares after this offering (excluding the representative shares and assuming the initial stockholders and anchor investors do not purchase any units in this offering).
(5)
Assumes no exercise of the underwriters’ over-allotment option. If the over-allotment option is exercised in full, there will be a total of 11,500,000 rights.
Neither our sponsor nor any of our officers or directors have expressed an intention to purchase any units in this offering. Up to 375,000 founder shares held by our sponsor will be subject to forfeiture by our sponsor depending on the extent to which the underwriters’ over-allotment option is exercised so that our initial stockholders will maintain ownership of 20% of our common stock after this offering (excluding the placement warrants and underlying Class A common stock and the representative shares and assuming the anchor investors do not purchase any units in this offering). Subject to each anchor investor purchasing 100% of the units allocated to it, in connection with the closing of this offering, our sponsor will sell 75,000 founder shares to each anchor investor (up to 750,000 founder shares in the aggregate) at their original purchase price. We will effect a stock dividend or share contribution prior to this offering should the size of the offering change, in order to maintain such ownership percentage.
The founder shares are identical to the shares of Class A common stock included in the units being sold in this offering, except that:
•
the founder shares are shares of Class B common stock that automatically convert into shares of our Class A common stock at the time of the consummation of our initial business combination, on a one-for-one basis, subject to adjustment pursuant to certain anti-dilution rights, as described herein;
•
the founder shares are subject to certain transfer restrictions, as described in more detail below;
•
our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to (i) waive their redemption rights with respect to any founder shares and public shares held by them in connection with the completion of our initial business combination, (ii) waive their redemption rights with respect to any founder shares and public shares held by them in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity and (iii) waive their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 12 months, or if we decide to extend the period of time to
complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame;
•
pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote any founder shares held by them and any public shares they may acquire during or after this offering (including in open market and privately negotiated transactions) in favor of our initial business combination. If we submit our initial business combination to our public stockholders for a vote, we will complete our initial business combination only if a majority of the then outstanding shares of common stock present and entitled to vote at the meeting to approve the initial business combination are voted in favor of the initial business combination. The anchor investors have agreed to vote any founder shares held by them in favor of our initial business combination. As a result, in the event that only the minimum number of shares representing a quorum is present at a stockholders’ meeting held to vote on our initial business combination, in addition to our initial stockholders’ founder shares, we would need only 512,501 or 5.13%, of the 10,000,000 public shares sold in this offering to be voted in favor of an initial business combination in order to have our initial business combination approved (assuming the over-allotment option is not exercised, and that the initial stockholders and anchor investors do not purchase any units in this offering or units or shares in the after-market and the representative shares are voted in favor of the initial business combination). In the event that all shares of our outstanding common stock are voted, we would need 3,675,001 or 36.75%, of the 10,000,000 public shares sold in this offering to be voted in favor of an initial business combination in order to have our initial business combination approved (assuming the over-allotment option is not exercised, and that the initial stockholders and anchor investors do not purchase any units in this offering or units or shares in the after-market and the representative shares are voted in favor of the initial business combination);
•
the anchor investors will not be entitled to (i) redemption rights with respect to any founder shares held by them in connection with the completion of our initial business combination, (ii) redemption rights with respect to any founder shares held by them in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to
redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity and (iii) waive their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame. In the event that the anchor investors purchase all of the units that they have expressed an interest in purchasing in this offering, hold all such units until prior to consummation of our initial business combination and vote their public shares in favor of our initial business combination, in addition to the founder shares, no affirmative votes from other public stockholders would be required to approve our initial business combination. However, because our anchor investors are not obligated to continue owning any public shares following the closing and are not obligated to vote any public shares in favor of our initial business combination, we cannot assure you that any of these investors will be stockholders at the time our stockholders vote on our initial business combination, and, if they are stockholder, we cannot assure you as to how such anchor investors will vote on any business combination; and
•
the founder shares are entitled to registration rights.
Transfer restrictions on founder
shares
Our initial stockholders have agreed not to transfer, assign or sell any of their founder shares (or shares of common stock issuable upon conversion thereof) until the earlier to occur of: (A) 180 days after the completion of our initial business combination and (B) subsequent to our initial business combination, (x) if the reported last sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property (except as described herein under the section
of this prospectus entitled “Principal Stockholders — Restrictions on Transfers of Founder Shares and Placement Warrants”). Any permitted transferees will be subject to the same restrictions and other agreements of our initial stockholders with respect to any founder shares. We refer to such transfer restrictions throughout this prospectus as the lock-up.
Founder shares conversion and anti-dilution rights
The shares of Class B common stock will automatically convert into shares of our Class A common stock at the time of the consummation of our initial business combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In no event will the Class B common stock convert into Class A common stock at a rate of less than one-to-one. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in this prospectus and related to the closing of the initial business combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of this offering (excluding the placement warrants and underlying Class A common stock and the representative shares) plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial business combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial business combination or any private placement-equivalent warrants and their underlying Class A common stock issued to our sponsor or its affiliates upon conversion of working capital loans made to us). Securities could be “deemed issued” for purposes of the conversion rate adjustment if such shares are issuable upon the conversion or exercise of convertible securities, warrants or similar securities.
Holders of record of the Class A common stock and holders of record of the Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders, with each share of common stock entitling the holder to one vote, except as required by law.
Our sponsor has agreed to purchase an aggregate of 3,200,000 placement warrants (or 3,500,000 placement warrants if the over-allotment option is exercised in full) at a price of $1.00 per warrant, for an aggregate purchase price of $3,200,000 ($3,500,000 if the over-allotment option is exercised in full). Each placement warrant is identical to the warrants offered by this prospectus except as described below. There will be no redemption rights or liquidating distributions from the trust
account with respect to the founder shares or placement warrants, which will expire worthless if we do not consummate a business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, the proceeds from the sale of the private placement warrants held in the trust account will be used to fund the redemption of our public shares (subject to the requirements of applicable law) and the private placement warrants (and the underlying securities) and rights will expire worthless.
Transfer restrictions on placement warrants
The placement warrants (including the shares of Class A common stock issuable upon exercise of the placement warrants) will not be transferable, assignable or saleable until the consummation of our initial business combination (except as described under the section of this prospectus entitled “Principal Stockholders — Restrictions on Transfers of Founder Shares and Placement Warrants”).
We will issue 150,000 shares of Class A common stock (172,500 if the underwriters exercise their over-allotment option in full) to the representative or its designee, for nominal consideration. The holders of the representative shares have agreed (i) that they will not transfer, assign or sell any such shares without our prior consent until the completion of our initial business combination, (ii) to waive their redemption rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of our initial business combination and (iii) to waive their rights to liquidating distributions from the trust account with respect to such shares if we fail to complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, as described in more detail in this prospectus. The representative shares are deemed to be underwriters’ compensation by FINRA pursuant to FINRA Rule 5110. The representative shares will have registration rights.
Proceeds to be held in trust
account
Nasdaq rules provide that at least 90% of the gross proceeds from this offering and the sale of the placement warrants be deposited in a trust account. Of the net proceeds of this offering and the sale of the placement warrants, $101,000,000, or $10.10 per unit ($116,150,000, or $10.10 per unit, if the underwriters’ over-allotment option is exercised in full) will be placed into a trust account in the United States with Continental Stock Transfer & Trust Company acting as trustee and J.P. Morgan Securities LLC acting as investment manager.
These proceeds include $4,000,000 (or $4,600,000 if the underwriters’ over-allotment option is exercised in full) in deferred underwriting commissions.
Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our tax obligations and up to $100,000 of interest that may be used for our dissolution expenses, the proceeds from this offering and the sale of the placement warrants held in the trust account will not be released from the trust account until the earliest to occur of: (a) the completion of our initial business combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, and (c) the redemption of our public shares if we are unable to complete our initial business combination 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, subject to applicable law. The proceeds deposited in the trust account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders.
Anticipated expenses and funding sources
Except as described above with respect to the payment of taxes, unless and until we complete our initial business combination, no proceeds held in the trust account will be available for our use. The proceeds held in the trust account will be invested only in U.S. government securities with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. We will disclose in each quarterly and annual report filed with the SEC prior to our initial business combination whether the proceeds deposited in the trust account are invested in U.S. government treasury obligations or money market funds or a combination thereof. Based upon current interest rates, we expect the trust account to generate approximately $30,300 of pre-tax interest annually assuming an interest rate of 0.03% per year; however, we can provide no assurances regarding this amount.
Unless and until we complete our initial business combination, we may pay our expenses only from:
•
the net proceeds of this offering and the sale of the placement warrants not held in the trust account, which will be approximately $525,000 in working capital after the payment of approximately $675,000 in expenses relating to this offering; and
•
any loans or additional investments from our sponsor, members of our management team or their affiliates or other third parties, although they are under no obligation to advance funds or invest in us, and provided that any such loans will not have any claim on the proceeds held in the trust account unless such proceeds are released to us upon completion of an initial business combination.
Conditions to completing our initial business combination
Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of directors will make the determination as to the fair market value of our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial business combination target, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination target, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. There is no limitation on our ability to raise funds privately, or through loans in connection with our initial business combination. Additionally, pursuant to Nasdaq rules, any initial business combination must be approved by a majority of our independent directors.
We anticipate structuring our initial business combination either (i) in such a way so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses, or (ii) in such a way so that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the target management team or stockholders, or for other reasons. However, we will only complete an initial business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target.
In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be taken into account for purposes of Nasdaq’s 80% fair market value test. If the initial business combination involves more than one target business, the 80% fair market value test will be based on the aggregate value of all of the transactions and we will treat the target businesses together as the initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.
Permitted purchases of public shares and public warrants by our
affiliates
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial stockholders, directors, officers, advisors or their affiliates may purchase public shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares or warrants our sponsor, initial stockholders, directors, officers, advisors or their affiliates may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules. However, apart from the purchase of the placement warrants, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. We expect that any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.
None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions prior to completion of our initial business combination. See “Proposed Business — Permitted purchases of our securities” for a description of how our sponsor, initial stockholders, directors, officers or any of their affiliates will select which stockholders to purchase securities from in any private transaction.
The purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our shares of Class A common stock, rights or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Redemption rights for public stockholders upon completion of our initial business combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of our initial business combination, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is initially anticipated to be $10.10 per public share, however, there is no guarantee that investors will receive $10.10 per share upon redemption. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. There will be no redemption rights upon the completion of our initial business combination with respect to our warrants or rights. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares held by them and any public shares they may acquire during or after this offering in connection with the completion of our initial business combination or otherwise. The anchor investors will not be entitled to redemption rights with respect to any founder shares held by them, in connection with the completion of our initial business combination, but they will be entitled to redemption rights with respect to any public shares held by them.
Manner of conducting
redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination either (i) in
connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under applicable law or stock exchange listing requirements. Under Nasdaq rules, asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would typically require stockholder approval. We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by law or stock exchange listing requirements or we choose to seek stockholder approval for business or other legal reasons. So long as we obtain and maintain a listing for our securities on Nasdaq, we will be required to comply with Nasdaq’s stockholder approval rules.
If stockholder approval of the transaction is required by law or stock exchange listing requirements, or we decide to obtain stockholder approval for business or other legal reasons, we will:
•
conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and
•
file proxy materials with the SEC.
If we seek stockholder approval, we will complete our initial business combination only if a majority of the then outstanding shares of common stock present and entitled to vote at the meeting to approve the initial business combination are voted in favor of the initial business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting. Our initial stockholders will count towards this quorum and, pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote any founder shares held by them and any public shares acquired by them during or after this offering (including in open market and privately negotiated transactions) in favor of our initial business combination. The anchor investors have agreed to vote any founder shares held by them in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. As a result, in addition to our initial stockholders’ founder shares, we would need only 512,501 or 5.13%, of the 10,000,000 public shares sold in this
offering to be voted in favor of an initial business combination (assuming only the minimum number of shares representing a quorum are voted) in order to have our initial business combination approved (assuming the over-allotment option is not exercised and that the initial stockholders do not purchase any units in this offering or units or shares in the after and the representative shares are voted in favor of the initial business combination). In the event that all shares of our outstanding common stock are voted, we would need 3,675,001 or 36.75%, of the 10,000,000 public shares sold in this offering to be voted in favor of an initial business combination in order to have our initial business combination approved (assuming the over-allotment option is not exercised, and that the initial stockholders do not purchase any units in this offering or units or shares in the after-market and the representative shares are voted in favor of the initial business combination).
We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial stockholders, may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction.
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
•
conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and
•
file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.
Such provisions may be amended if approved by holders of at least 65% of our common stock entitled to vote thereon.
Whether or not we maintain our registration under the Exchange Act or our listing on Nasdaq, we will provide our public stockholders with the opportunity to redeem their public shares by one of the two methods listed above. Upon the public announcement of our initial business combination, if we elect to conduct redemptions pursuant to the tender offer rules, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our Class A common stock in the open market, in order to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20
business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, we will not redeem any public shares unless our net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are 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 our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.
We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents mailed to such holders, or up to two business days prior to the vote on the proposal to approve the initial business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. We believe that this will allow our transfer agent to efficiently process any redemptions without the need for further communication or action from the redeeming public stockholders, which could delay redemptions and result in additional administrative cost. If the proposed initial business combination is not approved and we continue to search for a target company, we will promptly return any certificates delivered, or shares tendered electronically, by public stockholders who elected to redeem their shares.
Our amended and restated certificate of incorporation will provide that in no event will we redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are 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 our initial business combination. For example, the proposed initial business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed initial business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof.
In the event that the anchor investors purchase all of the units that they have expressed an interest in purchasing in this offering, hold all such units until prior to consummation of our initial business combination and vote their public shares in favor of our initial business combination, in addition to the founder shares, no affirmative votes from other public stockholders would be required to approve our initial business combination. However, because our anchor investors are not obligated to continue owning any public shares following the closing and are not obligated to vote any public shares in favor of our initial business combination, we cannot assure you that any of these anchor investors will be stockholders at the time our stockholders vote on our initial business combination, and, if they are stockholders, we cannot assure you as to how such anchor investors will vote on any business combination.
Limitation on redemption rights of stockholders holding 15% or more of the shares sold in this offering if we hold a stockholder vote
Notwithstanding the foregoing redemption rights, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in this offering, without our prior consent. We believe the restriction described above will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to redeem their shares as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem to no more than 15% of the shares sold in this offering, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial business combination, particularly in connection with an initial business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including all shares held by those stockholders that hold more than 15% of the shares sold in this offering) for or against our initial business combination.
Redemption rights in connection with proposed amendments to our certificate of incorporation
Our amended and restated certificate of incorporation will provide that any of its provisions related to pre-initial business combination activity (including the requirement to deposit proceeds of this offering and the private placement of warrants into the trust account and not release such amounts except in specified circumstances, and to provide redemption rights
to public stockholders as described herein) may be amended if approved by holders of at least 65% of our common stock entitled to vote thereon, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of at least 65% of our common stock entitled to vote thereon. In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions of the Delaware General Corporation Law, or DGCL, or applicable stock exchange rules.
Under our amended and restated certificate of incorporation, we may not issue additional securities that can vote on amendments to our amended and restated certificate of incorporation or on our initial business combination or that would entitle holders thereof to receive funds from the trust account. Our initial stockholders, who will collectively beneficially own approximately 20% of our common stock upon the closing of this offering (excluding the representative shares and assuming the initial stockholders and anchor investors do not purchase any units in this offering), will participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose. Our sponsor, executive officers, and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow holders to redeem their shares in connection with an initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (ii) with respect to any other provision relating to stockholders’ rights or pre-business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable) divided by the number of then outstanding public shares. Our sponsor, officers and directors have entered into a letter agreement with us pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination.
Release of funds in trust account on closing of our initial business combination
On the completion of our initial business combination, the funds held in the trust account will be used to pay amounts due to any public stockholders who exercise their redemption rights as described above under “Redemption rights for public stockholders upon completion of our initial business
combination.” We will use the remaining funds to pay the underwriters their deferred underwriting commissions, to pay all or a portion of the consideration payable to the target or owners of the target of our initial business combination and to pay other expenses associated with our initial business combination. If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of post-transaction businesses, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
Redemption of public shares and distribution and liquidation if no initial business combination
Our amended and restated certificate of incorporation will provide that we will have only 12 months from the closing of this offering (or up to 18 months from the closing of this offering if we extend the period of time to consummate a business combination, as described in more detail in this prospectus) to complete our initial business combination. If we are unable to complete our initial business combination within the prescribed time frame, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants and rights, which will expire worthless if we fail to complete our initial business combination within the prescribed time frame.
Our sponsor, officers and directors have entered into a letter agreement with us pursuant to which they have agreed to waive their redemption rights with respect to any founder shares if we are forced to liquidate. The anchor investors will not be entitled to redemption rights with respect to any founder shares if we are forced to liquidate. However, if our sponsor, the anchor investors, officers or directors acquire public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public
shares if we fail to complete our initial business combination within the prescribed time frame. The underwriters have agreed to waive their rights to their deferred underwriting commission in the event we do not complete our initial business combination within the prescribed time frame and subsequently liquidate and, in such event, the deferred fees will be included with the funds held in the trust account that will be available to fund the redemption of our public shares.
In the event we decide to exercise the extension option, investors will not have voting rights nor redemption rights in connection with such additional three-month extensions.
Limited payments to insiders
There will be no finder’s fees, reimbursement, consulting fee, non-cash payments, monies in respect of any payment of a loan or other compensation paid by us to our sponsor, officers or directors or any affiliate of our sponsor, officers or directors prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, the following payments will be made to our sponsor, officers or directors, or our or their affiliates, none of which will be made from the proceeds of this offering and the sale of the placement warrants held in the trust account prior to the completion of our initial business combination:
•
Repayment of up to an aggregate of $400,000 in loans made to us by our sponsor to cover offering-related and organizational expenses;
•
Payment to our sponsor of $10,000 per month, for up to 12 months, for office space, utilities and secretarial and administrative support;
•
Reimbursement for any out-of-pocket expenses actually incurred related to identifying, investigating and completing an initial business combination; and
•
Repayment of non-interest bearing loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination, the terms of which (other than as described above) have not been determined nor have any written agreements been executed with respect thereto. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender, upon consummation of our initial business combination. The warrants would be identical to the placement warrants.
Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors or our or their affiliates.
We will establish and maintain an audit committee, which will be composed entirely of independent directors to, among other things, monitor compliance with the terms described above and the other terms relating to this offering. If any
noncompliance is identified, then the audit committee will be charged with the responsibility to immediately take all action necessary to rectify such noncompliance or otherwise to cause compliance with the terms of this offering. For more information, see the section of this prospectus entitled “Management — Committees of the Board of Directors — Audit Committee.”
Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than the independent public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.10 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.10 per public share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Summary of Risk Factors
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors,” that represent challenges that we face in connection with the successful implementation of our strategy. The occurrence of one or more of the events or circumstances described in the section titled “Risk Factors,” alone or in combination with other events or circumstances, may adversely affect our ability to effect a business combination, and may have an adverse effect on our business, cash flows, financial condition and results of operations. Such risks include, but are not limited to:
•
we are a newly formed company with no operating history and no revenues;
•
our ability to continue as a “going concern”;
•
as a result of the low initial price paid by our sponsor and the anchor investors for the founder shares, our sponsor, its affiliates and our management team as well as the anchor investors stand to make a substantial profit even if an initial business combination subsequently declines in value or is unprofitable for our public stockholders;
•
we may not be able to complete our initial business combination within the prescribed time frame;
•
you will not have any rights or interests in funds from the trust account, except under certain limited circumstances;
•
negative interest rate for securities in which we invest the funds held in the trust account;
•
our stockholders may be held liable for claims by third parties against us;
•
if third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share;
•
subsequent to completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges;
•
conflicts of interest of our sponsor, officers and directors and our anchor investors;
•
we may have a limited ability to assess the management of a prospective target business;
•
our public stockholders may not be afforded an opportunity to vote on our proposed business combination;
•
the absence of a redemption threshold may make it possible for us to complete a business combination with which a substantial majority of our stockholders do not agree;
•
we may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you;
•
we may amend the terms of the public warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 65% of the then outstanding public warrants;
•
our competitors have advantages over us in seeking business combinations;
•
we may be unable to obtain additional financing;
•
our warrants may have an adverse effect on the market price of our common stock;
•
we may issue additional equity and/or debt securities to complete our initial business combination;
•
our sponsor controls a substantial interest in us;
•
if we seek stockholder approval of our initial business combination, our sponsor, who controls a substantial interest in us, has agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote;
•
the ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, may not allow us to complete the
most desirable business combination or optimize our capital structure, and will increase the probability that our initial business combination would be unsuccessful;
•
lack of protections normally afforded to investors of blank check companies;
•
possibility of losing the ability to redeem all shares equal to or in excess of 15% of our common stock if we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules;
•
Nasdaq may delist our securities from trading on its exchange;
•
we will likely only be able to complete one business combination with the proceeds of this offering and the sale of the placement warrants, which will cause us to be solely dependent on a single business which may have a limited number of products or services;
•
we are not registering the shares of common stock issuable upon exercise of the warrants sold as part of the units in this offering at this time, and such registration may not be in place when an investor desires to exercise such warrants;
•
shares being redeemed and warrants and rights becoming worthless;
•
events which may result in the per-share amount held in our trust account dropping below $10.10 per public share;
•
our directors may decide not to enforce the indemnification obligations of our sponsor;
•
if, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced;
•
because we are not limited to a particular industry or any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations;
•
we may seek acquisition opportunities in companies that may be outside of our management’s areas of expertise;
•
impact of COVID-19 and related risks;
•
if we effect our initial business combination with a company with operations or opportunities outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations; and
•
changes in laws or regulations, or a failure to comply with any laws and regulations, tax consequences to business combinations may adversely affect our business, investments and results of operations.
SUMMARY FINANCIAL DATA
The following table summarizes the relevant financial data for our business and should be read with our financial statements, which are included in this prospectus. We have not had any significant operations to date, so only balance sheet data is presented.
| |
|
|
December 31, 2021
Actual
|
|
|
As Adjusted(1)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
Working capital deficit
|
|
|
|
$ |
(324,495) |
|
|
|
|
$ |
(3,575,452) |
|
|
|
Total assets
|
|
|
|
$ |
334,662 |
|
|
|
|
$ |
101,530,111 |
|
|
|
Total liabilities
|
|
|
|
$ |
329,551 |
|
|
|
|
$ |
4,105,563 |
|
|
|
Value of common stock subject to possible redemption
|
|
|
|
$ |
— |
|
|
|
|
$ |
101,000,000 |
|
|
|
Stockholders’ equity (deficit)
|
|
|
|
$ |
5,111 |
|
|
|
|
$ |
(3,575,452) |
|
|
(1)
The “as adjusted” information gives effect to the sale of the units we are offering and the sale of the private placement warrants, including the application of the related gross proceeds and the payment of the estimated remaining costs from such sale and the repayment of the accrued and other liabilities required to be repaid.
The “as adjusted” total assets amount includes the $101,000,000 to be held in the trust account, plus $525,000 in cash to be held outside the trust account, plus $55 of cash remaining after the settlement of deferred offering costs and liabilities at December 31, 2021. If our initial business combination is not consummated, the funds held in the trust account, less amounts we are permitted to withdraw as described in this prospectus, will be distributed solely to our public shareholders.
RISK FACTORS
An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this prospectus, before making a decision to invest in our units. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.
Risks Relating to our Search for, Consummation or, or Inability to Consummate, a Business Combination and Post Business Combination Risks
Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the recent coronavirus (COVID-19) pandemic.
The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected the economies and financial markets worldwide, and the business of any potential target business with which we consummate a business combination could be materially and adversely affected. Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination.
We may choose not to hold a stockholder vote to approve our initial business combination unless the initial business combination would require stockholder approval under applicable law or stock exchange listing requirements or if we decide to hold a stockholder vote for business or other legal reasons. Except as required by applicable law or stock exchange requirements, the decision as to whether we will seek stockholder approval of a proposed initial business combination or will allow stockholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. Accordingly, we may complete our initial business combination even if holders of a majority of our public shares do not approve of the initial business combination we complete. Please see the section of this prospectus entitled “Proposed Business — Stockholders May Not Have the Ability to Approve Our Initial Business Combination” for additional information.
If we seek stockholder approval of our initial business combination, our initial stockholders have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote.
Pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote any founder shares held by them, as well as any public shares they may acquire during or after this offering (including in open market and privately negotiated transactions), in favor of our initial business combination. The anchor investors have agreed to vote any founder shares held by them in favor of our initial business combination. As a result, in addition to our initial stockholders’ founder shares, we would need only 512,501 or 5.13%, of the 10,000,000 public shares sold in this offering to be voted in favor of an initial business combination (assuming only the minimum number of shares representing a quorum are voted) in order to have our initial business combination approved (assuming the over-allotment option is not exercised and the representative shares are voted in favor of the initial business combination). In the event that our anchor investors purchase all of the units that they have collectively expressed an interest in purchasing in this offering and vote their public shares in favor of our initial business combination, no affirmative votes from other
public stockholders would be required to approve our initial business combination. However, because our anchor investors are not obligated to continue owning any public shares following the closing and are not obligated to vote any public shares in favor of our initial business combination, we cannot assure you that any of these anchor investors will be stockholders at the time our stockholders vote on our initial business combination, and, if they are stockholders, we cannot assure you as to how such anchor investors will vote on any business combination. As a result of the founder shares that the anchor investors may hold, each anchor investor may have different interests with respect to a vote on an initial business combination than other public stockholders. Among other matters, the anchor investors’ investments in the founder shares will generally be worthless if we do not consummate an initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, as described in more detail in this prospectus, and these investors will benefit more than our public stockholders from our completion of an initial business combination and may benefit from an initial business combination even if our public stockholders experience a loss. Accordingly, these investors may be more likely to favor any proposed initial business combination transaction even if our public stockholders do not favor the transaction. The anchor investors will also have the potential to realize enhanced economic returns and overall economic outcome from their investment in us in comparison to our other public stockholders who are not making anchor investments and purchasing founder shares. Our initial stockholders will own shares representing approximately 19.41% of our outstanding shares of common stock immediately following the completion of this offering and the private placement (including the representative shares and assuming the initial stockholders and anchor investors do not purchase any units in this offering). Accordingly, if we seek stockholder approval of our initial business combination, the agreement by our initial stockholders to vote in favor of our initial business combination, and the agreement by the anchor investors to vote any founder shares held by them in favor of our initial business combination will increase the likelihood that we will receive the requisite stockholder approval for such initial business combination.
Since our anchor investors will own founder shares, a conflict of interest may arise in determining whether a particular target business is appropriate for our initial business combination.
The anchor investors will own founder shares, and will pay only a nominal amount for such shares. The anchor investors will benefit from any appreciation in the value of the founder shares above that nominal amount, provided that we successfully complete a business combination. Moreover, assuming that the anchor investors acquire all of the units in this offering for which they have expressed an interest for a purchase price of $10.00 per unit and acquire an interest in all of the up to 750,000 founder shares that they are expected to agree to purchase for a price of $0.009 per share, and assuming each warrant has no value and without taking into account any liquidity discount on the founder shares, the anchor investors will be paying an effective price of approximately $9.30 per share of Class A common stock acquired, as compared to the $10.00 per share to be paid by the other public stockholders in this offering. As a result of their interest in the founder shares, the anchor investors may have an incentive to vote any public shares they own in favor of a business combination, and, if a business combination is approved, they may make a substantial profit on such interests, even if the business combination is with a target that ultimately declines in value and is not profitable for other public stockholders.
In the event we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, for a maximum total of 18 months, investors will have no voting rights and no redemption rights in connection with such extensions.
Pursuant to the terms of the amended and restated certificate of incorporation and this Registration Statement/prospectus, we will be granted 12 months (or up to 18 months, as applicable) to complete an initial business combination with a target company. In the event we are unable to complete an initial business combination within 12 months, we will have the ability to extend the period of time to complete an initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, for a maximum total of 18 months. If we decide to exercise this extension option and do not complete our initial business combination within the prescribed time frame, (i) we shall redeem 100% of the public shares at a per share price, payable in cash, equal to the aggregate amount
then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, subject to applicable law and certain conditions as further described herein; and (ii) investors will have no voting rights and no redemption rights in connection with the additional three-month extensions.
Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek stockholder approval of the initial business combination.
At the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of our initial business combination. Since our board of directors may complete an initial business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the initial business combination, unless we seek such stockholder vote. Accordingly, if we do not seek stockholder approval, your only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our public stockholders in which we describe our initial business combination.
The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into an initial business combination with a target.
We may seek to enter into an initial business combination agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with the initial business combination. Furthermore, in no event will we redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are 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 our initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination and after payment of underwriters’ fees and commissions or such greater amount necessary to satisfy a closing condition, each as described above, we would not proceed with such redemption and the related business combination and may instead search for an alternate business combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into an initial business combination with us.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.
At the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements, or arrange for third party financing. In addition, if a larger number of shares are submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for third party financing. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. Furthermore, this dilution would increase to the extent that the anti-dilution provision of the Class B common stock result in the issuance of Class A common stock on a greater than one-to-one basis upon conversion of the Class B common stock at the time of the consummation of our business combination. The above considerations may limit our ability to complete the most desirable business combination available to us or optimize our capital structure. The amount of the deferred underwriting commissions payable to the underwriters will not be adjusted for any shares that are redeemed in connection with an initial business combination. The per-share amount we will distribute to
stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting commission and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay the deferred underwriting commissions.
The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.
If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that our initial business combination would be unsuccessful is increased. If our initial business combination is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate the trust account. If you are in need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a discount to the pro rata amount per share in the trust account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.
Our sponsor paid an aggregate of $25,000 for the founder shares, or approximately $0.009 per founder share. As a result of this low initial price, our sponsor, its affiliates, our management team and the anchor investors stand to make a substantial profit even if the company declines in value after an initial business combination or is unprofitable for our public stockholders.
As a result of the low acquisition cost of our founder shares, our sponsor, its affiliates, our management team and the anchor investors could make a substantial profit even if we select and consummate an initial business combination with an acquisition target that subsequently declines in value or is unprofitable for our public stockholders. Thus, such parties may have more of an economic incentive for us to enter into an initial business combination with a riskier, weaker-performing or financially unstable business, or an entity lacking an established record of revenues or earnings, than would be the case if such parties had paid the full offering price for their founder shares.
The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating an initial business combination and may decrease our ability to conduct due diligence on potential business combination targets as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would produce value for our stockholders.
Any potential target business with which we enter into negotiations concerning an initial business combination will be aware that we must complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering. Consequently, such target business may obtain leverage over us in negotiating an initial business combination, knowing that if we do not complete our initial business combination with that particular target business, we may be unable to complete our initial business combination with any target business. This risk will increase as we get closer to the time frame described above. In addition, we may have limited time to conduct due diligence and may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.
We may not be able to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may only receive $10.10 per share, or less than such amount in certain circumstances, and our warrants and rights will expire worthless.
Our amended and restated certificate of incorporation will provide that we must complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering. We may not be able
to find a suitable target business and complete our initial business combination within such prescribed time frame described above. Our ability to complete our initial business combination may be negatively impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein. For example, the outbreak of COVID-19 continues to grow both in the United States and globally and, while the extent of the impact of the outbreak on us will depend on future developments, it could limit our ability to complete our initial business combination, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all. Additionally, the outbreak of COVID-19 may negatively impact businesses we may seek to acquire.
If we have not completed our initial business combination within such prescribed time frame, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such case, our public stockholders may only receive $10.10 per share, or less in certain circumstances, and our warrants and rights will expire worthless. In certain circumstances, our public stockholders may receive less than $10.10 per share on the redemption of their shares. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share” and other risk factors below. In the event we decide to exercise the extension option, investors will not have voting rights nor redemption rights in connection with such additional three-month extensions.
If we seek stockholder approval of our initial business combination, our sponsor, directors, officers and their affiliates may elect to purchase shares, rights or warrants from public stockholders, which may influence a vote on a proposed initial business combination and reduce the public “float” of our Class A common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, directors, officers or their affiliates may purchase shares, rights or public warrants or a combination thereof in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation to do so. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the trust account will be used to purchase shares, rights or public warrants in such transactions.
Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our sponsor, directors, officers or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights or submitted a proxy to vote against our initial business combination, such selling stockholders would be required to revoke their prior elections to redeem their shares and any proxy to vote against our initial business combination. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with our initial business combination. The purpose of such purchases could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination, or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination.
Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. We expect that any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.
In addition, if such purchases are made, the public “float” of our Class A common stock, rights or public warrants and the number of beneficial holders of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of our securities on a national securities exchange.
If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our initial business combination. Despite our compliance with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, proxy materials or tender offer documents, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will describe the various procedures that must be complied with in order to validly tender or redeem public shares. For example, we may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either deliver their stock certificates to our transfer agent prior to the date set forth in the tender offer documents mailed to such holders, or up to two business days prior to the vote on the proposal to approve the initial business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. In the event that a stockholder fails to comply with these or any other procedures disclosed in the proxy or tender offer materials, as applicable, its shares may not be redeemed. See the section of this prospectus entitled “Proposed Business — Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination — Tendering Stock Certificates in Connection with a Tender Offer or Redemption Rights.”
You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your public shares, rights or warrants, potentially at a loss.
Our public stockholders will be entitled to receive funds from the trust account only upon the earliest to occur of: (i) our completion of an initial business combination, and then only in connection with those shares of Class A common stock that such stockholder properly elected to redeem, subject to the limitations described herein, (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity and (iii) the redemption of our public shares if we are unable to complete an initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, subject to applicable law and as further described herein. In addition, if our plan to redeem our public shares if we are unable to complete an initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering is not completed for any reason, compliance with Delaware law may require that we submit a plan of dissolution to our then-existing stockholders for approval prior to the distribution of the proceeds held in our trust account. In that case, public stockholders may be forced to wait beyond 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10
per extension, for a total of $0.20 aggregate in trust, beyond 18 months, from the closing of this offering before they receive funds from our trust account. In no other circumstances will a public stockholder have any right or interest of any kind in the trust account. In the event we decide to exercise the extension option, investors will not have voting rights nor redemption rights in connection with such additional three-month extensions. Holders of warrants and rights will not have any right to the proceeds held in the trust account with respect to the warrants or rights. Accordingly, to liquidate your investment, you may be forced to sell your public shares, rights, or warrants, potentially at a loss.
You will not be entitled to protections normally afforded to investors of many other blank check companies.
Since the net proceeds of this offering and the sale of the placement warrants are intended to be used to complete an initial business combination with a target business that has not been identified, we may be deemed to be a “blank check” company under the United States securities laws. However, because we will have net tangible assets in excess of $5,000,000 upon the successful completion of this offering and the sale of the placement warrants and will file a Current Report on Form 8-K, including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, this means our units will be immediately tradable and we will have a longer period of time to complete our business combination than do companies subject to Rule 419. Moreover, if this offering were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the trust account to us unless and until the funds in the trust account were released to us in connection with our completion of an initial business combination. For a more detailed comparison of our offering to offerings that comply with Rule 419, please see the section of this prospectus entitled “Proposed Business — Comparison of This Offering to Those of Blank Check Companies Subject to Rule 419.”
If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our Class A common stock.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in this offering without our prior consent, which we refer to as the “Excess Shares.” However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our initial business combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our initial business combination. And as a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your stock in open market transactions, potentially at a loss.
Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share on our redemption of our public shares, or less than such amount in certain circumstances, and our warrants and rights will expire worthless.
We expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more industry knowledge
than we do, and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could potentially acquire with the net proceeds of this offering and the sale of the placement warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, because we are obligated to pay cash for the shares of Class A common stock which our public stockholders redeem in connection with our initial business combination, target companies will be aware that this may reduce the resources available to us for our initial business combination. This may place us at a competitive disadvantage in successfully negotiating and completing an initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share on the liquidation of our trust account, or less in certain circumstances, and our warrants and rights will expire worthless. In certain circumstances, our public stockholders may receive less than $10.10 per share upon our liquidation. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share” and other risk factors herein.
If the net proceeds of this offering and the sale of the placement warrants not being held in the trust account are insufficient to allow us to operate for at least the 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, the 18 months, following the closing of this offering, we may be unable to complete our initial business combination, in which case our public stockholders may only receive $10.10 per share, or less than such amount in certain circumstances, and our warrants and rights will expire worthless.
The funds available to us outside of the trust account to fund our working capital requirements may not be sufficient to allow us to operate for at least the 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, the 18 months, following the closing of this offering, assuming that our initial business combination is not completed during that time. We believe that, upon the closing of this offering, the funds available to us outside of the trust account will be sufficient to allow us to operate for at least the 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, the 18 months, following such closing; however, we cannot assure you that our estimate is accurate.
Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent or merger agreements designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into a letter of intent or merger agreement where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share on the liquidation of our trust account, or less in certain circumstances, and our warrants and rights will expire worthless. In certain circumstances, our public stockholders may receive less than $10.10 per share upon our liquidation. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share” and other risk factors herein.
If the net proceeds of this offering and the sale of the placement warrants not being held in the trust account are insufficient, it could limit the amount available to fund our search for a target business or businesses and complete our initial business combination and we will depend on loans from our sponsor or management team to fund our search for an initial business combination, to pay our taxes and to complete our initial business combination. If we are unable to obtain these loans, we may be unable to complete our initial business combination.
Of the net proceeds of this offering and the sale of the placement warrants, only approximately $525,000 will be available to us initially outside the trust account to fund our working capital requirements.
In the event that our offering expenses exceed our estimate of $675,000, we may fund such excess with funds not to be held in the trust account. In such case, the amount of funds we intend to be held outside the trust account would decrease by a corresponding amount. The amount held in the trust account will not be impacted as a result of such increase or decrease. Conversely, in the event that the offering expenses are less than our estimate of $675,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding amount. If we are required to seek additional capital, we would need to borrow funds from our sponsor, management team or other third parties to operate or may be forced to liquidate. None of our sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside the trust account or from funds released to us upon completion of our initial business combination. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender, upon consummation of our initial business combination. The warrants would be identical to the placement warrants. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account. If we are unable to obtain these loans, we may be unable to complete our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. Consequently, our public stockholders may only receive approximately $10.10 per share on our redemption of our public shares, or less in certain circumstances, and our warrants and rights will expire worthless. In certain circumstances, our public stockholders may receive less than $10.10 per share on the redemption of their shares. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share” and other risk factors below.
Subsequent to the completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.
Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will surface all material issues that may be present inside a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining debt financing to partially finance the initial business combination. Accordingly, any stockholders who choose to remain stockholders following the initial business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the initial business combination constituted an actionable material misstatement or omission.
If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share.
Our placing of funds in the trust account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers, prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, such parties may not
execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Certain parties, including Marcum LLP (“Marcum”), our independent registered public accounting firm, and the underwriters of this offering, will not execute agreements with us waiving such claims to the monies held in the trust account.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Upon redemption of our public shares, if we are unable to complete our initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.10 per share initially held in the trust account, due to claims of such creditors. Pursuant to the letter agreement, the form of which is filed as Exhibit 10.1 to the registration statement of which this prospectus forms a part, our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.10 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.10 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Our directors may decide not to enforce the indemnification obligations of our sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our public stockholders.
In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.10 per share and (ii) the actual amount per share held in the trust account as of the date of the liquidation of the trust account if less than $10.10 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations.
While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable
outcome is not likely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to our public stockholders may be reduced below $10.10 per share.
We may not have sufficient funds to satisfy indemnification claims of our directors and executive officers.
We have agreed to indemnify our officers and directors to the fullest extent permitted by law. However, our officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account and to not seek recourse against the trust account for any reason whatsoever. Accordingly, any indemnification provided will be able to be satisfied by us only if (i) we have sufficient funds outside of the trust account or (ii) we consummate an initial business combination. Our obligation to indemnify our officers and directors may discourage stockholders from bringing a lawsuit against our officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against our officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against our officers and directors pursuant to these indemnification provisions.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and we and our board may be exposed to claims of punitive damages.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete our initial business combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
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restrictions on the nature of our investments; and
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restrictions on the issuance of securities, each of which may make it difficult for us to complete our initial business combination.
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In addition, we may have imposed upon us burdensome requirements, including:
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registration as an investment company with the SEC;
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adoption of a specific form of corporate structure; and
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reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations that we are currently not subject to.
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading in securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Our business will be to identify and complete an initial business combination and thereafter to operate the post-transaction business or assets for the long term. We do not plan to buy businesses or assets with a view to resale or profit from their resale. We do not plan to buy unrelated businesses or assets or to be a passive investor.
We do not believe that our anticipated principal activities will subject us to the Investment Company Act. To this end, the proceeds held in the trust account may only be invested in United States “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. Pursuant to the trust agreement, the trustee is not permitted to invest in other securities or assets. By restricting the investment of the proceeds to these instruments, and by having a business plan targeted at acquiring and growing businesses for the long term (rather than on buying and selling businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. This offering is not intended for persons who are seeking a return on investments in government securities or investment securities. The trust account is intended as a holding place for funds pending the earliest to occur of: (i) the completion of our initial business combination; (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; or (iii) absent an initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, our return of the funds held in the trust account to our public stockholders as part of our redemption of the public shares. If we do not invest the proceeds as discussed above, we may be deemed to be subject to the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete an initial business combination or may result in our liquidation. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share on the liquidation of our trust account, or less in certain circumstances, and our warrants and rights will expire worthless.
Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought
against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following the 12th month (or up to 18th month, as applicable) from the closing of this offering in the event we do not complete our initial business combination and, therefore, we do not intend to comply with the foregoing procedures.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
We may not hold an annual meeting of stockholders until after the consummation of our initial business combination, which could delay the opportunity for our stockholders to elect directors.
In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until no later than one year after our first fiscal year end following our listing on Nasdaq. Under Section 211(b) of the DGCL, we are, however, required to hold an annual meeting of stockholders for the purposes of electing directors in accordance with our bylaws unless such election is made by written consent in lieu of such a meeting. We may not hold an annual meeting of stockholders to elect new directors prior to the consummation of our initial business combination, and thus we may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting. Therefore, if our stockholders want us to hold an annual meeting prior to the consummation of our initial business combination, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.
The grant of registration rights to our sponsor and holders of our placement warrants 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 Class A common stock.
Pursuant to an agreement to be entered into concurrently with the issuance and sale of the securities in this offering, our sponsor, holders of our placement warrants, and their permitted transferees can demand that we register the placement warrants, the Class A common stock issuable upon exercise of the placement warrants, the rights, the Class A common stock issuable upon conversion of such rights, the Class A common stock issuable upon conversion of the founder shares, and holders of units that may be issued upon conversion of working capital loans may demand that we register such Class A common stock, warrants, or the Class A common stock issuable upon exercise of such warrants. We will bear the cost of registering these
securities. 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 Class A common stock. In addition, the existence of the registration rights may make our initial business combination more costly or difficult to conclude. This is because the stockholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A common shares that is expected when the common stock owned by our sponsor, holders of our placement warrants or holders of our working capital loans or their respective permitted transferees are registered.
Because we are neither limited to evaluating a target business in a particular industry sector nor have we selected any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business’s operations.
We will seek to complete an initial business combination with companies in the clean transition sector but may also pursue other business combination opportunities, except that we will not, under our amended and restated certificate of incorporation, be permitted to effectuate our initial business combination with another blank check company or similar company with nominal operations. Additionally, we shall not undertake our initial business combination with any entity with its principal business operations in China (including Hong Kong and Macau). Because we have not yet selected or approached any specific target business with respect to a business combination, there is no basis to evaluate the possible merits or risks of any particular target business’s operations, results of operations, cash flows, liquidity, financial condition or prospects. To the extent we complete our initial business combination, we may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business. We also cannot assure you that an investment in our units will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a business combination target. Accordingly, any stockholders who choose to remain stockholders following our initial business combination could suffer a reduction in the value of their securities. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the business combination contained an actionable material misstatement or material omission.
We may seek business combination opportunities in industries or sectors which may or may not be outside of our management’s area of expertise.
Although we intend to focus on identifying companies in the clean transition sector, we will consider an initial business combination outside of our management’s area of expertise if an initial business combination candidate is presented to us and we determine that such candidate offers an attractive business combination opportunity for our company or we are unable to identify a suitable candidate in the clean transition sector after having expanded a reasonable amount of time and effort in an attempt to do so. Although our management will endeavor to evaluate the risks inherent in any particular business combination candidate, we cannot assure you that we will adequately ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our units will not ultimately prove to be less favorable to investors in this offering than a direct investment, if an opportunity were available, in an initial business combination candidate. In the event we elect to pursue a business combination outside of the areas of our management’s expertise, our management’s expertise may not be directly applicable to its evaluation or operation, and the information contained in this prospectus regarding the areas of our management’s expertise would not be relevant to an understanding of the business that we elect to acquire. As a result, our management may not be able to adequately ascertain or assess all of the significant risk factors. Accordingly,
any stockholders who choose to remain stockholders following our initial business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial business combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial business combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our initial business combination will not have all of these positive attributes. If we complete our initial business combination with a target that does not meet some or all of these guidelines, such combination may not be as successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target that does not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required by applicable law or stock exchange requirements, or we decide to obtain stockholder approval for business or other legal reasons, it may be more difficult for us to attain stockholder approval of our initial business combination if the target business does not meet our general criteria and guidelines. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share on the liquidation of our trust account, or less in certain circumstances, and our warrants and rights will expire worthless. In certain circumstances, our public stockholders may receive less than $10.10 per share on the redemption of their shares. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share” and other risk factors herein.
We may seek business combination opportunities with a financially unstable business or an entity lacking an established record of revenue, cash flow or earnings, which could subject us to volatile revenues, cash flows or earnings or difficulty in retaining key personnel.
To the extent we complete our initial business combination with a financially unstable business or an entity lacking an established record of revenues or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include volatile revenues or earnings and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.
We are not required to obtain a fairness opinion and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.
Unless we complete our initial business combination with an affiliated entity or our board cannot independently determine the fair market value of the target business or businesses, we are not required to obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our proxy materials or tender offer documents, as applicable, related to our initial business combination.
Resources could be wasted in researching business combinations that are not completed, which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share, or less than such amount in certain circumstances, on the liquidation of our trust account and our warrants and rights will expire worthless.
We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys, consultants and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share on the liquidation of our trust account, or less in certain circumstances, and our warrants and rights will expire worthless. In certain circumstances, our public stockholders may receive less than $10.10 per share on the redemption of their shares. See “— If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share” and other risk factors herein.
We may have a limited ability to assess the management of a prospective target business and, as a result, may effect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company, which could, in turn, negatively impact the value of our stockholders’ investment in us.
When evaluating the desirability of effecting our initial business combination with a prospective target business, our ability to assess the target business’s management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any stockholders who choose to remain stockholders following the initial business combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete an initial business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us.
Although we have no commitments as of the date of this prospectus to issue any notes or other debt securities, or to otherwise incur outstanding debt following this offering, we may choose to incur substantial debt to complete our initial business combination. We have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the trust account. As such, no issuance of debt will affect the per-share amount available for redemption from the trust account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:
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default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
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our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;
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our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
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our inability to pay dividends on our common stock;
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using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes;
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limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
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increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;
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limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and
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other disadvantages compared to our competitors who have less debt.
We may only be able to complete one business combination with the proceeds of this offering, the sale of the placement warrants, which will cause us to be solely dependent on a single business which may have a limited number of services and limited operating activities. This lack of diversification may negatively impact our operating results and profitability.
Of the net proceeds from this offering and the sale of the placement warrants, $101,000,000 (or $116,150,000 if the underwriters’ over-allotment option is exercised in full) will be available to complete our initial business combination and pay related fees and expenses (which includes up to $4,000,000, or up to $4,600,000 if the over-allotment option is exercised in full, for the payment of deferred underwriting commissions).
We may effectuate our initial business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuate our initial business combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our initial business combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry. In addition, we intend to focus our search for an initial business combination in a single industry. Accordingly, the prospects for our success may be:
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solely dependent upon the performance of a single business, property or asset, or
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dependent upon the development or market acceptance of a single or limited number of products, processes or services.
This lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our initial business combination.
We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our initial business combination and give rise to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete our initial business combination. We do not, however, intend to purchase multiple businesses in
unrelated industries in conjunction with our initial business combination. With multiple business combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business. If we are unable to adequately address these risks, it could negatively impact our profitability and results of operations.
We may attempt to complete our initial business combination with a private company about which little information is available, which may result in an initial business combination with a company that is not as profitable as we suspected, if at all.
In pursuing our initial business combination strategy, we may seek to effectuate our initial business combination with a privately held company. Very little public information generally exists about private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in an initial business combination with a company that is not as profitable as we suspected, if at all.
Our management may not be able to maintain control of a target business after our initial business combination.
We may structure an initial business combination so that the post-transaction company in which our public stockholders own shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-transaction company owns 50% or more of the voting securities of the target, our stockholders prior to the initial business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares of Class A common stock in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common stock, our stockholders immediately prior to such transaction could own less than a majority of our outstanding shares of common stock subsequent to such transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain our control of the target business. We cannot provide assurance that, upon loss of control of a target business, new management will possess the skills, qualifications or abilities necessary to profitably operate such business.
We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete an initial business combination with which a substantial majority of our stockholders do not agree.
Our amended and restated certificate of incorporation will not provide a specified maximum redemption threshold, except that in no event will we redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (such that we are 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 our initial business combination. As a result, we may be able to complete our initial business combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our sponsor, officers, directors or their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares,
all shares of Class A common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
In order to effectuate an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and other governing instruments, including their warrant agreements. We cannot assure you that we will not seek to amend our amended and restated certificate of incorporation or governing instruments in a manner that will make it easier for us to complete our initial business combination that our stockholders may not support.
In order to effectuate an initial business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments, including their warrant agreements. For example, blank check companies have amended the definition of business combination, increased redemption thresholds and extended the time to consummate an initial business combination and, with respect to their warrants, amended their warrant agreements to require the warrants to be exchanged for cash and/or other securities. Amending our amended and restated certificate of incorporation will require the approval of holders of 65% of our common stock, amending our rights agreement will require a vote of holders of at least a majority of the then oustanding rights (which may include rights acquired by our sponsor or its affiliates in this offering or thereafter in the open market), and amending our warrant agreement will require a vote of holders of at least a majority of the public warrants (which may include public warrants acquired by our sponsor or its affiliates in this offering or thereafter in the open market). In addition, our amended and restated certificate of incorporation requires us to provide our public stockholders with the opportunity to redeem their public shares for cash if we propose an amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity.
To the extent any such amendments would be deemed to fundamentally change the nature of any securities offered through this registration statement, we would register, or seek an exemption from registration for, the affected securities. We cannot assure you that we will not seek to amend our charter or governing instruments or extend the time to consummate an initial business combination in order to effectuate our initial business combination.
The provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from our trust account), including an amendment to permit us to withdraw funds from the trust account such that the per share amount investors will receive upon any redemption or liquidation is substantially reduced or eliminated, may be amended with the approval of holders of at least 65% of our common stock, which is a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of incorporation and the trust agreement to facilitate the completion of an initial business combination that some of our stockholders may not support.
Our amended and restated certificate of incorporation will provide that any of its provisions related to pre-initial business combination activity (including the requirement to deposit proceeds of this offering and the sale of the placement warrants into the trust account and not release such amounts except in specified circumstances, and to provide redemption rights to public stockholders as described herein and including to permit us to withdraw funds from the trust account such that the per share amount investors will receive upon any redemption or liquidation is substantially reduced or eliminated) may be amended if approved by holders of at least 65% of our common stock entitled to vote thereon, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of at least 65% of our common stock entitled to vote thereon. In all other instances, our amended and restated certificate of incorporation may be amended by holders of a majority of our outstanding common stock entitled to vote thereon, subject to applicable provisions of the DGCL or applicable stock exchange rules. We may not issue additional securities that can vote on amendments to our amended and restated
certificate of incorporation. Our initial stockholders, who will collectively beneficially own approximately 19.41% of our common stock upon the closing of this offering (including the representative shares and assuming the initial stockholders and anchor investors do not purchase any units in this offering), will participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of our amended and restated certificate of incorporation which govern our pre-initial business combination behavior more easily than some other blank check companies, and this may increase our ability to complete an initial business combination with which you do not agree. Our stockholders may pursue remedies against us for any breach of our amended and restated certificate of incorporation.
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, divided by the number of then outstanding public shares. These agreements are contained in a letter agreement that we have entered into with our sponsor, officers and directors. In the event we decide to exercise the extension option, investors will not have voting rights nor redemption rights in connection with such additional three-month extensions. Our stockholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies against our sponsor, officers or directors for any breach of these agreements. As a result, in the event of a breach, our stockholders would need to pursue a stockholder derivative action, subject to applicable law.
Changes in the market for directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination.
In recent months, the market for directors and officers liability insurance for special purpose acquisition companies has changed in ways adverse to us and our management team. Fewer insurance companies are offering quotes for directors and officers liability coverage, the premiums charged for such policies have generally increased and the terms of such policies have generally become less favorable. These trends may continue into the future.
The increased cost and decreased availability of directors and officers liability insurance could make it more difficult and more expensive for us to negotiate and complete an initial business combination. In order to obtain directors and officers liability insurance or modify its coverage as a result of becoming a public company, the post-business combination entity might need to incur greater expense and/or accept less favorable terms. Furthermore, any failure to obtain adequate directors and officers liability insurance could have an adverse impact on the post-business combination’s ability to attract and retain qualified officers and directors.
In addition, after completion of any initial business combination, our directors and officers could be subject to potential liability from claims arising from conduct alleged to have occurred prior to such initial business combination. As a result, in order to protect our directors and officers, the post-business combination entity may need to purchase additional insurance with respect to any such claims (“run-off insurance”). The need for run-off insurance would be an added expense for the post-business combination entity and could interfere with or frustrate our ability to consummate an initial business combination on terms favorable to our investors.
We may be unable to obtain additional financing to complete our initial business combination or to fund the operations and growth of a target business, which could compel us to restructure or abandon a particular business combination.
We have not selected any specific business combination target, but intend to target businesses larger than we could acquire with the net proceeds of this offering and the sale of the placement warrants. As a
result, we may be required to seek additional financing to complete such proposed initial business combination. We cannot assure you that such financing will be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. Further, the amount of additional financing we may be required to obtain could increase as a result of future growth capital needs for any particular transaction, the depletion of the available net proceeds in search of a target business, the obligation to repurchase for cash a significant number of shares from stockholders who elect redemption in connection with our initial business combination and/or the terms of negotiated transactions to purchase shares in connection with our initial business combination. If we are unable to complete our initial business combination, our public stockholders may receive only approximately $10.10 per share plus any pro rata interest earned on the funds held in the trust account and not previously released to us to pay our taxes on the liquidation of our trust account and our warrants and rights will expire worthless. In addition, even if we do not need additional financing to complete our initial business combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after our initial business combination. If we are unable to complete our initial business combination, our public stockholders may only receive approximately $10.10 per share on the liquidation of our trust account, or less in certain circumstances, and our warrants and rights will expire worthless. Furthermore, as described in the risk factor entitled “If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.10 per share,” under certain circumstances our public stockholders may receive less than $10.10 per share upon the liquidation of the trust account.
Our initial stockholders may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.
Upon the closing of this offering, our initial stockholders will own shares representing approximately 19.41% of our issued and outstanding shares of common stock (including the representative shares and assuming the initial stockholders and anchor investors do not purchase any units in this offering). Accordingly, they may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended and restated certificate of incorporation and approval of major corporate transactions. If our initial stockholders purchase any units in this offering or if our initial stockholders purchase any additional shares of common stock in the aftermarket or in privately negotiated transactions, this would increase their control. Factors that would be considered in making such additional purchases would include consideration of the current trading price of our Class A common stock. In addition, our board of directors, whose members were elected by our initial stockholders, is and will be divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. We may not hold an annual meeting of stockholders to elect new directors prior to the completion of our initial business combination, in which case all of the current directors will continue in office until at least the completion of the initial business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our initial stockholders, because of their ownership position, will have considerable influence regarding the outcome. Accordingly, our initial stockholders will continue to exert control at least until the completion of our initial business combination.
Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses.
The federal proxy rules require that a proxy statement with respect to a vote on an initial business combination meeting certain financial significance tests include historical and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial statements may be required to be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or international financial reporting standards as issued by the International Accounting Standards Board, or IFRS, depending on the circumstances and
the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame.
Compliance obligations under the Sarbanes-Oxley Act may make it more difficult for us to effectuate our initial business combination, require substantial financial and management resources, and increase the time and costs of completing an initial business combination.
Section 404 of the Sarbanes-Oxley Act requires that we evaluate and report on our system of internal controls beginning with our Annual Report on Form 10-K for the year ending December 31, 2022. Only in the event we are deemed to be a large accelerated filer or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. Further, for as long as we remain an emerging growth company, we will not be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target company with which we seek to complete our initial business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination.
If we effect our initial business combination with a company with operations or opportunities outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations.
If we effect our initial business combination with a company with operations or opportunities outside of the United States, we would be subject to any special considerations or risks associated with companies operating in an international setting, including any of the following:
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higher costs and difficulties inherent in managing cross-border business operations and complying with different commercial and legal requirements of overseas markets;
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rules and regulations regarding currency redemption;
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complex corporate withholding taxes on individuals;
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laws governing the manner in which future business combinations may be effected;
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tariffs and trade barriers;
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regulations related to customs and import/export matters;
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longer payment cycles and challenges in collecting accounts receivable;
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tax issues, including but not limited to tax law changes and variations in tax laws as compared to the United States;
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currency fluctuations and exchange controls;
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rates of inflation;
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cultural and language differences;
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employment regulations;
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crime, strikes, riots, civil disturbances, terrorist attacks, natural disasters and wars;
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deterioration of political relations with the United States; and
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government appropriations of assets.
We may not be able to adequately address these additional risks. If we were unable to do so, our operations might suffer, which may adversely impact our results of operations and financial condition.
If our management team following our initial business combination is unfamiliar with United States securities laws, they may have to expend time and resources becoming familiar with such laws, which could lead to various regulatory issues.
Following our initial business combination, our founding team may resign from their positions as officers or directors of the company and the management of the business combination partner will may assume the roles of executive officers and directors of our company. Such officers and directors may not be familiar with United States securities laws. If our new management following our initial business combination is unfamiliar with United States securities laws, they may have to expend time and resources becoming familiar with such laws. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.
After our initial business combination, substantially all of our assets may be located in a foreign country and substantially all of our revenue may be derived from our operations in such country. Accordingly, our results of operations and prospects will be subject, to a significant extent, to the economic, political and social conditions and government policies, developments and conditions in the country in which we operate.
Although we have undertaken to not enter into our initial business combination with any entity with its principal business operations in China (including Hong Kong and Macau), as we may acquire a business located outside of the United States as part of our initial business combination, the economic, political and social conditions, as well as government policies, of the country in which our operations would be located following our initial business combination could affect our business. Economic growth could be uneven, both geographically and among various sectors of the economy and such growth may not be sustained in the future. If in the future such country’s economy experiences a downturn or grows at a slower rate than expected, there may be less demand for spending in certain industries. A decrease in demand for spending in certain industries could materially and adversely affect our ability to find an attractive target business with which to consummate our initial business combination and if we effect our initial business combination, the ability of that target business to become profitable.
Exchange rate fluctuations and currency policies may cause our target business’s ability to succeed in the international markets to be diminished.
In the event we acquire a non-U.S. business as part of our initial business combination, all revenues and income would likely be received in a foreign currency, and the dollar equivalent of our net assets and distributions, if any, could be adversely affected by reductions in the value of the local currency. The value of the currencies in our target regions fluctuate and are affected by, among other things, changes in political and economic conditions. Any change in the relative value of such currency against our reporting currency may affect the attractiveness of any target business or, following consummation of our initial business combination, our financial condition and results of operations. Additionally, if a currency appreciates in value against the dollar prior to the consummation of our initial business combination, the cost of a target business as measured in dollars will increase, which may make it less likely that we are able to consummate such transaction.
We may reincorporate in another jurisdiction in connection with our initial business combination, and the laws of such jurisdiction may govern some or all of our future material agreements and we may not be able to enforce our legal rights.
In connection with our initial business combination, we may relocate the home jurisdiction of our business from the United States to another jurisdiction. If we determine to do this, the laws of such jurisdiction may govern some or all of our future material agreements. The system of laws and the enforcement of existing laws in such jurisdiction may not be as certain in implementation and interpretation as in the United States. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital.
There may be tax consequences to our business combinations that may adversely affect us.
While we expect to undertake any merger or acquisition so as to minimize taxes both to the acquired business and/or asset and us, such business combination might not meet the statutory requirements of a
tax-free reorganization, or the parties might not obtain the intended tax-free treatment upon a transfer of shares or assets. A reorganization that does not qualify as tax-free could result in the imposition of substantial taxes on holders of our securities.
Risks Relating to our Sponsor and Management Team
Our ability to successfully effect our initial business combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following our initial business combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
Our ability to successfully effect our initial business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following our initial business combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we employ after our initial business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements. In addition, the officers and directors of an initial business combination candidate may resign upon completion of our initial business combination. The departure of an initial business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an initial business combination candidate’s key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an initial business combination candidate’s management team will remain associated with the initial business combination candidate following our initial business combination, it is possible that members of the management of an initial business combination candidate will not wish to remain in place. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.
We are dependent upon our executive officers and directors and their departure could adversely affect our ability to operate.
Our operations are dependent upon a relatively small group of individuals and, in particular, our executive officers and directors. We believe that our success depends on the continued service of our executive officers and directors, at least until we have completed our initial business combination. We do not have an employment agreement with, or key-man insurance on the life of, any of our directors or executive officers. The unexpected loss of the services of one or more of our directors or executive officers could have a detrimental effect on us.
Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation following our initial business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.
Our key personnel may be able to remain with the company after the completion of our initial business combination only if they are able to negotiate employment or consulting agreements in connection with the initial business combination. Such negotiations would take place simultaneously with the negotiation of the initial business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the initial business combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us after the completion of our initial business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. There is no certainty, however, that any of our key personnel will remain with us after the completion of our initial business combination. We cannot assure you that any of our key personnel will remain in senior
management or advisory positions with us. The determination as to whether any of our key personnel will remain with us will be made at the time of the consummation of our initial business combination.
Our officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination.
Our officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for an initial business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each of our officers is engaged in other business endeavors for which he may be entitled to substantial compensation and our officers are not obligated to contribute any specific number of hours per week to our affairs. Our independent directors may also serve as officers or board members for other entities. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our initial business combination. For a complete discussion of our officers’ and directors’ other business affairs, please see the section of this prospectus entitled “Management — Directors and Officers.”
Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular business opportunity should be presented.
Following the completion of this offering and until we consummate our initial business combination, we intend to engage in the business of identifying and combining with one or more businesses. Our sponsor and officers and directors are, and may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged in a similar business and our officers and directors may become officers or directors of another special purpose acquisition company with a class of securities intended to be registered under the Exchange Act, even prior to us entering into a definitive agreement for our initial business combination. Our officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties.
Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
For a complete discussion of our officers’ and directors’ business affiliations and the potential conflicts of interest that you should be aware of, please see the sections of this prospectus entitled “Management — Directors and Officers,” “Management — Conflicts of Interest” and “Certain Relationships and Related Party Transactions.”
Our officers, directors, security holders and their respective affiliates may have competitive pecuniary interests that conflict with our interests.
We have not adopted a policy that expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact, we may enter into an initial business combination with a target business that is affiliated with our sponsor, our directors or officers, although we do not intend to do so. We do not have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours.
The representative may have a conflict of interest if they render services to us in connection with our initial business combination.
We may elect to engage EF Hutton, division of Benchmark Investments, LLC (who is the representative of the underwriters of this offering) to assist us in connection with our initial business combination. The representative shares held by the representative and/or its designees will also be worthless if we do not consummate an initial business combination. Therefore, if the representative provides services to us in connection with our initial business combination, these financial interests may result in the representative having a conflict of interest when providing such services to us.
We may engage in an initial business combination with one or more target businesses that have relationships with entities that may be affiliated with our sponsor, officers, directors or existing holders which may raise potential conflicts of interest.
In light of the involvement of our sponsor, officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our sponsor, officers or directors. Our directors and officers also serve as officers and board members for other entities, including, without limitation, those described under the section of this prospectus entitled “Management — Conflicts of Interest.” Such entities may compete with us for business combination opportunities. Our sponsor, officers and directors are not currently aware of any specific opportunities for us to complete our initial business combination with any entities with which they are affiliated, and there have been no preliminary discussions concerning an initial business combination with any such entity or entities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria for an initial business combination as set forth in the section of this prospectus entitled “Proposed Business — Selection of a Target Business and Structuring of our Initial Business Combination” and such transaction was approved by a majority of our disinterested directors. Despite our agreement to obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions, regarding the fairness to our stockholders from a financial point of view of an initial business combination with one or more businesses affiliated with our sponsor, officers, directors or existing holders, potential conflicts of interest still may exist and, as a result, the terms of the initial business combination may not be as advantageous to our public stockholders as they would be absent any conflicts of interest.
Since our sponsor, officers, directors and the anchor investors will lose their entire investment in us if our initial business combination is not completed, and because our sponsor, officers, directors and the anchor investors who have an interest in founder shares may profit substantially even under circumstances where our public shareholders would experience losses in connection with their investment, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.
On October 6, 2021, our sponsor purchased 2,875,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.009 per share. On October 28, 2021, our sponsor transferred 25,000 founder shares to each of Kathy Cuocolo, Leela Gray and Stephen Markscheid. The 75,000 shares in the aggregate that were transferred will not be subject to forfeiture in the event the underwriters’ over-allotment is not exercised. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the outstanding shares after this offering (excluding the placement warrants and underlying Class A common stock and the representative shares). The founder shares will be worthless if we do not complete an initial business combination. Additionally, each of the anchor investors is expected to enter into a separate agreement with our sponsor and certain of its members pursuant to which, subject to the conditions set forth therein, each such anchor investor will agree to purchase founder shares upon closing of this offering. As a result of the founder shares that our anchor investors may hold, they may have different interests with respect to a vote on an initial business combination than other public stockholders. Our sponsor has agreed to purchase an aggregate of 3,200,000 placement warrants at a price of $1.00 per warrant for an aggregate purchase price of $3,200,000. Each warrant is exercisable to purchase one whole share of common stock at $11.50 per share. These securities will also be worthless if we do not complete an initial business combination. Holders of founder shares have agreed (A) to vote any shares owned by them in favor of any proposed initial business combination, (B) not to redeem any founder shares held by them in connection with a stockholder vote to approve a proposed initial business combination and (C) the anchor
investors will not be entitled to (i) redemption rights with respect to any founder shares held by them in connection with the completion of our business combination, (ii) redemption rights with respect to any founder shares held by them in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated an initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, or (iii) rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our business combination within such time period. In addition, we may obtain loans from our sponsor, affiliates of our sponsor or an officer or director. The personal and financial interests of our officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following the initial business combination.
Since our sponsor, executive officers and directors will not be eligible to be reimbursed for their out-of-pocket expenses if our business combination is not completed, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.
Our sponsor, executive officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses actually incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. There is no cap or ceiling on the reimbursement of out-of-pocket expenses actually incurred in connection with activities on our behalf; provided, however, that to the extent such expenses exceed the available proceeds not deposited in the trust account, such expenses would not be reimbursed by us unless we consummate an initial business combination. These financial interests of our sponsor, executive officers and directors may influence their motivation in identifying and selecting a target business combination and completing an initial business combination.
Risks Relating to our Securities
Potential participation in this offering by our anchor investors could reduce the public float for our securities.
Up to ten anchor investors have each expressed to us an interest in purchasing up to 990,000 units in this offering at the offering price of $10.00, and such allocations will be determined by the underwriters. In no event would the anchor investors purchase more than 9,900,000 units in the aggregate (or 11,385,000 units in the aggregate if the underwriters’ over-allotment option is exercised in full), up to 99.0% of the units issued in this offering. Such amounts will be allocated among the anchor investors proportionally based on their expression of interest. We expect that the number of units the anchor investors will purchase would, in general, be increased or decreased proportionately in the event the number of units offered hereby is increased or decreased, respectively. Because these expressions of interest are not binding agreements or commitments to purchase, our anchor investors may determine to purchase fewer or no units in this offering or the underwriters may determine to sell fewer or no units to our anchor investors. If our anchor investors purchase all of the units for which they have expressed an interest, such purchases would reduce the available public float for our securities. Any such reduction in our available public float may consequently reduce the trading volume, volatility and liquidity of our securities relative to what they would have been had such units been purchased by public investors and could result in our securities being delisted from Nasdaq. The anchor investors are not required to hold any units, shares of Class A common stock, rights or warrants they may purchase in this offering or thereafter for any amount of time. Accordingly, the anchor investors may sell any, or up to all, of the units, shares of Class A common stock, rights or warrants they may purchase in this offering or thereafter at any time. The sale of material amounts of our units, shares of Class A common stock, rights or warrants, or the perception that such sales may occur, could reduce the market prices of those securities and may encourage short sales.
Concentration of ownership among our sponsor and the anchor investors may prevent other investors from influencing significant corporate decisions or adversely affect the trading price of our public shares.
There can be no assurance that any of the anchor investors will acquire any units in this offering, or as to the amount of such units the anchor investors will retain, if any, prior to or upon the consummation of our initial business combination. We will be required to meet certain minimum initial listing standards with respect to liquidity to list on the Nasdaq, which may result in a lower number of units being allocated to our anchor investors. If the anchor investors each elect to purchase the full amounts described in "Principal Stockholders—Expressions of Interest," our sponsor and the anchor investors will own collectively substantially all of our outstanding public shares. As a result, these stockholders could have substantial control over us and be able to exercise significant influence over all matters requiring stockholder approval (although we have no knowledge of any affiliation or other agreement or arrangement, as to voting of our securities or otherwise, among any such persons). For example, in the event that the anchor investors purchase the full amount of units described in their respective expressions of interest, continue to hold such shares included in the units and vote such shares in favor of our initial business combination (although they are not contractually obligated to, their interest in our founder shares directly or in the sponsor may provide an incentive for them to do so), we would not need any additional public shares sold in this offering to be voted in favor of our initial business combination to have our initial business combination approved. This potential concentration of influence could be disadvantageous to other stockholders with interests different from those of our sponsor and the anchor investors. In addition, this potential significant concentration of stock ownership may adversely affect the trading price of our public shares because investors often perceive disadvantages in owning shares in companies with principal stockholders and might make it more difficult to complete a business combination with targets that would prefer to enter into a transaction with a SPAC with less concentrated ownership.
The securities in which we invest the funds held in the trust account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.10 per share.
The proceeds held in the trust account will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable to complete our initial business combination or make certain amendments to our amended and restated certificate of incorporation, our public stockholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income, net of taxes paid or payable (less, in the case we are unable to complete our initial business combination, $100,000 of interest). Negative interest rates could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.10 per share.
Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
We have applied to have our units listed on Nasdaq. We expect that our units will be listed on Nasdaq on or promptly after the date of this prospectus. Following the date the shares of our Class A common stock, rights and warrants are eligible to trade separately, we anticipate that the shares of our Class A common stock, rights and warrants will be separately listed on Nasdaq. We cannot guarantee that our securities will be approved for listing on Nasdaq. Although after giving effect to this offering we expect to meet, on a pro forma basis, the minimum initial listing standards set forth in the Nasdaq listing standards, we cannot assure you that our securities will be, or will continue to be, listed on Nasdaq in the future or prior to our initial business combination. In order to continue listing our securities on Nasdaq prior to our initial business combination, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum amount in stockholders’ equity (generally $2,500,000) and a minimum number of holders of our securities (generally 300 public holders). Additionally, in connection with our initial
business combination, we will be required to demonstrate compliance with Nasdaq’s initial listing requirements, which are more rigorous than Nasdaq’s continued listing requirements, in order to continue to maintain the listing of our securities on Nasdaq. For instance, our stock price would generally be required to be at least $4.00 per share, our stockholders’ equity would generally be required to be at least $5.0 million and we would be required to have a minimum of 300 round lot holders (with at least 50% of such round lot holders holding securities with a market value of at least $2,500) of our securities. We cannot assure you that we will be able to meet those initial listing requirements at that time.
For example, if the anchor investors purchase all of the units which may be allocated to them (99% of the units issued in this offering), such purchases would reduce the available public float for our securities. Any such reduction in our available public float may consequently reduce the trading volume, volatility and liquidity of our securities relative to what they would have been had such units been purchased by public investors and could result in our securities being delisted from Nasdaq.
If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
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reduced liquidity for our securities;
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a determination that our securities are a “penny stock” which will require brokers trading in our securities to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
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a limited amount of news and analyst coverage; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because we expect that our units and eventually our Class A common stock, rights and warrants will be listed on Nasdaq, our units, Class A common stock, rights and warrants will be covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the State of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities, including in connection with our initial business combination.
We are not registering the shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a cashless basis. If the issuance of the shares upon exercise of warrants is not registered, qualified or exempt from registration or qualification, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless.
We are not registering the shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement for the registration under the Securities Act of the issuance of the shares of Class A common stock issuable upon exercise of the warrants and thereafter will use our best efforts to cause the same to become effective within 60 business days following our initial business combination and to maintain a current prospectus relating to the Class A common stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. We cannot assure you that
we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current, complete or correct or the SEC issues a stop order. If the shares of Class A common stock issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the foregoing, if a registration statement covering the issuance of the Class A common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. We will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants under applicable state securities laws and there is no exemption available. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of Class A common stock included in the units. If and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in this offering. However, there may be instances in which holders of our public warrants may be unable to exercise such public warrants but holders of our placement warrants may be able to exercise such placement warrants.
If you exercise your public warrants on a “cashless basis,” you will receive fewer shares of Class A common stock from such exercise than if you were to exercise such warrants for cash.
There are circumstances in which the exercise of the public warrants may be required or permitted to be made on a cashless basis. First, if a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of our initial business combination, warrant holders may, until such time as there is an effective registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption. Second, if a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available; if that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. Third, if we call the public warrants for redemption, our management will have the option to require all holders that wish to exercise warrants to do so on a cashless basis. In the event of an exercise on a cashless basis, a holder would pay the warrant exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (as defined in the next sentence) by (y) the fair market value. The “fair market value” for this purpose shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third day prior to the date on which the notice of exercise is received by the warrant agent or on which the notice of redemption is sent to the holders of warrants, as applicable. As a result, you would receive fewer shares of Class A common stock from such exercise than if you were to exercise such warrants for cash.
We may issue additional common stock or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon the conversion of the Class B common stock at a ratio greater than one-to-one at the time of the consummation of our initial business combination as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. Any such issuances would dilute the interest of our stockholders and likely present other risks.
Our amended and restated certificate of incorporation will authorize the issuance of up to 100,000,000 shares of Class A common stock, par value $0.0001 per share, 10,000,000 shares of Class B common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. Immediately after this offering and the sale of the placement warrants, there will be 90,000,000 and 7,500,000 (assuming, in each case, that the underwriters have not exercised their over-allotment option, the anchor investors do not purchase any units in this offering and excluding the representative shares) authorized but unissued shares of Class A common stock and Class B common stock, respectively, available for issuance, which amount takes into account shares reserved for issuance upon conversion of outstanding rights but does not take into account the shares of Class A common stock reserved for issuance upon exercise of outstanding warrants or the shares of Class A common stock issuable upon conversion of Class B common stock. Immediately after the consummation of this offering, there will be no shares of preferred stock issued and outstanding. Shares of Class B common stock are convertible into shares of our Class A common stock initially at a one-for-one ratio but subject to adjustment as set forth herein, including in certain circumstances in which we issue Class A common stock or equity-linked securities related to our initial business combination.
We may issue a substantial number of additional shares of common or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination (although our amended and restated certificate of incorporation will provide that we may not issue securities that can vote with common stockholders on matters related to our pre-initial business combination activity). We may also issue shares of Class A common stock upon conversion of the Class B common stock at a ratio greater than one-to-one at the time of the consummation of our initial business combination as a result of the anti-dilution provisions contained in our amended and restated certificate of incorporation. However, our amended and restated certificate of incorporation will provide, among other things, that prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial business combination. These provisions of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with the approval of our stockholders. However, our executive officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding public shares.
The issuance of additional shares of common or preferred stock:
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may significantly dilute the equity interest of investors in this offering, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A common stock on a greater than one-to-one basis upon conversion of the Class B common stock;
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may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;
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could cause a change of control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
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may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and
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may adversely affect prevailing market prices for our units, Class A common stock, rights and/or warrants.
We may issue our shares to investors in connection with our initial business combination at a price that is less than the prevailing market price of our shares at that time.
In connection with our initial business combination, we may issue shares to investors in private placement transactions (so-called PIPE transactions) at a price of $10.00 per share or which approximates the per-share amounts in our trust account at such time. The purpose of such issuances will be to enable us to provide sufficient liquidity to the post-business combination entity. The price of the shares we issue may therefore be less, and potentially significantly less, than the market price for our shares at such time.
Our initial stockholders and anchor investors paid a nominal price for the founders’ shares and, accordingly, you will experience immediate and substantial dilution from the purchase of our shares of common stock.
The difference between the public offering price per share (allocating all of the unit purchase price to the Class A common stock and none to the warrants included in the unit) and the pro forma net tangible book value per share of our Class A common stock after this offering constitutes the dilution to you and the other investors in this offering. Our sponsor and anchor investors acquired the founder shares at a nominal price, significantly contributing to this dilution. Upon the closing of this offering, and assuming no value is ascribed to the warrants included in the units, you and the other public stockholders will incur an immediate and substantial dilution of approximately 110.8% (or $10.07 per share, assuming no exercise of the underwriters’ over-allotment option), the difference between the pro forma net tangible book deficit per share of $0.98 and the initial offering price of $9.09 per share. In addition, because of the anti-dilution rights of the founder shares, any equity or equity-linked securities issued or deemed issued in connection with our initial business combination would be disproportionately dilutive to our Class A common stock.
Unlike many other similarly structured special purpose acquisition companies, our initial stockholders will receive additional shares of Class A common stock if we issue shares to consummate an initial business combination.
The founder shares will automatically convert into Class A common stock at the time of the consummation of our initial business combination, on a one-for-one basis, subject to adjustment as provided herein. In no event will the Class B common stock convert into Class A common stock at a rate of less than one-to-one. In the case that additional shares of Class A common stock, or equity-linked securities convertible or exercisable for Class A common stock, are issued or deemed issued in excess of the amounts offered in this prospectus and related to the closing of the initial business combination, the ratio at which founder shares shall convert into Class A common stock will be adjusted so that the number of Class A common stock issuable upon conversion of all founder shares will equal, in the aggregate, on an as-converted basis, 20% of the total number of all outstanding shares of common stock upon completion of the initial business combination, excluding the placement warrants and underlying Class A common stock, the representative shares and any shares or equity-linked securities issued, or to be issued, to any seller in the business combination and any private placement-equivalent warrants and their underlying Class A common stock issued to our sponsor or its affiliates upon conversion of loans made to us. This is different from most other similarly structured blank check companies in which the initial stockholder will only be issued an aggregate of 20% of the total number of shares to be outstanding prior to the initial business combination. Additionally, the aforementioned adjustment will not take into account any shares of Class A common stock redeemed in connection with the business combination. Accordingly, the holders of the founder shares could receive additional shares of Class A common stock even if the additional shares of Class A common stock, or equity-linked securities convertible or exercisable for Class A common stock, are issued or deemed issued solely to replace those shares that were redeemed in connection with the business combination. The foregoing may make it more difficult and expensive for us to consummate an initial business combination.
We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least a majority of the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number of shares of our Class A common stock purchasable upon exercise of a warrant could be decreased, all without your approval.
Our warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any mistake, including to conform the provisions of the warrant agreement to the description of the terms of the warrants and the warrant agreement set forth in this prospectus, or defective provision, but requires the approval by the holders of at least a majority of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants (which may include public warrants acquired by our sponsor or its affiliates in this offering or thereafter in the open market). Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least a majority of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least a majority of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock, shorten the exercise period or decrease the number of shares of our Class A common stock purchasable upon exercise of a warrant.
We may amend the terms of the rights in a way that may be adverse to holders with the approval by the holders of a majority of the then outstanding rights.
Our rights will be issued in registered form under a rights agreement between Continental Stock Transfer & Trust Company, as rights agent, and us. The rights agreement provides that the terms of the rights may be amended without the consent of any holder to cure any ambiguity or correct any defective provision. The rights agreement requires the approval by the holders of a majority of the then outstanding rights in order to make any change that adversely affects the interests of the registered holders.
Our warrant agreement and rights agreement will designate the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants and rights, which could limit the ability of warrant holders and rights holders to obtain a favorable judicial forum for disputes with our company.
Our warrant agreement and rights agreement will provide that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement or rights agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
Notwithstanding the foregoing, these provisions of the warrant agreement and rights agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants and rights shall be deemed to have notice of and to have consented to the forum provisions in our warrant agreement and rights agreement. If any action, the subject matter of which is within the scope the forum provisions of the warrant agreement and rights agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants or rights, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant or rights holder in any such enforcement action by service upon such warrant or rights holder’s counsel in the foreign action as agent for such warrant or rights holder.
This choice-of-forum provision may limit a warrant or rights holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company, which may discourage such lawsuits. Alternatively,
if a court were to find this provision of our warrant agreement and rights agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the reported last sale price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period commencing once the warrants become exercisable and ending on the third day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. If and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in this offering. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants.
Our warrants, rights and founder shares may have an adverse effect on the market price of our Class A common stock and make it more difficult to effectuate our initial business combination.
We will be issuing rights to purchase 1,000,000 shares of our Class A common stock (or up to 1,150,000 shares of our Class A common stock if the underwriter’s over-allotment option is exercised in full) as part of the units offered by this prospectus. We will also be issuing warrants to purchase 10,000,000 shares of our Class A common stock (or up to 11,500,000 shares of Class A common stock if the underwriters’ over-allotment option is exercised in full) as part of the units offered by this prospectus and, simultaneously with the closing of this offering, we will be issuing placement warrants, in a private placement, consisting of an aggregate of 3,200,000 placement warrants (or 3,500,000 if the over-allotment option is exercised in full) exercisable for 3,200,000 shares of our Class A common stock (or 3,500,000 shares of our common stock if the over-allotment option is exercised in full). Our initial stockholders currently own an aggregate of 2,875,000 founder shares. The founder shares are convertible into shares of Class A common stock on a one-for-one basis, subject to adjustment as set forth herein. In addition, if our sponsor makes any working capital loans, up to $1,500,000 of such loans may be converted into warrants, at a price of $1.00 per warrant at the option of the lender, upon consummation of our initial business combination. The warrants would be identical to the placement warrants. To the extent we issue shares of Class A common stock to effectuate an initial business combination, the potential for the issuance of a substantial number of additional shares of Class A common stock upon exercise of these warrants, conversion of these rights or conversion of these working capital loans could make us a less attractive business combination vehicle to a target business. Any such issuance will increase the number of issued and outstanding shares of our Class A common stock and reduce the value of the shares of Class A common stock issued to complete the initial business combination. Therefore, our warrants, rights and founder shares may make it more difficult to effectuate an initial business combination or increase the cost of acquiring the target business.
The placement warrants are identical to the warrants sold as part of the units in this offering except that, so long as they are held by our sponsor or its permitted transferees, (i) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holders until the completion of our initial business combination, (ii) they may be exercised by the holders on a cashless basis, and (iii) they will be entitled to registration rights.
A provision of our warrant agreement may make it more difficult for us to consummate an initial business combination.
Unlike most blank check companies, if
(i)
we issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at a Newly Issued Price of less than $9.20 per share;
(ii)
the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions); and
(iii)
the Market Value is below $9.20 per share;
then the exercise price of the warrants will be adjusted to be equal to 115% of the greater of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price. This may make it more difficult for us to consummate an initial business combination with a target business.
The determination of the offering price of our units, the size of this offering and the terms of the units is more arbitrary than the pricing of securities and size of an offering of an operating company in a particular industry. You may have less assurance, therefore, that the offering price of our units properly reflects the value of such units than you would have in a typical offering of an operating company.
Prior to this offering there has been no public market for any of our securities. The public offering price of the units and the terms of the warrants and rights were negotiated between us and the underwriters. In determining the size of this offering, management held customary organizational meetings with the representative of the underwriters, both prior to our inception and thereafter, with respect to the state of capital markets, generally, and the amount the underwriters believed they reasonably could raise on our behalf. Factors considered in determining the size of this offering, prices and terms of the units, including the Class A common stock, rights and warrants underlying the units, include:
•
the history and prospects of companies whose principal business is the acquisition of other companies;
•
prior offerings of those companies;
•
our prospects for acquiring an operating business;
•
a review of debt to equity ratios in leveraged transactions;
•
our capital structure;
•
an assessment of our management and their experience in identifying operating companies;
•
general conditions of the securities markets at the time of this offering; and
•
other factors as were deemed relevant.
Although these factors were considered, the determination of our offering price, size and terms of the units is more arbitrary than the pricing of securities of an operating company in a particular industry since we have no historical operations or financial results.
An investment in this offering may involve adverse U.S. federal income tax consequences.
An investment in this offering may involve adverse U.S. federal income tax consequences. For instance:
•
Because there are no authorities that directly address instruments similar to the units we are issuing in this offering, the allocation an investor makes with respect to the purchase price of the unit among the share of Class A common stock, one right to receive one-tenth (1/10) of one share of Class A common stock and one warrant included in the unit could be challenged by the Internal Revenue Service of the United States (“IRS”) or the courts.
•
If we make distributions on our Class A common stock, such distributions generally will be treated as dividends for U.S. federal income tax purposes to the extent of our current or accumulated earnings and profits. The ability of a holder to seek redemption of their shares may be viewed as a position with respect to substantially similar or related property which diminishes your risk of loss and thereby affects your ability to satisfy the holding period requirements for the dividends received deduction or the preferential tax rate on qualified dividend income with respect to the time period prior to the approval of an initial business combination.
•
Any capital gain or loss you realize on a sale or other disposition of our Class A common stock will generally be long-term capital gain or loss if your holding period for the Class A common stock is more than one year. However, the redemption feature of the Class A common stock could affect your ability to satisfy the holding period requirements for the long-term capital gain tax rate with respect to the time period prior to the approval of an initial business combination.
See the section titled “Material U.S. Federal Income Tax Considerations” for a summary of the material United States Federal income tax consequences of an investment in our securities. Accordingly, each prospective investor is urged to consult a tax advisor with respect to the specific tax consequences of the acquisition, ownership and disposition of our securities, including the applicability and effect of state, local, or foreign tax laws, as well as U.S. federal tax laws.
There is currently no market for our securities and a market for our securities may not develop, which would adversely affect the liquidity and price of our securities.
There is currently no market for our securities. Stockholders therefore have no access to information about prior market history on which to base their investment decision. Following this offering, the price of our securities may vary significantly due to one or more potential business combinations and general market or economic conditions. Furthermore, an active trading market for our securities may never develop or, if developed, it may not be sustained. You may be unable to sell your securities unless a market can be established and sustained.
Provisions in our amended and restated certificate of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A common stock and could entrench management.
Our amended and restated certificate of incorporation will contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and certain other actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will, subject to certain exceptions, be deemed to have consented to service of process on such stockholder’s counsel, which may have the effect of discouraging lawsuits against our directors, officers, other employees or stockholders.
Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and certain other actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel except any action (A) as
to which the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery or (C) for which the Court of Chancery does not have subject matter jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation. This choice of forum provision may limit or make more costly a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Our amended and restated certificate of incorporation will provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, or the rules and regulations promulgated thereunder. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
General Risk Factors
We are a newly formed company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.
We are a newly formed company with no operating results, and we will not commence operations until obtaining funding through this offering. Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business objective of completing our initial business combination with one or more target businesses. We have no plans, arrangements or understandings with any prospective target business concerning an initial business combination and may be unable to complete our initial business combination. If we fail to complete our initial business combination, we will never generate any operating revenues.
Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”
On December 31, 2021, we had cash of $5,056 and a working capital deficit of $324,495. Further, we have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans. Management’s plans to address this need for capital through this offering are discussed in the section of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We cannot assure you that our plans to raise capital or to consummate an initial business combination will be successful. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements contained elsewhere in this prospectus do not include any adjustments that might result from our inability to consummate this offering or our inability to continue as a going concern.
Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination and results of operations.
We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly.
Those laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our initial business combination and results of operations.
Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our ability to consummate a business combination and lead to financial loss.
Past performance by our management team may not be indicative of future performance of an investment in us.
Past performance by our management team is not a guarantee either (i) of success with respect to any business combination we may consummate or (ii) that we will be able to locate a suitable candidate for our initial business combination. You should not rely on the historical record of our management team’s performance as indicative of our future performance of an investment in the company or the returns the company will, or is likely to, generate going forward. None of our directors has experience with blank check companies or special purpose acquisition companies. Additionally, in the course of their respective careers, members of our management team have been involved in businesses and deals that were unsuccessful.
We may be subject to an increased rate of tax on our income if we are treated as a personal holding company.
Depending on the date and size of our initial business combination, it is possible that we could be treated as a “personal holding company” for U.S. federal income tax purposes. A U.S. corporation generally will be classified as a personal holding company for U.S. federal income tax purposes in a given taxable year if more than 50% of its ownership (by value) is concentrated, within a certain period of time, in five or fewer individuals (without regard to their citizenship or residency and including as individuals for this purpose certain entities such as certain tax-exempt organizations, pension funds, and charitable trusts), and at least 60% of its income is comprised of certain passive items. See the section titled “Material U.S. Federal Income Tax Considerations — Personal Holding Company Status” for more detailed information.
We are an emerging growth company and a smaller reporting company within the meaning of the rules adopted by the Securities and Exchange Commission, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies and smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the rules adopted by the Securities and Exchange Commission, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor internal
controls attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our Class A common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates equals or exceeds $250 million as of the end of the prior June 30th, or (2) our annual revenues equaled or exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30th. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this prospectus may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus may include, for example, statements about:
•
our ability to select an appropriate target business or businesses in our target industry or otherwise;
•
our ability to complete our initial business combination in our target industry or otherwise;
•
our expectations around the performance of the prospective target business or businesses in the clean transition sector;
•
our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;
•
our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements;
•
our potential ability to obtain additional financing to complete our initial business combination;
•
our ability to consummate an initial business combination due to the uncertainty resulting from the ongoing COVID-19 pandemic;
•
the ability of our officers and directors to generate a number of potential business combination opportunities;
•
our public securities’ potential liquidity and trading, which could be impacted by the potential participation in this offering by the anchor investors;
•
the lack of a market for our securities;
•
the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;
•
the trust account not being subject to claims of third parties;
•
our financial performance following this offering; or
•
the potential purchases of units in this offering by our anchor investors, which would reduce the public “float” of our securities and consequently affect trading in our securities.
The forward-looking statements contained in this prospectus are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the section of this prospectus entitled “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
USE OF PROCEEDS
We are offering 10,000,000 units at an offering price of $10.00 per unit. We estimate that the net proceeds of this offering together with the funds we will receive from the sale of the placement warrants will be used as set forth in the following table.
| |
|
|
Without
Over-Allotment
Option
|
|
|
Over-Allotment
Option Fully
Exercised
|
|
|
Gross proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross proceeds from units offered to public(1)
|
|
|
|
$ |
100,000,000 |
|
|
|
|
$ |
115,000,000 |
|
|
|
Gross proceeds from placement warrants offered in the private placement to
the sponsor
|
|
|
|
$ |
3,200,000 |
|
|
|
|
$ |
3,500,000 |
|
|
|
Total gross proceeds
|
|
|
|
$ |
103,200,000 |
|
|
|
|
$ |
118,500,000 |
|
|
|
Estimated Offering expenses(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting commissions (1.0% of gross proceeds from units offered to public, excluding deferred portion)(3)
|
|
|
|
$ |
1,000,000 |
|
|
|
|
$ |
1,150,000 |
|
|
|
Legal fees and expenses
|
|
|
|
|
350,000 |
|
|
|
|
|
350,000 |
|
|
|
Accounting fees and expenses
|
|
|
|
|
55,000 |
|
|
|
|
|
55,000 |
|
|
|
SEC/FINRA Expenses
|
|
|
|
|
28,411 |
|
|
|
|
|
28,411 |
|
|
|
Reimbursement to underwriters for expenses
|
|
|
|
|
125,000 |
|
|
|
|
|
125,000 |
|
|
|
Nasdaq listing and filing fees
|
|
|
|
|
75,000 |
|
|
|
|
|
75,000 |
|
|
|
Printing and engraving expenses
|
|
|
|
|
30,000 |
|
|
|
|
|
30,000 |
|
|
|
Miscellaneous expenses
|
|
|
|
|
11,589 |
|
|
|
|
|
11,589 |
|
|
|
Total offering expenses (excluding underwriting commissions)
|
|
|
|
$ |
675,000 |
|
|
|
|
$ |
675,000 |
|
|
|
Proceeds after estimated offering expenses
|
|
|
|
$ |
101,525,000 |
|
|
|
|
$ |
116,675,000 |
|
|
|
Held in trust account(3)
|
|
|
|
$ |
101,000,000 |
|
|
|
|
$ |
116,150,000 |
|
|
|
% of public offering size
|
|
|
|
|
101.0% |
|
|
|
|
|
101.0% |
|
|
|
Not held in trust account
|
|
|
|
$ |
525,000 |
|
|
|
|
$ |
525,000 |
|
|
The following table shows the use of the approximately $525,000 of net proceeds not held in the trust account:(4)
| |
Legal, accounting, due diligence, travel, and other expenses in connection with any business combination(5)
|
|
|
|
$ |
92,000 |
|
|
| |
Legal and accounting fees related to regulatory reporting obligations
|
|
|
|
|
75,000 |
|
|
| |
Payment for office space, utilities and secretarial and administrative support ($10,000 per month
for up to 12 months)
|
|
|
|
|
120,000 |
|
|
| |
Working capital to cover miscellaneous expenses, including D&O insurance
|
|
|
|
|
238,000 |
|
|
| |
Total
|
|
|
|
$ |
525,000 |
|
|
(1)
Includes amounts payable to public stockholders who properly redeem their shares in connection with our successful completion of our initial business combination.
(2)
A portion of the offering expenses will be paid from the proceeds of loans from our sponsor of up to $400,000 as described in this prospectus. As of December 31, 2021, we had outstanding borrowings of $80,000 under the promissory note with our sponsor. These amounts will be repaid upon completion of this offering out of the $525,000 of offering proceeds that has been allocated for the payment of offering expenses (other than underwriting commissions). In the event that offering expenses are more than as set forth in this table, they will be repaid using a portion of the $525,000 of offering proceeds not held in the trust account and set aside for post-closing working capital expenses. In the event that
offering expenses are less than set forth in this table, any such amounts will be used for post-closing working capital expenses.
(3)
The underwriters have agreed to defer underwriting commissions equal to 4.0% of the gross proceeds of this offering. Upon completion of our initial business combination, $4,000,000, which constitutes the underwriters’ deferred commissions (or $4,600,000 if the underwriters’ over-allotment option is exercised in full) will be paid to the underwriters from the funds held in the trust account, and the remaining funds, less amounts released to the trustee to pay redeeming stockholders, will be released to us and can be used to pay all or a portion of the purchase price of the business or businesses with which our initial business combination occurs or for general corporate purposes, including payment of principal or interest on indebtedness incurred in connection with our initial business combination, to fund the purchases of other companies or for working capital. The underwriters will not be entitled to any interest accrued on the deferred underwriting discounts and commissions.
(4)
These expenses are estimates only. Our actual expenditures for some or all of these items may differ from the estimates set forth herein. For example, we may incur greater legal and accounting expenses than our current estimates in connection with negotiating and structuring our initial business combination based upon the level of complexity of such business combination. In the event we identify an initial business combination target in a specific industry subject to specific regulations, we may incur additional expenses associated with legal due diligence and the engagement of special legal counsel. In addition, our staffing needs may vary and as a result, we may engage a number of consultants to assist with legal and financial due diligence. We do not anticipate any change in our intended use of proceeds, other than fluctuations among the current categories of allocated expenses, which fluctuations, to the extent they exceed current estimates for any specific category of expenses, would not be available for our expenses.
(5)
Includes estimated amounts that may also be used in connection with our initial business combination to fund a “no shop” provision and commitment fees for financing.
Of the net proceeds of this offering and the sale of the placement warrants, $101,000,000 (or $116,150,000 if the underwriters’ over-allotment option is exercised in full), including $4,000,000 (or $4,600,000 if the underwriters’ over-allotment option is exercised in full) of deferred underwriting commissions, will be placed in a trust account in the United States with Continental Stock Transfer & Trust Company acting as trustee and J.P. Morgan Securities LLC acting as investment manager, and will be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. We estimate that the pre-tax interest earned on the trust account will be approximately $30,300 per year, assuming an interest rate of 0.03% per year; however, we can provide no assurance regarding this amount. Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our tax obligations and up to $100,000 of interest that may be used for our dissolution expenses, the proceeds from this offering and the sale of the placement warrants will not be released from the trust account until the earliest to occur of: (i) the completion of our initial business combination, (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, and (iii) the redemption of our public shares if we are unable to complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, subject to applicable law. In the event we decide to exercise the extension option, investors will not have voting rights nor redemption rights in connection with such additional three-month extensions.
The net proceeds held in the trust account may be used as consideration to pay the sellers of a target business with which we ultimately complete our initial business combination. If our initial business
combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination, we may apply the balance of the cash released from the trust account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital. There is no limitation on our ability to raise funds privately or through loans in connection with our initial business combination. However, our amended and restated certificate of incorporation will provide that, following this offering and prior to the consummation of our initial business combination, we will be prohibited from issuing additional securities that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote as a class with our public shares (a) on any initial business combination or (b) to approve an amendment to our amended and restated certificate of incorporation to (x) extend the time we have to consummate a business combination beyond 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, beyond 18 months, from the closing of this offering or (y) amend the foregoing provisions.
We believe that amounts not held in trust will be sufficient to pay the costs and expenses to which such proceeds are allocated. This belief is based on the fact that while we may begin preliminary due diligence of a target business in connection with an indication of interest, we intend to undertake in-depth due diligence, depending on the circumstances of the relevant prospective business combination, only after we have negotiated and signed a letter of intent or other preliminary agreement that addresses the terms of an initial business combination. However, if our estimate of the costs of undertaking in-depth due diligence and negotiating an initial business combination is less than the actual amount necessary to do so, we may be required to raise additional capital, the amount, availability and cost of which is currently unascertainable. If we are required to seek additional capital, we could seek such additional capital through loans or additional investments from our sponsor, members of our management team or their affiliates, but such persons are not under any obligation to advance funds to, or invest in, us.
Commencing on the date of this prospectus, we have agreed to pay our sponsor, a total of $10,000 per month, for up to 12 months, for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
Prior to the closing of this offering, our sponsor has agreed to loan us up to $400,000 to be used for a portion of the expenses of this offering. As of December 31, 2021, we had outstanding borrowings of $80,000 (of up to $400,000 available to us) under the promissory note with our sponsor. These loans are non-interest bearing, unsecured and are due at the earlier of June 24, 2022 or the closing of this offering. The loan will be repaid upon the closing of this offering out of the offering proceeds not held in the trust account.
In addition, in order to fund working capital deficiencies and finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds on a non-interest bearing basis as may be required. If we complete our initial business combination, we would repay such loaned amounts out of the proceeds of the trust account released to us. Otherwise, such loans would be repaid only out of funds held outside the trust account. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used to repay such loaned amounts. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrants at the option of the lender, upon consummation of our initial business combination. The warrants would be identical to the placement warrants. Other than as described above, the terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial stockholders, directors, officers, advisors or their affiliates may purchase public shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our
initial business combination. There is no limit on the number of shares our initial stockholders, directors, officers or their affiliates may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions prior to completion of our initial business combination. See “Proposed Business — Permitted purchases of our securities” for a description of how our sponsor, initial stockholders, directors, officers or any of their affiliates will select which stockholders to purchase securities from in any private transaction.
The purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our shares of Class A common stock, rights or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
In no event will we redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules) and the agreement for our initial business combination may require as a closing condition that we have a minimum net worth or a certain amount of cash. If too many public stockholders exercise their redemption rights so that we cannot satisfy the net tangible asset requirement or any net worth or cash requirements, we would not proceed with the redemption of our public shares or the initial business combination, and instead may search for an alternate business combination, including pursuant to forward purchase agreements or backstop arrangements we may enter into following consummation of this offering, in order to, among other reasons, satisfy such net tangible assets or minimum cash requirements.
Up to ten anchor investors have each expressed to us an interest in purchasing up to 990,000 units in this offering at the offering price of $10.00 per unit, and such allocations will be determined by the underwriters.
Pursuant to such units, the anchor investors have not been granted any stockholder or other rights in addition to those afforded to our other public stockholders. Further, the anchor investors are not required to (i) hold any units, shares of Class A common stock, rights or warrants they may purchase in this offering or thereafter for any amount of time, (ii) vote any shares of Class A common stock they may own (other than the founder shares) at the applicable time in favor of our initial business combination or (iii) refrain from exercising their right to redeem their public shares at the time of our initial business combination. The anchor investors will have the same rights to the funds held in the trust account with respect to the shares of Class A common stock underlying the units they may purchase in this offering as the rights afforded to our other public stockholders.
There can be no assurance that the anchor investors will acquire any units in this offering, or as to the amount of such units the anchor investors will retain, if any, prior to or upon the consummation of our initial business combination. There is also no guarantee that all ten anchor investors will participate in the
offering. We will be required to meet certain minimum initial listing standards with respect to liquidity to list on the Nasdaq, which may result in a lower number of units being allocated to our anchor investors. In the event that the anchor investors purchase all of the units that they have expressed an interest in purchasing in this offering, hold all such units until prior to consummation of our initial business combination and vote their public shares in favor of our initial business combination, in addition to the founder shares, no affirmative votes from other public stockholders would be required to approve our initial business combination. The anchor investors are not required to vote any of their public shares in favor of our initial business combination or for or against any other matter presented for a stockholder vote.
A public stockholder will be entitled to receive funds from the trust account only upon the earliest to occur of: (i) our completion of an initial business combination, (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, and (iii) the redemption of our public shares if we are unable to complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering created by the terms of the proposed initial business combination. In no other circumstances will a public stockholder have any right or interest of any kind to or in the trust account.
Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination. The anchor investors will not be entitled to redemption rights with respect to any founder shares held by them, in connection with the completion of our initial business combination. In addition, our initial stockholders have agreed to waive their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within the prescribed time frame. The anchor investors will not be entitled to rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within the prescribed time frame. However, if our sponsor or any of our officers, directors or affiliates, or the anchor investors acquires public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the prescribed time frame.
DIVIDEND POLICY
We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of our initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of our initial business combination. If we increase or decrease the size of the offering we will effect a stock dividend or a share contribution back to capital or other appropriate mechanism, as applicable, with respect to our Class B common stock immediately prior to the consummation of the offering in such amount as to maintain the ownership of our initial stockholders at 20.0% of the issued and outstanding shares of our common stock (excluding the placement warrants and underlying Class A common stock and assuming the initial stockholders do not purchase units in this offering) upon the consummation of this offering. Further, if we incur any indebtedness in connection with our initial business combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
DILUTION
The difference between the public offering price per share of Class A common stock, assuming no value is attributed to the warrants or rights included in the units we are offering pursuant to this prospectus or the placement warrants, and the pro forma net tangible book value per share of our Class A common stock after this offering constitutes the dilution to investors in this offering. Such calculation does not reflect any dilution associated with the sale, conversion and/or exercise of rights or warrants, including the placement warrants, which would cause the actual dilution to the public stockholders to be higher, particularly where a cashless exercise is utilized. Net tangible book value per share is determined by dividing our net tangible book value, which is our total tangible assets less total liabilities (including the value of Class A common stock which may be redeemed for cash), by the number of outstanding shares of our Class A common stock.
At December 31, 2021, our net tangible book deficit was $324,495, or approximately $(0.11) per share of common stock. For purposes of the dilution calculation, in order to present the maximum estimated dilution as a result of this offering, we have assumed the number of shares included in the units offered hereby will be deemed to be 11,000,000 shares of Class A common stock, including 1,000,000 Class A common stock related to the rights included in the units, and the price per share in this offering will be deemed to be $9.09. After giving effect to the sale of 11,000,000 shares of Class A common stock included in the units we are offering by this prospectus (or 12,650,000 shares of Class A common stock if the underwriters’ over-allotment option is exercised in full), the deduction of underwriting commissions and estimated expenses of this offering, the issuance of the representative shares, our pro forma net tangible book deficit at December 31, 2021 would have been $(0.98) per share (or $(0.97) per share if the underwriters’ over-allotment option is exercised in full), representing an immediate decrease in net tangible book value (as decreased by the value of the approximately 10,000,000 shares of Class A common stock that may be redeemed for cash, or 11,500,000 shares of Class A common stock if the underwriters’ over-allotment option is exercised in full) of $(0.87) per share (or $(0.86) per share if the underwriters’ over-allotment option is exercised in full) to our initial stockholders as of the date of this prospectus and an immediate dilution of $10.07 per share or 110.8% to our public stockholders (or $10.06 per share or 110.7% if the underwriters’ over-allotment option is exercised in full).
The following table illustrates the dilution to the public stockholders on a per-share basis, attributing no value to the warrants or rights included in the units or the placement warrants:
| |
|
|
No exercise of
over-allotment
option
|
|
|
Exercise of
over-allotment
option in full
|
|
|
Public offering price
|
|
|
|
|
|
|
|
|
|
$ |
9.09 |
|
|
|
|
|
|
|
|
|
|
$ |
9.09 |
|
|
|
Net tangible book deficit before this offering
|
|
|
|
$ |
(0.11) |
|
|
|
|
|
|
|
|
|
|
$ |
(0.11) |
|
|
|
|
|
|
|
|
|
Increase (decrease) attributable to public stockholders and sale of the placement
warrants
|
|
|
|
|
(0.87) |
|
|
|
|
|
|
|
|
|
|
|
(0.86) |
|
|
|
|
|
|
|
|
|
Pro forma net tangible book deficit after this offering
|
|
|
|
|
|
|
|
|
|
|
(0.98) |
|
|
|
|
|
|
|
|
|
|
|
(0.97) |
|
|
|
Dilution to public stockholders
|
|
|
|
|
|
|
|
|
|
$ |
10.07 |
|
|
|
|
|
|
|
|
|
|
$ |
10.06 |
|
|
|
Percentage of dilution to public stockholders
|
|
|
|
|
|
|
|
|
|
|
110.8% |
|
|
|
|
|
|
|
|
|
|
|
110.7% |
|
|
For purposes of presentation, our pro forma net tangible book deficit after this offering is $(0.98) (or $(0.97) if the underwriters exercise their over-allotment option in full) less than it otherwise would have been because if we effect our initial business combination, the conversion rights of the public stockholders (but not our insiders) may result in the conversion or tender of up to 10,000,000 (or 11,150,000 if the underwriters exercise their over-allotment option in full) shares sold in this offering.
The following table sets forth information with respect to our initial stockholders and the public stockholders:
| |
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
Average
Price
Per Share
|
|
| |
|
|
Number
|
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
|
Initial Stockholders(1)
|
|
|
|
|
2,500,000 |
|
|
|
|
|
18.32% |
|
|
|
|
$ |
25,000 |
|
|
|
|
|
0.02% |
|
|
|
|
$ |
0.010 |
|
|
|
Representative Shares(2)
|
|
|
|
|
150,000 |
|
|
|
|
|
1.10% |
|
|
|
|
|
— |
|
|
|
|
|
0.00% |
|
|
|
|
|
— |
|
|
|
Public Stockholders(3)
|
|
|
|
|
11,000,000 |
|
|
|
|
|
80.58% |
|
|
|
|
|
100,000,000 |
|
|
|
|
|
99.98% |
|
|
|
|
$ |
9.09 |
|
|
| |
|
|
|
|
13,650,000 |
|
|
|
|
|
100.0% |
|
|
|
|
$ |
100,025,000 |
|
|
|
|
|
100.00% |
|
|
|
|
|
|
|
|
(1)
Assumes no exercise of the underwriters’ over-allotment option and the corresponding forfeiture of an aggregate of 375,000 shares of Class B common stock held by our sponsor.
(2)
Assumes the issuance of the 150,000 shares of Class A common stock to the representative.
(3)
Includes the additional 1,000,000 shares underlying the rights included in the units.
The pro forma net tangible book deficit per share after the offering is calculated as follows:
| |
|
|
Without
Over-allotment
|
|
|
With
Over-allotment
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tangible book deficit before this offering
|
|
|
|
$ |
(324,495) |
|
|
|
|
$ |
(324,495) |
|
|
|
Net proceeds from this offering and sale of the placement warrants, net of
expenses(1)
|
|
|
|
|
101,525,000 |
|
|
|
|
|
116,675,000 |
|
|
|
Plus: Offering costs paid in advance, excluded from tangible book value
|
|
|
|
|
329,606 |
|
|
|
|
|
329,606 |
|
|
|
Less: Overallotment liability(3)
|
|
|
|
|
(105,563) |
|
|
|
|
|
|
|
|
|
Less: Deferred underwriting commissions
|
|
|
|
|
(4,000,000) |
|
|
|
|
|
(4,600,000) |
|
|
|
Less: Proceeds held in trust subject to redemption(2)
|
|
|
|
|
(101,000,000) |
|
|
|
|
|
(116,150,000) |
|
|
| |
|
|
|
$ |
(3,575,452) |
|
|
|
|
$ |
(4,069,888) |
|
|
| |
|
|
Without
Over-allotment
|
|
|
With
Over-allotment
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of Class B common stock outstanding prior to this offering
|
|
|
|
|
2,875,000 |
|
|
|
|
|
2,875,000 |
|
|
|
Shares of Class B common stock forfeited if over-allotment is not exercised
|
|
|
|
|
(375,000) |
|
|
|
|
|
— |
|
|
|
Shares of Class A common stock included in the units offered
|
|
|
|
|
10,000,000 |
|
|
|
|
|
11,500,000 |
|
|
|
Representative Shares
|
|
|
|
|
150,000 |
|
|
|
|
|
172,500 |
|
|
|
Class A common stock underlying the rights to be included in the units
|
|
|
|
|
1,000,000 |
|
|
|
|
|
1,150,000 |
|
|
|
Less: Shares subject to possible redemption
|
|
|
|
|
(10,000,000) |
|
|
|
|
|
(11,500,000) |
|
|
| |
|
|
|
|
3,650,000 |
|
|
|
|
|
4,197,500 |
|
|
(1)
Expenses applied against gross proceeds include offering expenses of $525,000 and underwriting commissions of $1,000,000 (or $1,150,000 if the over-allotment option is exercised in full) (excluding deferred underwriting fees). See “Use of Proceeds.”
(2)
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial stockholders, directors, executive officers, advisors or their affiliates may purchase public shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. In the event of any such purchases of our shares prior to the completion of our initial business combination, the number of shares of Class A common stock subject to redemption will be reduced by the amount of any such purchases, increasing the
pro forma net tangible book value per share. See “Proposed Business — Effecting Our Initial Business Combination — Permitted Purchases of Our Securities.”
(3)
Includes the fair value of the over-allotment option to purchase additional 1,500,000 units, accounted for as a liability.
CAPITALIZATION
The following table sets forth our capitalization at December 31, 2021, and as adjusted to give effect to the filing of our amended and restated certificates of incorporation, the sale of our units in this offering and the sale of the placement warrants and the application of the estimated net proceeds derived from the sale of such securities, assuming no exercise by the underwriters of their over-allotment option:
| |
|
|
December 31, 2021
|
|
| |
|
|
Actual
|
|
|
As Adjusted
|
|
|
Notes payable to related party(1)
|
|
|
|
$ |
80,000 |
|
|
|
|
$ |
— |
|
|
|
Deferred underwriting commissions
|
|
|
|
|
— |
|
|
|
|
|
4,000,000 |
|
|
|
Overallotment liability(4)
|
|
|
|
|
— |
|
|
|
|
|
105,563 |
|
|
|
Class A common stock, $0.0001 par value, 100,000,000 shares authorized; -0- and 10,000,000 shares are subject to possible redemption, actual and as adjusted,
respectively(2)
|
|
|
|
|
— |
|
|
|
|
|
101,000,000 |
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 1,000,000 shares authorized; none issued and outstanding, actual and as adjusted
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
Class A common shares, $0.0001 par value, 100,000,000 shares authorized; 0 and 150,000 shares not subject to possible redemption (excluding 0 and 10,000,000 shares subject to possible redemption), actual and as adjusted, respectively
|
|
|
|
|
— |
|
|
|
|
|
15 |
|
|
|
Class B common stock, $0.0001 par value, 10,000,000 shares authorized, 2,875,000 and 2,500,000 shares issued and outstanding, actual and as adjusted, respectively(3)
|
|
|
|
|
288 |
|
|
|
|
|
250 |
|
|
|
Additional paid-in capital
|
|
|
|
|
24,712 |
|
|
|
|
|
— |
|
|
|
Accumulated deficit(5)(6)
|
|
|
|
|
(19,889) |
|
|
|
|
|
(3,575,717) |
|
|
|
Total stockholders’ equity (deficit)
|
|
|
|
|
5,111 |
|
|
|
|
|
(3,575,452) |
|
|
|
Total capitalization
|
|
|
|
$ |
85,111 |
|
|
|
|
$ |
101,530,111 |
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(1)
Our sponsor has agreed to loan us up to $400,000 to be used for a portion of the expenses of this offering. The “as adjusted” information gives effect to the repayment of any loans made under this note out of the proceeds from this offering and the sale of the placement warrants. As of December 31, 2021, we had outstanding borrowings of $80,000 borrowed (of up to $400,000 available to us) under the promissory note with our sponsor.
(2)
Upon the completion of our initial business combination, we will provide our stockholders with the opportunity to redeem their public shares for cash equal to their pro rata share of the aggregate amount then on deposit in the trust account (initially $10.10 per share of Class A common stock) as of two business days prior to the consummation of the initial business combination including interest earned on the funds held in the trust account and not previously released to us to pay our taxes. In accordance with SEC and its guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of a company require shares of common stock subject to redemption to be classified outside of permanent equity. Given that the 10,000,000 shares of Class A common stock sold as part of the units in this offering will be issued with other freestanding instruments (i.e., public warrants and rights), the initial carrying value of shares of Class A common stock classified as temporary equity will be the allocated proceeds determined in accordance with ASC 470-20. According to ASC 480-10-S99-15, the subsequent adjustment is needed if it is probable that the instrument will become redeemable. The shares of Class A common stock will be immediately accreted to their redemption value of $10.10.
(3)
Actual share amount is prior to any forfeiture of founder shares by our sponsor and as adjusted amount assumes no exercise of the underwriters’ over-allotment option.
(4)
Includes the fair value of the over-allotment option to purchase additional 1,500,000 units, accounted for as a liability.
(5)
The “as adjusted” accumulated deficit calculation is equal to actual accumulated deficit increased by the immediate accretion of the Class A redeemable shares to their redemption value and partially offset by the allocated proceeds from the issuance of the public warrants and placement warrants.
(6)
The Company will account for the fair value in excess of consideration paid with respect to the 750,000 founder shares sold to the anchor investors at the initial public offering as an offering cost that will be reflected as an increase to additional paid in capital and an offset to the offering proceeds upon completion of this offering.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a newly-organized blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. While we may pursue a business combination target in any business, industry or geographical location, we intend to focus our search for businesses in the clean transition sector. We have not selected any specific business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. We intend to effectuate our initial business combination using cash from the proceeds of this offering and the sale of the placement warrants, the proceeds of the sale of our shares in connection with our initial business combination (including pursuant to backstop agreements we may enter into following the consummation of this offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing. We shall not undertake our initial business combination with any entity with its principal business operations in China (including Hong Kong and Macau).
The issuance of additional shares in connection with an initial business combination to the owners of the target or other investors:
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may significantly dilute the equity interest of investors in this offering, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A common stock on a greater than one-to-one basis upon conversion of the Class B common stock;
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may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;
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could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
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may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and
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may adversely affect prevailing market prices for our Class A common stock, rights and/or warrants.
Similarly, if we issue debt securities or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
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default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
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our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;
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our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;
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our inability to pay dividends on our common stock;
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using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes;
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limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
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increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;
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limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and
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other purposes and other disadvantages compared to our competitors who have less debt.
As indicated in the accompanying financial statements, at December 31, 2021, we had $5,056 cash and deferred offering costs of $329,606. Further, we expect to continue to incur significant costs in the pursuit of our initial business combination plans. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary to prepare for this offering. Following this offering, we will not generate any operating revenues until after completion of our initial business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents after this offering. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. After this offering, we expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as expenses as we conduct due diligence on prospective business combination candidates. We expect our expenses to increase substantially after the closing of this offering.
Liquidity and Capital Resources
As indicated in the accompanying financial statements, at December 31, 2021, we had $5,056 cash and a working capital deficit of $324,495. Further, we have incurred and expect to continue to incur significant costs in pursuit of our financing and acquisition plans. We cannot assure you that our plans to raise capital or to consummate an initial business combination will be successful. These factors, among others, raise substantial doubt about our ability to continue as a going concern.
Our liquidity needs have been satisfied prior to the completion of this offering through a capital contribution from our sponsor of $25,000 for the founder shares and up to $400,000 in loans available from our sponsor under an unsecured promissory note. We estimate that the net proceeds from (i) the sale of the units in this offering, after deducting offering expenses of approximately $675,000, underwriting commissions of $1,000,000 ($1,150,000 if the underwriters’ over-allotment option is exercised in full) (excluding deferred underwriting commissions of $4,000,000 (or $4,600,000 if the underwriters’ over-allotment option is exercised in full)), and (ii) the sale of the placement warrants for a purchase price of $3,200,000 (or $3,500,000 if the underwriters’ over-allotment option is exercised in full), will be $101,525,000 (or $116,675,000 if the underwriters’ over-allotment option is exercised in full). Of this amount, $101,000,000 (or $116,150,000 if the underwriters’ over-allotment option is exercised in full) will be held in the trust account, which includes $4,000,000 (or $4,600,000 if the underwriters’ over-allotment option is exercised in full) of deferred underwriting commissions. The proceeds held in the trust account will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. The remaining approximately $525,000 will not be held in the trust account. In the event that our offering expenses exceed our estimate of $675,000, we may fund such excess with funds not to be held in the trust account. In such case, the amount of funds we intend to be held outside the trust account would decrease by a corresponding amount. Conversely, in the event that the offering expenses are less than our estimate of $675,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding amount.
We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less deferred underwriting commissions), to complete our initial business combination. We may withdraw interest to pay taxes. We estimate our annual franchise tax
obligations, based on the number of shares of our common stock authorized and outstanding after the completion of this offering, to be $200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, which we may pay from funds from this offering held outside of the trust account or from interest earned on the funds held in our trust account and released to us for this purpose. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account. We expect the interest earned on the amount in the trust account will be sufficient to pay our income taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
Prior to the completion of our initial business combination, we will have available to us the approximately $525,000 of proceeds held outside the trust account. We will use these funds to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete an initial business combination.
In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds on a non-interest bearing basis as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender, upon consummation of our initial business combination. The warrants would be identical to the placement warrants. Other than as described above, the terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
We expect our primary liquidity requirements during that period to include approximately $300,000 for legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting successful business combinations; $75,000 for legal and accounting fees related to regulatory reporting requirements; $120,000 for office space ($10,000 per month for up to 12 months), utilities and secretarial and administrative support; and approximately $610,000 for directors and officers insurance.
These amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds not being placed in trust to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.
We will need to raise additional funds following this offering in order to meet the expenditures required for operating our business and to complete the initial business combination. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds on a non-interest bearing basis as may be required. If we complete our initial business combination, we would repay such loaned amounts. In addition, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our
business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we intend to target businesses larger than we could acquire with the net proceeds of this offering and the sale of the placement warrants, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Controls and Procedures
We are not currently required to maintain an effective system of internal controls as defined by Section 404 of the Sarbanes-Oxley Act. We will be required to comply with the internal control requirements of the Sarbanes-Oxley Act for the fiscal year ending December 31, 2022. Only in the event that we are deemed to be a large accelerated filer or an accelerated filer would we be required to comply with the independent registered public accounting firm attestation requirement. Further, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirement.
Prior to the closing of this offering, we have not completed an assessment, nor has our independent registered public accounting firm tested our systems, of internal controls. We expect to assess the internal controls of our target business or businesses prior to the completion of our initial business combination and, if necessary, to implement and test additional controls as we may determine are necessary in order to state that we maintain an effective system of internal controls. A target business may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding the adequacy of internal controls. Many small and mid-sized target businesses we may consider for our initial business combination may have internal controls that need improvement in areas such as:
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staffing for financial, accounting and external reporting areas, including segregation of duties;
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reconciliation of accounts;
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proper recording of expenses and liabilities in the period to which they relate;
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evidence of internal review and approval of accounting transactions;
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documentation of processes, assumptions and conclusions underlying significant estimates; and
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documentation of accounting policies and procedures.
Because it will take time, management involvement and perhaps outside resources to determine what internal control improvements are necessary for us to meet regulatory requirements and market expectations for our operation of a target business, we may incur significant expense in meeting our public reporting responsibilities, particularly in the areas of designing, enhancing, or remediating internal and disclosure controls. Doing so effectively may also take longer than we expect, thus increasing our exposure to financial fraud or erroneous financing reporting.
Once our management’s report on internal controls is complete, we will retain our independent registered public accounting firm to audit and render an opinion on such report when required by Section 404 of the Sarbanes-Oxley Act. The independent registered public accounting firm may identify additional issues concerning a target business’s internal controls while performing their audit of internal control over financial reporting.
Quantitative and Qualitative Disclosures about Market Risk
The net proceeds of this offering and the sale of the placement warrants held in the trust account will be invested in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Related Party Transactions
On October 6, 2021, our sponsor purchased 2,875,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.009 per share. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the outstanding shares upon completion of this offering (excluding the placement warrants and underlying Class A common stock and the representative shares). The per share purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the aggregate number of founder shares issued. If we increase or decrease the size of the offering we will effect a stock dividend or a share contribution back to capital or other appropriate mechanism, as applicable, with respect to our Class B common stock immediately prior to the consummation of the offering in such amount as to maintain the ownership of our initial stockholders at 20% of the issued and outstanding shares of our common stock (excluding the placement warrants and underlying Class A common stock and assuming the initial stockholders do not purchase units in this offering) upon the consummation of this offering. Up to 375,000 founder shares held by our sponsor are subject to forfeiture by our sponsor depending on the extent to which the underwriters’ over-allotment option is exercised. The founder shares (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
Commencing on the date of this prospectus, we have agreed to pay our sponsor, a total of $10,000 per month, for up to 12 months, for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
Our sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses actually incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses actually incurred by such persons in connection with activities on our behalf.
Prior to the consummation of this offering, our sponsor has agreed to loan us up to $400,000 to be used for a portion of the expenses of this offering. These loans are non-interest bearing, unsecured and are due at the earlier of June 24, 2022 or the closing of this offering. As of December 31, 2021, we had outstanding borrowings of $80,000 under the promissory note with our sponsor. The loan will be repaid upon the closing of this offering out of the proceeds not held in the trust account.
In addition, in order to fund working capital deficiencies and finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per unit at the option of the lender, upon consummation of our initial business combination. The warrants would be identical to the placement warrants. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
Our sponsor has agreed to purchase an aggregate of 3,200,000 placement warrants at a price of $1.00 per warrant for an aggregate purchase price of $3,200,000. If the over-allotment option is exercised in
full, the amount of placement warrants sold will be 3,500,000 for an aggregate purchase price of $3,500,000. Each warrant is exercisable to purchase one whole share of common stock at $11.50 per share. There will be no redemption rights or liquidating distributions from the trust account with respect to the founder shares or the placement warrants, which will expire worthless if we do not consummate a business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering. The placement warrants are identical to the warrants sold in this offering except that (a) the placement warrants and their underlying Class A common stock will not be transferable, assignable or saleable until the consummation of our initial business combination except to permitted transferees, (b) the placement warrants, so long as they are held by our sponsor or its permitted transferees, will be entitled to registration rights as set forth elsewhere in this prospectus. Otherwise, the placement warrants have terms and provisions that are identical to those of the warrants being sold as part of the units in this offering, including as to exercise price, exercisability and exercise period.
Our initial stockholders have agreed to waive their redemption rights with respect to their founder shares (i) in connection with the consummation of a business combination, (ii) in connection with a stockholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering and (iii) if we fail to consummate a business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or if we liquidate prior to the expiration of the 12-month period (or up to 18-month period, as applicable). However, our initial stockholders will be entitled to redemption rights with respect to any public shares held by them if we fail to consummate a business combination or liquidate within the 12-month period (or up to 18-month period, as applicable).
Pursuant to a registration rights agreement we will enter into with our initial stockholders on or prior to the closing of this offering, we may be required to register certain securities for sale under the Securities Act. These holders, and holders of warrants issued upon conversion of working capital loans, if any, are entitled under the registration rights agreement to make up to three demands that we register certain of our securities held by them for sale under the Securities Act and to have the securities covered thereby registered for resale pursuant to Rule 415 under the Securities Act. In addition, these holders have the right to include their securities in other registration statements filed by us. We will bear the costs and expenses of filing any such registration statements. See the section of this prospectus entitled “Certain Relationships and Related Party Transactions.”
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations; Quarterly Results
As of December 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations. No unaudited quarterly operating data is included in this prospectus, as we have conducted no operations to date.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualify as an “emerging growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is
required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company”, we choose to rely on such exemptions we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the report of independent registered public accounting firm providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officers’ compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of this offering or until we are no longer an “emerging growth company,” whichever is earlier.
PROPOSED BUSINESS
Our Company
We are a blank check company formed under the laws of the State of Delaware on September 23, 2021. We were formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities, which we refer to as a “target business.” We may pursue a business combination opportunity in any business or industry we choose and intend to target businesses with enterprise values of approximately $250 million to $1 billion. To date, our efforts have been limited to organizational activities as well as activities related to this offering. We have generated no operating revenues to date and do not expect to generate operating revenues until after we consummate our initial business combination. None of our officers, directors, promoters or other affiliates have engaged in any substantive discussions on our behalf with representatives of other companies regarding the possibility of a potential merger, capital stock exchange, asset acquisition or other similar business combination with us. While we may pursue business combination target in any business, industry or geographical location, we intend to focus our search within the clean transition sector. We shall not undertake our initial business combination with any entity with its principal business operations in China (including Hong Kong and Macau).
We plan to initially target companies in the clean transition economy. Our management team and board of directors are very active in the clean transition ecosystem and connected to well over 300 clean transition companies, a majority of which are in the United States, where “connected” means having direct investment, holding a board seat, or, at a minimum, having vetted a company’s business plan. Each member of our management team and board of directors thus has a network of talented people who will help evaluate potential target businesses.
Climate change and impact are a major concern for most countries across the globe. Greenhouse gases trap heat and make the planet warmer. Climate catastrophes have been prevalent in recent months. In June 2021, an unprecedented heatwave blasted the Pacific Northwest, creating the conditions for devastating wildfires that followed. In July 2021, extreme floods in central China killed more than 30 people. Since August 2021, deadly fires have been blazing across Turkey and Greece. The sixth assessment report by the Intergovernmental Panel on Climate Change (IPCC) was issued on August 9, 2021. The IPCC report states, “It is unequivocal that the increase of carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) in the atmosphere over the industrial era is the result of human activities and that human influence is the principal driver of many changes observed across the atmosphere, ocean, cryosphere and biosphere.” According to the report, it is only possible to avoid warming of 1.5 °C or 2 °C if massive and immediate cuts in greenhouse gas emissions are made.
The major sources of the greenhouse gas emissions globally are associated with the use of fossil fuel-based energy and industrial processes. According to the U.S. Environmental Protection Agency, these two sectors by themselves account for about 75% of the global greenhouse gas (GHG) emissions. In order to mitigate the climate challenges, we believe it is important to reduce and control the carbon emissions in all human activities without compromising the growth of all economies. To mitigate the potential impacts of climate change, as a global society we believe that we have to transition from one that is heavily dependent on fossil fuel-based energy and material resources with high GHG emissions to one that uses energy sources and materials with much lower or no GHG emissions. Therefore, there is a huge focus on the clean transition in the energy and industrial sectors for all countries to collectively achieve the climate targets. It is this clean transition that we believe will create huge business opportunities for decades.
Decarbonization and clean transition from legacy fossil fuel use in global economies is a high priority and is impacting all aspects of life, which we believe makes it an attractive area for potential business combination targets. According to Bloomberg’s New Energy Finance report in January 2021, “in 2020, global investment in the low-carbon energy transition totaled $501.3 billion, up from $458.6 billion in 2019 and just $235.4 billion in 2010. This figure includes investment in projects, such as renewable power, clean transition, electrical vehicle charging infrastructure, hydrogen production and carbon capture and storage (CCS) projects – as well as end-user purchases of low-carbon energy devices, such as small-scale solar systems, heat pumps and zero-emission vehicles.” According to a report by the International Energy Agency in
May 2021, “total annual energy investment surges to $5 trillion by 2030 in the net zero pathway, adding an extra 0.4 percentage points a year to global GDP growth, based on a joint analysis with the International Monetary Fund.”
We are confident that our established investment team, broad industry relationships and deal-making capabilities give us a distinct advantage to capitalize on the long-term opportunities created by the ongoing transition toward a clean energy economy.
Our Leadership
Monterey Capital Acquisition Corporation’s management team has unique experience in identifying potential targets, structuring acquisitions and growth effectively, and growing businesses in the energy markets. We believe our management team is distinctively-positioned to identify and evaluate businesses in the clean transition sector due to extensive experience executing and building opportunities across the broader energy transition and sustainability arena. Additionally, we believe our management team has created a reputation as knowledgeable operators, value-added investors and strategic partners in the clean transition sector that may help identify attractive investment opportunities whereby we can leverage our expertise and deep industry network to assist target businesses’ growth and value.
Bala Padmakumar, Chief Executive Officer and Chairman of the Board
Mr. Padmakumar, our Chief Executive Officer and the Chairman of our board of directors since September 2021, is a broad based entrepreneur and technologist with a strong background in strategic partnerships, product and business development, technology and operations, private equity, and venture capital environments. Since August 2020, Mr. Padmakumar has been a partner at Advantary LLC, where he specializes in business development and advises on strategic matters. Since January 2021, he has been actively partnering with the Asia practice of FocalPoint Partners LLC, a boutique investment bank on deal flow diligence in the clean transition space in Asia. Since June 2021, he has been an advisor to the Chief Executive Officer of NTherma Corporation on strategic relationships and capital raising activities. From July 2016 to December 2021, Mr. Padmakumar has also advised on deal flow and provided operational support to portfolio companies for a fund set up to support SK Telecom Co., Ltd.’s strategic interests. From 2007 through 2010, Mr. Padmakumar was a Venture Partner at X/Seed Capital Management, LLC, where he focused on transactions in the cleantech and materials sectors. Additionally, from 2011 to October 2020, Mr. Padmakumar was the Chief Executive Officer at Amperics, Inc., a developer and vendor of high energy density ultracap hybrid storage systems. Mr. Padmakumar also has extensive experience in the clean energy sectors, having been an advisor to Lionrock Batteries Ltd., which creates flexible batteries and high performance separator technology since 2019, an advisor to the board and CEO of Hyperscale Data Center Company, a company focused on energy usage efficiency in hyperscale data centers from 2018 to 2020, and an advisor to the chairman of Advanced Systems Automation Limited in Singapore, where he advised on issues surrounding urban transportation, High Energy Density Li Ion battery (NMC technology) and 3D printing technology from 2017 to 2019. Mr. Padmakumar also has broad experience advising on capital raising and corporate strategy, serving as a mentor to OneValley Inc., a global entrepreneurship platform for individuals, startups, and corporations seeking innovation and accelerated growth, and as an advisor to several early stage companies from audio technologies to SaaS products.
Mr. Padmakumar has a Bachelor’s Degree in Technology from the University of Madras in Chemical Engineering and a Master of Science Degree in Chemical Engineering from Stanford University.
We believe Mr. Padmakumar’s extensive industry and management experience makes him well suited to serve as our Chief Executive Officer and as a member of our board of directors.
Vivek Soni, Executive Vice President and Director
Dr. Soni, our Executive Vice President and a member of our board of directors since September 2021, has held board and crucial managerial positions at numerous businesses within the cleantech and venture space. Dr. Soni has been a member of Prithvi Ventures LLC since January 2021, a fund for investments in innovative cleantech companies, and has been a member of S CAP ClimateTech Opportunity Fund, LP, since July 2021, which is a late stage Climatech fund. With these funds, he has played a vital role in investing
$22 million in 2021 in the clean transition sector that includes investments in energy storage, electrical vehicle (EV) technology, renewable energy, and novel materials companies. Since September 2017, Dr. Soni has been on the Advisory Board of Reading Municipal Light Department, the largest municipal electric utility in Massachusetts and currently is the Vice Chair. Since 2016, he has also been a Managing Director for TiE Boston Angels, where he created a robust process for syndication and due diligence, and also grew investments threefold over five years. From 2007 to 2011, he was a Venture Advisor to Nomura International plc’s New and Clean Energy Technology Ventures fund, a late stage Cleantech VC fund. Since 2006, Dr. Soni has also been the Managing Partner of Boston Cleantech, a company that enables investors and entrepreneurs to grow businesses in cleantech, energy, chemicals, materials and manufacturing. His responsibilities include promoting early-stage companies and impact investing in cleantech, carbon capture and sequestration, and solar energy. Dr. Soni is also a member of the boards of directors of A.T.E Private Limited, A.T.E. Enterprises Private Limited and A.T.E. Huber Envirotech Private Limited, where he provides expertise on governance, technology, innovation, cleantech, fundraising, acquisitions and global expansion.
Dr. Soni holds a Bachelor’s Degree in Technology from the Indian Institute of Technology, New Delhi, India, a Master of Science Degree in Polymer Science & Engineering from the University of Massachusetts, Amherst, a Ph.D. in Polymer Science & Engineering from the University of Massachusetts, Amherst, and an Executive Development Program certificate from the Kellogg School of Management at Northwestern University.
We believe Dr. Soni’s broad experience advising investors and companies in the cleantech sectors makes him well suited to serve as our Executive Vice President and as a member of our board of directors.
Daniel Davis, Chief Financial Officer
Mr. Davis, our Chief Financial Officer since 2021, is a skilled financial executive with a proven background in managing and growing companies. Mr. Davis has served as the Chief Administrative Officer of SeQure Dx, Inc., a company focused on providing off-target diagnostics in gene editing since April 2021. Prior to that, from 2007 through April 2020, Mr. Davis was a Director in the Life Sciences and Technology Practice at Accounting Management Solutions (“AMS”), and subsequently, following its acquisition, at CliftonLarsonAllen LLP, an accountancy firm. At AMS, Mr. Davis founded and managed the life sciences practice and provided strategic consulting on complex engagements surrounding fundraising and mergers and acquisitions strategies. Mr. Davis is also co-founder, acting Chief Financial Officer and Director of AngioWave Imaging, LLC, where he led an over-subscribed seed round, and was a key contributor to the strategic plan and drove the forecasting for the five-year plan.
Mr. Davis received his B.A. in Political Science from Brown University and his M.B.A from the University of Pennsylvania, Wharton School of Business.
We believe Mr. Davis’ financial expertise and private sector experience makes him well suited to serve as our Chief Financial Officer.
Independent Directors
We intend to be actively involved in the strategy and operations of our target companies and have assembled a number of seasoned corporate executives and professional advisors to serve as Monterey Capital Acquisition Corporation’s independent directors. These executives have been chosen for their extensive sector experience — within mergers and acquisitions, venture capital/private equity and technology sectors — or for their extensive executive and legal experience in managing successful and disruptive high-growth companies and financial strategies. Our independent directors will provide a broad network of operational experience, various industry perspectives, and management capabilities to supplement our management’s network of potential target opportunities.
Leela Gray, Director
Ms. Gray, a member of our board of directors since 2021, is a retired Brigadier General with 30 years in the U.S. Army, including seven in the U.S. Army Reserve while in corporate positions developing business
expertise. Between November 2018 and May 2019, Ms. Gray served as Strategic Advisor to United States Army Cyber Command, playing a key role in innovating and modernizing cyber policy shaped by her market and stakeholder insights, including her tenure at the Department of State, where she created interagency and international partner initiatives in Cyber/Information Warfare. Prior to that, from August 2016 to July 2018, Ms. Gray served as a Deputy Commanding General at the U.S. Army Central Command guiding strategies to transform operations and logistics. As a National Security senior executive with Top Secret clearance, Ms. Gray represented the United States internationally, shaped policy, and advised logistics and governance, building on a global perspective that also included two combat operations and one peacekeeping mission. Since June 2020, Ms. Gray has been a mentor at Tampa Bay WAVE’s Tech Accelerator programs. From July 2019 to June 2021, Ms. Gray served on the Executive Board of Alpha Omicron Pi Fraternity, a $100 million international nonprofit with over 100,000 members. Ms. Gray currently serves on the Advisory Board of Empower Rideshare, SaaS ridesharing company alternative to Uber and Lyft and holds the National Association of Corporate Directors (NACD) Directorship Certification™.
Ms. Gray earned a Master of Strategic Studies from the United States Army War College, an M.A. in Journalism from Ball State University, and a B.A. in Communications from Elon University.
We believe Ms. Gray’s leadership and cybersecurity experience makers her well suited to serve as a member of our board of directors.
Kathy Cuocolo, CPA, Director
Ms. Cuocolo, a member of our board of directors since 2021, is a versatile executive and director with demonstrated success in developing and managing financial services operations on a global basis. Ms. Cuocolo is currently a director and Audit Chair of Greenbacker Renewable Energy Company LLC and a director at Syntax ETF Trust. Her prior directorships include President and Director of The China Fund, Inc., which invests primarily in private placements in mainland China, Chairperson of Select Sector ETF Trust, and director of Guardian Life family of funds. From 2014 through March 2020, Ms. Cuocolo was the president of Syntax Advisors, LLC where she was responsible for all aspects of business operations and the development of its financial management products. Prior to that, from 2008 until 2013, Ms. Cuocolo was a Managing Director and Division Head for the Mutual Fund and global ETF Services for The Bank of New York Mellon Corporation, where she was responsible for the operations and strategic planning for these business lines. Prior to that, from 1982 until 2003, Ms. Cuocolo served in various roles at State Street Corporation, including as an Executive Vice President, Division Head of Investor Products and Services, where she was responsible for operations and strategic planning. Ms. Cuocolo was a member of the corporations’ Executive Operating Committee responsible for all aspects of business strategy. During her 22 years at State Street, Ms. Cuocolo led the firm to become the largest fund administrator in the U.S., with over $1.2 trillion in assets. Prior to State Street, Ms. Cuocolo was an auditor at PriceWaterhouseCoopers LLP.
Ms. Cuocolo received her B.A. in Accounting, summa cum laude, from Boston College, and holds a Masters Professional Director Certificate from the American College of Corporate Governance. Ms. Cuocolo received her CPA license in the Commonwealth of Massachusetts in 1981.
We believe Ms. Cuocolo’s financial expertise and executive experience makes her well suited to serve as a member of our board of directors.
Stephen Markscheid, Director
Mr. Markscheid, a member of our board of directors since 2021, is currently the Chairman of Still Waters Green Technology Limited, a UK based renewable energy developer since December 2019 and currently serves as a director of Fanhua, Inc. (Nasdaq: FANH), JinkoSolar Holding Co., Ltd. (NYSE: JKS), Zhongjin Technology Services Group Company Limited (HKEX: Stock Code 08295), Xiaobai Maimai Inc. (Nasdaq: HX), UGE International Ltd. (TSXV: UGE.V), and the Global Corporate Social Responsibility Foundation. In addition, Mr. Markscheid is currently the Chief Financial Officer of ChildWise International Corporation and serves as a Board Advisor to several companies, including NanoGraf Corporation, Intelligent Generation LLC, SeedVantage LLC, Clean Energy Trust, and Kearsarge Energy L.P. Mr. Markscheid also serves as a trustee emeritus of Princeton-in-Asia. From 1998 until 2006,
Mr. Markscheid served as a Director of Business Development and Senior Vice President and led GE Capital’s business development activities in China and the Asia Pacific region, primarily focusing on acquisitions and direct investments. Prior to GE, Mr. Markscheid worked with the Boston Consulting Group throughout Asia. Mr. Markscheid was a banker for ten years in London, Chicago, New York, Hong Kong and Beijing with Chase Manhattan Bank and First National Bank of Chicago. Mr. Markscheid began his career with the US-China Business Council, in Washington D.C. and Beijing.
Mr. Markscheid earned a B.A. in East Asian Studies from Princeton University in 1976, an M.A. in international affairs from Johns Hopkins University in 1980, and an MBA from Columbia University in 1991, where he was class valedictorian.
We believe Mr. Markscheid’s significant public and private sector experience makes him well suited to serve as a member of our board of directors.
Past experience or performance of our management team is not a guarantee (i) of success with respect to any business combination we may consummate or (ii) that we will be able to identify a suitable candidate for our initial business combination. You should not rely on the historical performance record of our management team or any affiliates as indicative of our future performance. Additionally, in the course of their respective careers, members of our management team have been involved in businesses and deals that were unsuccessful. Our officers and directors have little to no experience with blank check companies or special purpose acquisition companies. In addition, our executive officers and directors may have conflicts of interest with other entities to which they owe fiduciary duties or contractual obligations with respect to initial business combination opportunities.
Industry Opportunity
Decarbonization and clean transition from legacy fossil fuel use are high priorities that are impacting all aspects of the global economy. Some of the major opportunities that we find very attractive are:
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EV charging infrastructure, advanced battery chemistries and fuel cells and hydrogen infrastructure;
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Advanced powertrain and battery management and vehicle-to-grid solutions;
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Distributed energy resource management, demand response and transactive energy solutions, and artificial intelligence (AI) and machine learning (ML) approaches;
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Drone and remote sensing solutions; and
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Novel materials and processes for decarbonization of industrial processes, transportation and built infrastructure.
Advances in AI and ML are driving advances in many of the energy sectors and we are aware of tremendous value creation at the intersection of the clean transition, the electric grid, mobility and data. We believe that there are many attractive acquisition targets, which, with appropriate capital infusion in a SPAC process can yield transactions with a final enterprise value between, approximately, $250 million to $1 billion with a strong potential for growth in the next decade. Through our network and domain expertise, we have a pipeline of numerous opportunities, several of which are proprietary.
Business Strategy
One of our business theses is that the time-proven IPO process imposes avoidable delays and costs on both new companies and investors. We believe the increase in SPAC IPO issuance and merger activity in 2020 and 2021 validates the SPAC structure’s ability to address some of the problems with the IPO process, which are commonly discussed among public technology investors today. Fundamental technology investors find it difficult to own stock in new technology companies during their pre-revenue and/or pre-profit phases because technology companies are typically required by most investment banks to produce a string of revenue growth quarters with profit or near-profit before they are allowed to do an IPO. We may offer earlier access to a technology company that is reporting milestones as opposed to revenue or profits, but we will certainly also consider companies on the IPO track, with growing revenue on the path to profitability.
Our team has seen new technology companies face these issues in the context of a traditional IPO:
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Late-stage public funding expensive and hard to source. In the period just prior to profitability, a company may need large amounts of working capital or more capacity or to exploit a research and development, or R&D, breakthrough, which are all good signs. Unfortunately, this cash drain is often funded with significant dilution by venture capital or high-coupon debt. We intend to facilitate earlier public investment in a private company earlier in the process.
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Pre-IPO R&D stall. Prior to its IPO, a company is incentivized to depress its operating expenses, including R&D expenses, to bolster its profitability. This may delay second-product introduction and other investments that put the company at a disadvantage relative to its more mature competitors for a period of a year or more (i.e., for the time needed to create the consecutive series of profitable quarters often mandated by investment banks).
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Low corporate visibility. Privately held companies can certainly become prominent in the era of the “unicorn”, but we believe there is nothing like open debate in the market over a company’s prospects to make the public-not to mention prospective customers and business partners-aware of an important new company.
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Missed opportunities for target size. Consistent with our investment thesis as described above, we plan to target businesses with total enterprise values ranging from $250 million to $1 billion in the clean transition sector. We believe the traditional underwritten initial public offering process and many other special purpose acquisition companies are focused on target businesses with valuations in the higher end of the range, and that there are many missed high growth opportunities in the clean transition sector with more modest enterprise valuations of $250 million to $600 million that are not being served.
The use of SPACs to effect public offerings earlier can bring on potential new problems caused by the accelerated entry of immature companies into public markets. For our target candidate, we intend to address the following common problems and mitigate them to the best of our ability
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Incomplete or inaccurate financial reports may lead to unsound internal business decisions which may necessitate future restatements of financial reports. We will work to install Sarbanes-Oxley-compatible systems in our target company as early as possible.
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Second product stall (R&D based). We have observed that R&D product pipelines can also stall if a startup company relies solely on a group of very good engineers whose skill allows them to develop a new product with informal new-product documentation and scheduling systems. When some of those engineers move on or move up, the company’s R&D pipeline may suffer from repeated rework delays. We have direct experience with new product development processes and tools that will help ameliorate and address second product stall.
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Revenue over-forecasting. The use of third-party customer relationship management (CRM) software is now common, but we have observed that poor quality control of the funnel data input, and the use of simplistic algorithms to create revenue estimates from sales funnel data often lead to inflated revenue predictions. We are sensitive to the importance of accurate revenue projections and will work to ensure responsible revenue projections based on products and customer contracts.
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High manufacturing costs. Manufacturing creates many high-quality blue-collar jobs, but America’s manufacturing sector has been shrinking, which in turn has diminished the hiring pool. This forces companies to automate manufacturing.
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Poor product quality. Quality should be a way of life in all corporate activities, not just a mathematical system to measure and eliminate product defects. For example, we view Sarbanes-Oxley practices as financial quality-assurance systems. Several members of our management team and board of directors have worked personally for years on corporate-level quality systems and quality culture development processes, and we can leverage their experience to help integrate quality management into an organization that needs to improve product quality.
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Inadequate planning often shows up in public reports, for example, as late new products, long product lead times, quarterly revenue misses and unanticipated competitor success. We often see emerging companies plan poorly or even do no planning in some disciplines. While we certainly cannot promise to fix all of the formalities listed above, we can share excellent planning tools in multiple disciplines with our top-few prospective target companies.
We expect to leverage the full resources of the management team to help optimize business strategies, drive operational improvements and cultivate managerial talent on behalf of our initial business combination.
Business Process
The mission of Monterey Capital Acquisition Corporation is to provide fundamental public technology investors with early access to an attractive clean transition company. After our top-few prospective target companies are identified, we will analyze their business processes, systems, and disciplines relative to what we believe is required for stable and predictable performance. Then, if the target desires our consultation, we will offer our help.
Finally, we will offer our target company consulting support from our internal and external experts. Given that strategy, some of our key directors may remain on the board of the combined company.
Although we have not yet selected a business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, we are not prohibited from pursuing an initial business combination with a company that is affiliated with one or more of our officers or directors. In the event we seek to complete our initial business combination with an affiliated company, we, or a committee of our independent directors, will obtain outside opinions to assess the fairness of the combination from an independent investment banking firm that is a member of FINRA or an independent accounting firm that commonly renders valuation opinions to ensure that our initial business combination is fair to our shareholders prior to their vote to on our initial business combination.
Following this offering, members of our management team will directly or indirectly own our common stock and may also own our placement warrants. This may also lead to individual conflicts of interest when we determine whether a particular target business is appropriate for our initial business combination or when we choose directors for the combined company. Any conflicts will be disclosed to shareholders prior to their vote on the initial business combination. Please see the Risk Factor titled, “We may engage in an initial business combination with one or more target businesses that have relationships with entities that may be affiliated with our sponsor, officers, directors or existing holders which may raise potential conflicts of interest.”
Acquisition Process
We believe our management team’s operational and investment track record in the clean transition, decarbonization, and related sectors provides us with a deep understanding of challenges faced by business operators and owners in this sector. We expect that our diligence may include assessments of the potential target company’s competitive advantages through meetings with management and key employees, key customers, interactions with consultants and experts within our network, visits to key operating facilities and a review of financial, legal and operational documents. We intend to utilize our ability to formulate creative solutions from operational experience, capital structure, growth and vision to unlock shareholder value.
In addition, we expect to retain and work with financial advisors and legal counsel as well as industry consultants to conduct due diligence, develop strategic plans and implement operational strategies. We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with such a company, we would obtain an opinion from an independent investment banking firm or from an independent accounting firm, that such an initial business combination is fair to our company from a financial point of view. Certain of our officers and directors presently have, and any of them in the future may have, additional, fiduciary duties or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our
officers or directors becomes aware of a business combination opportunity that is suitable for an entity to which he or she has then-current fiduciary duties or contractual obligations, he or she may need to honor these fiduciary duties or contractual obligations to present such business combination opportunity to such entity, subject to their fiduciary duties under Delaware law. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our initial business combination.
Competitive Advantages
We intend to capitalize on the following competitive advantages in our pursuit of a target company:
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Leadership of an Experienced Management Team. Our management team has decades of experience in the clean energy sector, having a long track record of attaining opportunities through proprietary transaction sources and a wide network of relationships. Additionally, we believe that the operational experience of our management team should enable us to enhance the strategic vision and operational performance of the assets and businesses that we acquire in order to maximize value for shareholders. We believe our expertise in identifying and sourcing compelling investment opportunities combined with our strategic and operational proficiency in creating value provides a competitive advantage relative to other strategic and financial buyers.
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Established Deal Sourcing Network. We believe the strong track record of our management team and board of directors will provide access to quality initial business combination partners. In addition, through our management team and board of directors, we believe we have contacts and sources from which to generate acquisition opportunities and possibly seek complementary follow-on business arrangements. These contacts and sources include those in government, private and public companies, private equity and venture capital funds, investment bankers, attorneys and accountants.
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Status as a Publicly Listed Acquisition Company. We believe our structure will make us an attractive business combination partner to prospective target businesses. As a publicly listed company, we will offer a target business an alternative to the traditional initial public offering process. We believe that some target businesses will favor this alternative, which we believe is less expensive, while offering greater certainty of execution, than the traditional initial public offering process. During an initial public offering, there are typically underwriting fees and marketing expenses, which would be costlier than a business combination with us. Furthermore, once a proposed business combination is approved by our stockholders (if applicable) and the transaction is consummated, the target business will have effectively become a publicly listed company, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions that could prevent the offering from occurring. Once publicly traded, we believe our target business would have greater access to capital and additional means of creating management incentives that are better aligned with stockholders’ interests than it would as a private company. This can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented management staffs.
Acquisition Criteria
Consistent with our strategy, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We will use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into our initial business combination with a target business that does not meet these criteria and guidelines.
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Target Size: Consistent with our investment thesis as described above, we plan to target businesses with total enterprise values ranging from $250 million to $1 billion in the clean transition sector.
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Companies that operate in clean transition and carbon emission industries and sectors that are ripe for technological disruption or are currently undergoing fundamental transformations. We plan to focus on companies that replace dirty carbon emission processes or enable a cleaner solution or process.
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Companies with an attractive and defensible competitive position. We will target companies with defensible market positions that we believe offer long-term competitive advantages. These could
include proprietary technology, a leading product suite, strong market share or an actionable path to gaining significant market share or creative use of existing technology that we believe is enduring and unique.
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Businesses with Revenue and Earnings Growth Potential. We will seek to acquire one or more businesses that are addressing large addressable markets and have the potential for significant revenue and earnings growth through a combination of both existing and new product development, increased production capacity, expense reduction and synergistic follow-on acquisitions resulting in increased operating leverage.
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Businesses with Potential for Strong Free Cash Flow Generation. We will seek to acquire one or more businesses that have the potential to generate strong, stable and increasing free cash flow. We intend to focus on one or more businesses that have predictable revenue streams and definable low working capital and capital expenditure requirements. We may also seek to prudently leverage this cash flow in order to enhance stockholder value.
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Significant operating advantage. We will seek to invest in companies that we believe possess not only proven business models and sustainable competitive advantages, but also unit economics that will yield significant economies of scale with continued growth.
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Strong Management. We will seek companies with strong management teams already in place. We will spend significant time assessing a company’s leadership and human fabric, and maximizing its efficiency over time.
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Accretive use of proceeds. We will seek investment opportunities where our capital will help fund growth, not just provide shareholder liquidity. We believe it is important that our transaction will help create shareholder value by funding the development of new products, increasing investment in sales and marketing or capacity expansion.
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Benefit from Being a Public Company. We intend to acquire one or more businesses that will benefit from being publicly-traded and can effectively utilize the broader access to capital and the public profile that are associated with being a publicly traded company.
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Appropriate Valuations and Upside Potential. We intend to apply rigorous, criteria-based, disciplined, and valuation-centric metrics. We intend to acquire a target on terms that we believe provide significant upside potential while seeking to limit risk to our investors.
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that from time to time our management may deem relevant. We shall not undertake our initial business combination with any entity with its principal business operations in China (including Hong Kong and Macau).
Initial Business Combination
So long as our securities are then listed on the Nasdaq, Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. Our board of directors will make the determination as to the fair market value of our initial business combination. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. Additionally, pursuant to Nasdaq rules, any initial business combination must be approved by a majority of our independent directors.
We anticipate structuring our initial business combination so that the post-transaction company in which our public stockholders own shares will own or acquire 100% of the equity interests or assets of the target business or businesses. We may, however, structure our initial business combination such that the post-transaction company owns or acquires less than 100% of such interests or assets of the target business in order to meet certain objectives of the prior owners of the target business, the target management team or stockholders or for other reasons, but we will only complete such business combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). Even if the post-transaction company owns or acquires 50% or more of the voting securities of the target, our stockholders prior to the business combination may collectively own a minority interest in the post-transaction company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock, shares or other equity interests of a target. In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to our initial business combination could own less than a majority of our issued and outstanding shares subsequent to our initial business combination. If less than 100% of the equity interests or assets of a target business or businesses are owned or acquired by the post-transaction company, the portion of such business or businesses that is owned or acquired is what will be valued for purposes of the 80% of net assets test. If the business combination involves more than one target business, the 80% of net assets test will be based on the aggregate value of all of the target businesses and we will treat the target businesses together as our initial business combination for purposes of a tender offer or for seeking stockholder approval, as applicable.
To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
In evaluating a prospective target business, we expect to conduct a thorough due diligence review which will encompass, among other things, meetings with incumbent management and employees, document reviews, inspection of facilities, as well as a review of financial, operational, legal 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 our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.
Sourcing of Potential Initial Business Combination Targets
Certain members of our management team have spent significant portions of their careers working with businesses in the clean transition sector and have developed a wide network of professional services contacts and business relationships in that industry. The members of our board of directors also have significant executive management and public company experience and bring additional relationships that further broaden our industry network.
This network has provided our management team with a flow of referrals that have resulted in numerous past transactions. We believe that the network of contacts and relationships of our management team will provide us with an important source of acquisition opportunities. In addition, we anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment market participants, private equity groups, investment banks, consultants, accounting firms, law firms and large business enterprises.
Members of our management team and our independent directors will directly or indirectly own founder shares and/or placement warrants following this offering and, accordingly, may have a conflict of
interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination. Further, each of our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination.
In addition, each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. We do not believe, however, that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our initial business combination.
In addition, our sponsor and our officers and directors may sponsor or form other special purpose acquisition companies similar to ours or may pursue other business or investment ventures during the period in which we are seeking an initial business combination. Our financial advisor is a sponsor of other special purposes acquisition companies. Any such companies, businesses or investments may present additional conflicts of interest in pursuing an initial business combination. However, we do not believe that any such potential conflicts would materially affect our ability to complete our initial business combination.
Status as a Public Company
We believe our structure will make us an attractive business combination partner to target businesses. As a public company, we offer a target business an alternative to the traditional initial public offering through a merger or other business combination with us. Following an initial business combination, we believe the target business would have greater access to capital and additional means of creating management incentives that are better aligned with stockholders’ interests than it would as a private company. A target business can further benefit by augmenting its profile among potential new customers and vendors and aid in attracting talented employees. In a business combination transaction with us, the owners of the target business may, for example, exchange their shares of stock in the target business for our shares of Class A common stock (or shares of a new holding company) or for a combination of our shares of Class A common stock and cash, allowing us to tailor the consideration to the specific needs of the sellers.
Although there are various costs and obligations associated with being a public company, we believe target businesses will find this method a more expeditious and cost-effective method to becoming a public company than the typical initial public offering. The typical initial public offering process takes a significantly longer period of time than the typical business combination transaction process, and there are significant expenses in the initial public offering process, including underwriting discounts and commissions, marketing and road show efforts that may not be present to the same extent in connection with an initial business combination with us.
Furthermore, once a proposed initial business combination is completed, the target business will have effectively become public, whereas an initial public offering is always subject to the underwriters’ ability to complete the offering, as well as general market conditions, which could delay or prevent the offering from occurring or could have negative valuation consequences. Following an initial business combination, we believe the target business would then have greater access to capital and an additional means of providing management incentives consistent with stockholders’ interests and the ability to use its shares as currency for acquisitions. Being a public company can offer further benefits by augmenting a company’s profile among potential new customers and vendors and aid in attracting talented employees.
While we believe that our structure and our management team’s backgrounds will make us an attractive business partner, some potential target businesses may view our status as a blank check company, such as our lack of an operating history and our ability to seek stockholder approval of any proposed initial business combination, negatively.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the independent registered public accounting
firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates equals or exceeds $250 million as of the end of the prior June 30th, or (2) our annual revenues equaled or exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30th.
Financial Position
With funds in the trust account available for an initial business combination initially in the amount of $97,000,000, after payment of $4,000,000 of deferred underwriting fees (or $111,550,000 after payment of $4,600,000 of deferred underwriting fees if the underwriters’ over-allotment option is exercised in full), in each case before fees and expenses associated with our initial business combination (other than deferred underwriting fees), we offer a target business a variety of options such as creating a liquidity event for its owners, providing capital for the potential growth and expansion of its operations or strengthening its balance sheet by reducing its debt or leverage ratio. Because we are able to complete our initial business combination using our cash, debt or equity securities, or a combination of the foregoing, we have the flexibility to use the most efficient combination that will allow us to tailor the consideration to be paid to the target business to fit its needs and desires. However, we have not taken any steps to secure third party financing and there can be no assurance it will be available to us.
Effecting Our Initial Business Combination
We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time following this offering. We intend to effectuate our initial business combination using cash from the proceeds of this offering and the sale of the placement warrants, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to backstop agreements we may enter into following the consummation of this offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.
If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemptions of our Class A common stock, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or
expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.
We may seek to raise additional funds through a private offering of debt or equity securities in connection with the completion of our initial business combination, and we may effectuate our initial business combination using the proceeds of such offering rather than using the amounts held in the trust account. In addition, we intend to target businesses larger than we could acquire with the net proceeds of this offering and the sale of the placement warrants, and may as a result be required to seek additional financing to complete such proposed initial business combination. Subject to compliance with applicable securities laws, we would expect to complete such financing only simultaneously with the completion of our initial business combination. In the case of an initial business combination funded with assets other than the trust account assets, our proxy materials or tender offer documents disclosing the initial business combination would disclose the terms of the financing and, only if required by applicable law or stock exchange requirements, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately, or through loans in connection with our initial business combination. At this time, we are not a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities or otherwise.
We have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. From the period commencing with our formation through the date of this prospectus, there have been no communications or discussions between any of our officers, directors or our sponsor and any of their potential contacts or relationships regarding a potential initial business combination. Additionally, we have not engaged or retained any agent or other representative to identify or locate any suitable acquisition candidate, to conduct any research or take any measures, directly or indirectly, to locate or contact a target business. Accordingly, there is no current basis for investors in this offering to evaluate the possible merits or risks of the target business with which we may ultimately complete our initial business combination. Although our management will assess the risks inherent in a particular target business with which we may combine, we cannot assure you that this assessment will result in our identifying all risks that a target business may encounter. Furthermore, some of those risks may be outside of our control, meaning that we can do nothing to control or reduce the chances that those risks will adversely impact a target business.
Sources of Target Businesses
We anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment bankers and investment professionals, as a result of being solicited by us by calls or mailings. These sources may also introduce us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read this prospectus and know what types of businesses we are targeting. Our officers and directors, as well as our sponsor and their affiliates, may also bring to our attention target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions. In addition, we expect to receive a number of deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors and our sponsor and their affiliates. While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any formal basis, we may engage these firms or other individuals in the future, in which event we may pay a finder’s fee, consulting fee, advisory fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of a transaction, in which case any such fee will be paid out of the funds held in the trust account. In no event, however, will our sponsor or any of our existing officers or directors be paid any finder’s fee, reimbursement, consulting fee, monies in respect of any payment of a loan or other compensation by the company prior to, or in connection with any services rendered for any services they render in order to effectuate, the completion of our initial business combination (regardless of the type of transaction that it is). None of our sponsor, executive officers or directors, or
any of their respective affiliates, will be allowed to receive any compensation, finder’s fees or consulting fees from a prospective business combination target in connection with a contemplated initial business combination except as set forth herein. We have agreed to pay our sponsor, a total of $10,000 per month, for up to 12 months, for office space, utilities and secretarial and administrative support and to reimburse our sponsor for any out-of-pocket expenses actually incurred related to identifying, investigating, and completing an initial business combination. Some of our officers and directors may enter into employment or consulting agreements with the post-transaction company following our initial business combination. The presence or absence of any such fees or arrangements will not be used as a criterion in our selection process of an initial business combination candidate.
We are not prohibited from pursuing an initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors or making the initial business combination through a joint venture or other form of shared ownership with our sponsor, officers or directors. In the event we seek to complete our initial business combination with an initial business combination target that is affiliated with our sponsor, officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that such an initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.
As more fully discussed in the section of this prospectus entitled “Management — Conflicts of Interest,” if any of our officers or directors becomes aware of an initial business combination opportunity that falls within the line of business of any entity to which he or she has pre-existing fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.
Selection of a Target Business and Structuring of our Initial Business Combination
Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. The fair market value of our initial business combination will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation, a valuation based on trading multiples of comparable public businesses or a valuation based on the financial metrics of M&A transactions of comparable businesses. If our board of directors is not able to independently determine the fair market value of our initial business combination, we will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. While we consider it unlikely that our board of directors will not be able to make an independent determination of the fair market value of our initial business combination, it may be unable to do so if it is less familiar or experienced with the business of a particular target or if there is a significant amount of uncertainty as to the value of a target’s assets or prospects. We do not intend to purchase multiple businesses in unrelated industries in conjunction with our initial business combination. Subject to this requirement, our management will virtually have unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations.
In any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be taken into account for purposes of Nasdaq’s 80% fair market value test. There is no basis for investors in this offering to evaluate the possible merits or risks of any target business with which we may ultimately complete our initial business combination.
To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.
In evaluating a prospective business target, we expect to conduct a thorough due diligence review, which may encompass, among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities, as well as a review of financial and other information that will be made available to us.
The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.
We shall not undertake our initial business combination with any entity with its principal business operations in China (including Hong Kong and Macau).
Lack of Business Diversification
For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. In addition, we intend to focus our search for an initial business combination in a single industry. By completing our initial business combination with only a single entity, our lack of diversification may:
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subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact on the particular industry in which we operate after our initial business combination, and
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cause us to depend on the marketing and sale of a single product or limited number of products or services.
Limited Ability to Evaluate the Target’s Management Team
Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’s management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. The determination as to whether any of the members of our management team will remain with the combined company will be made at the time of our initial business combination. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.
We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination.
Following an 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.
Stockholders May Not Have the Ability to Approve Our Initial Business Combination
We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC. However, we will seek stockholder approval if it is required by applicable law or applicable stock exchange listing requirements, or we may decide to seek stockholder approval for business or other legal reasons. Presented in the table below is a graphic explanation of the types of initial business combinations we may consider and whether stockholder approval is currently required under Delaware law for each such transaction.
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Type of Transaction
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Whether
Stockholder
Approval is
Required
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Purchase of assets
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No |
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Purchase of stock of target not involving a merger with the company
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No |
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Merger of target into a subsidiary of the company
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No |
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Merger of the company with a target
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Yes |
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Under Nasdaq’s listing rules, stockholder approval would be required for our initial business combination if, for example:
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we issue shares of Class A common stock that will be equal to or in excess of 20% of the number of shares of our Class A common stock then outstanding (other than in a public offering);
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any of our directors, officers or substantial stockholders (as defined by Nasdaq rules) has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the target business or assets to be acquired or otherwise and the present or potential issuance of common stock could result in an increase in outstanding common stock or voting power of 5% or more; or
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the issuance or potential issuance of common stock will result in our undergoing a change of control.
Permitted Purchases of our Securities
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, initial stockholders, directors, officers, advisors or their affiliates may purchase public shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination. There is no limit on the number of shares our initial stockholders, directors, officers or their affiliates may purchase in such transactions, subject to compliance with applicable law and Nasdaq rules. However, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material nonpublic information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. We do not currently anticipate that such purchases, if any, would constitute a tender offer subject to the tender offer rules under the Exchange Act or a going-private transaction subject to the going-private rules under the Exchange Act; however, if the purchasers determine at the time of any such purchases that the purchases are subject to such rules, the purchasers will comply with such rules. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements. None of the funds held in the trust account will be used to purchase shares or public warrants in such transactions prior to completion of our initial business combination.
The purpose of any such purchases of shares could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of
public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of our shares of Class A common stock, rights or warrants may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Our sponsor, officers, directors and/or their affiliates anticipate that they may identify the stockholders with whom our sponsor, officers, directors or their affiliates may pursue privately negotiated purchases by either the stockholders contacting us directly or by our receipt of redemption requests submitted by stockholders following our mailing of proxy materials in connection with our initial business combination. To the extent that our sponsor, officers, directors or their affiliates enter into a private purchase, they would identify and contact only potential selling stockholders who have expressed their election to redeem their shares for a pro rata share of the trust account or vote against our initial business combination, whether or not such stockholder has already submitted a proxy with respect to our initial business combination. Our sponsor, officers, directors or their affiliates will only purchase public shares if such purchases comply with Regulation M under the Exchange Act and the other federal securities laws.
Any purchases by our sponsor, officers, directors and/or their affiliates who are affiliated purchasers under Rule 10b-18 under the Exchange Act will only be made to the extent such purchases are able to be made in compliance with Rule 10b-18, which is a safe harbor from liability for manipulation under Section 9(a)(2) and Rule 10b-5 of the Exchange Act. Rule 10b-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors and/or their affiliates will not make purchases of common stock if the purchases would violate Section 9(a)(2) or Rule 10b-5 of the Exchange Act. We expect that any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchases are subject to such reporting requirements.
Redemption Rights for Public Stockholders upon Completion of our Initial Business Combination
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is initially anticipated to be approximately $10.10 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination. The anchor investors will not be entitled to redemption rights with respect to any founder shares held by them in connection with the completion of our business combination.
Manner of Conducting Redemptions
We will provide our public stockholders with the opportunity to redeem all or a portion of their public shares of Class A common stock upon the completion of our initial business combination either (i) in connection with a stockholder meeting called to approve the initial business combination or (ii) by means of a tender offer. The decision as to whether we will seek stockholder approval of a proposed initial business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under the law or stock exchange listing requirement. Under Nasdaq rules, asset acquisitions and stock purchases would not typically require stockholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our outstanding common stock or seek to amend our amended and restated certificate of incorporation would
require stockholder approval. If we structure an initial business combination with a target company in a manner that requires stockholder approval, we will not have discretion as to whether to seek a stockholder vote to approve the proposed initial business combination. We may conduct redemptions without a stockholder vote pursuant to the tender offer rules of the SEC unless stockholder approval is required by law or stock exchange listing requirements or we choose to seek stockholder approval for business or other legal reasons. So long as we obtain and maintain a listing for our securities on Nasdaq, we will be required to comply with such rules.
If stockholder approval of the transaction is required by law or stock exchange listing requirement, or we decide to obtain stockholder approval for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
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conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and
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file proxy materials with the SEC.
In the event that we seek stockholder approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public stockholders with the redemption rights described above upon completion of the initial business combination.
If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock present and entitled to vote at the meeting to approve the initial business combination when a quorum is present are voted in favor of the initial business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting. Our initial stockholders will count toward this quorum and pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote any founder shares held by them and any public shares acquired during or after this offering (including in open market and privately negotiated transactions) in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. As a result, in addition to our initial stockholders’ founder shares, we would need 512,501 or 5.13%, of the 10,000,000 public shares sold in this offering to be voted in favor of an initial business combination (assuming only the minimum number of shares representing a quorum are voted) in order to have our initial business combination approved (assuming the over-allotment option is not exercised and that the initial stockholders do not purchase any units in this offering or units or shares in the after-market and the representative shares are voted in favor of the initial business combination). In the event that all shares of our outstanding common stock are voted, we would need 3,675,001 or 36.75%, of the 10,000,000 public shares sold in this offering to be voted in favor of an initial business combination in order to have our initial business combination approved (assuming the over-allotment option is not exercised, and that the initial stockholders do not purchase any units in this offering or units or shares in the after-market and the representative shares are voted in favor of the initial business combination). We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial stockholders, may make it more likely that we will consummate our initial business combination. Each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction. The anchor investors will not be entitled to redemption rights with respect to any founder shares held by them, in connection with the completion of our initial business combination, but they will be entitled to such rights with respect to any public shares held by them.
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation:
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conduct the redemptions pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and
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file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination
and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies.
Upon the public announcement of our initial business combination, we or our sponsor will terminate any plan established in accordance with Rule 10b5-1 to purchase shares of our Class A common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, we will not redeem any public shares unless our net tangible assets will be at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are 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 our initial business combination. If public stockholders tender more shares than we have offered to purchase, we will withdraw the tender offer and not complete the initial business combination.
Our amended and restated certificate of incorporation will provide that we may not redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are 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 our initial business combination. For example, the proposed initial business combination may require: (i) cash consideration to be paid to the target or its owners, (ii) cash to be transferred to the target for working capital or other general corporate purposes or (iii) the retention of cash to satisfy other conditions in accordance with the terms of the proposed initial business combination. In the event the aggregate cash consideration we would be required to pay for all shares of Class A common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed initial business combination exceed the aggregate amount of cash available to us, we will not complete the initial business combination or redeem any shares, and all shares of Class A common stock submitted for redemption will be returned to the holders thereof.
In the event that the anchor investors purchase all of the units that they have expressed an interest in purchasing in this offering, hold all such units until prior to consummation of our initial business combination and vote their public shares in favor of our initial business combination, in addition to the founder shares, no affirmative votes from other public stockholders would be required to approve our initial business combination. However, because our anchor investors are not obligated to continue owning any public shares following the closing and are not obligated to vote any public shares in favor of our initial business combination, we cannot assure you that any of these anchor investors will be stockholders at the time our stockholders vote on our initial business combination, and, if they are stockholders, we cannot assure you as to how such anchor investors will vote on any business combination.
Limitation on Redemption upon Completion of our Initial Business Combination if we Seek Stockholder Approval
Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in this offering, which we refer to as the “Excess Shares.” Such restriction shall also be applicable to our affiliates. We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed initial business combination as a means to force us or our management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. By limiting our stockholders’ ability to redeem no more than 15% of the shares sold in this offering without our prior consent, we believe we will limit the ability of a small group of stockholders to unreasonably attempt to block our ability to complete our initial
business combination, particularly in connection with an initial business combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination.
Tendering Stock Certificates in Connection with Redemption Rights
We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent up to two business days prior to the vote on the proposal to approve the initial business combination, or to deliver their shares to the transfer agent electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the holder’s option. The proxy materials that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements. Accordingly, a public stockholder would have up to two days prior to the vote on the initial business combination to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise period, it is advisable for stockholders to use electronic delivery of their public shares.
There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System. The transfer agent will typically charge the tendering broker $80.00 and it would be up to the broker whether or not to pass this cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights regardless of the timing of when such delivery must be effectuated.
The foregoing is different from the procedures used by many special purpose acquisition companies. In order to perfect redemption rights in connection with their business combinations, many blank check companies would distribute proxy materials for the stockholders’ vote on an initial business combination, and a holder could simply vote against a proposed initial business combination and check a box on the proxy card indicating such holder was seeking to exercise his or her redemption rights. After the initial business combination was approved, the company would contact such stockholder to arrange for him or her to deliver his or her certificate to verify ownership. As a result, the stockholder then had an “option window” after the completion of the initial business combination during which he or she could monitor the price of the company’s stock in the market. If the price rose above the redemption price, he or she could sell his or her shares in the open market before actually delivering his or her shares to the company for cancellation. As a result, the redemption rights, to which stockholders were aware they needed to commit before the stockholder meeting, would become “option” rights surviving past the completion of the initial business combination until the redeeming holder delivered its certificate. The requirement for physical or electronic delivery prior to the meeting ensures that a redeeming holder’s election to redeem is irrevocable once the initial business combination is approved.
Any request to redeem such shares, once made, may be withdrawn at any time up to the date of the stockholder meeting. Furthermore, if a holder of a public share delivered its certificate in connection with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights, such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after the completion of our initial business combination.
If our initial business combination is not approved or completed for any reason, then our public stockholders who elected to exercise their redemption rights would not be entitled to redeem their shares for the applicable pro rata share of the trust account. In such case, we will promptly return any certificates delivered by public holders who elected to redeem their shares.
If our initial proposed initial business combination is not completed, we may continue to try to complete an initial business combination with a different target until 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the
closing of this offering. In the event we decide to exercise the extension option, investors will not have voting rights nor redemption rights in connection with such additional three-month extensions.
Redemption of Public Shares and Liquidation if no Initial Business Combination
Our amended and restated certificate of incorporation will provide that we will have only 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, only 18 months, from the closing of this offering to complete our initial business combination. In the event we decide to exercise the extension option, investors will not have voting rights nor redemption rights in connection with such additional three-month extensions. If we are unable to complete our initial business combination within such 12-month period (or up to 18-month period, as applicable), we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants and rights, which will expire worthless if we fail to complete our initial business combination within the 12-month period (or up to 18-month period, as applicable).
Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have waived their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering. The anchor investors will not be entitled to rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within the prescribed time frame. However, if our sponsor, officers, directors or anchor investors acquire public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering.
Our sponsor, officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business or certain amendments to our charter prior thereto combination or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes divided by the number of then outstanding public shares. In the event we decide to exercise the extension option, investors will not have voting rights nor redemption rights in connection with such additional three-month extensions. However, we may not redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions (so that we are not subject to the SEC’s “penny stock” rules). If this optional redemption right
is exercised with respect to an excessive number of public shares such that we cannot satisfy the net tangible asset requirement (described above), we would not proceed with the amendment or the related redemption of our public shares at such time.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $525,000 of proceeds held outside the trust account, although we cannot assure you that there will be sufficient funds for such purpose. We will depend on sufficient interest being earned on the proceeds held in the trust account to pay any tax obligations we may owe. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay taxes, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds of this offering and the sale of the placement warrants, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received by stockholders upon our dissolution would be approximately $10.10. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have higher priority than the claims of our public stockholders. We cannot assure you that the actual per-share redemption amount received by stockholders will not be substantially less than $10.10. Under Section 281(b) of the DGCL, our plan of dissolution must provide for all claims against us to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. These claims must be paid or provided for before we make any distribution of our remaining assets to our stockholders. While we intend to pay such amounts, if any, we cannot assure you that we will have funds sufficient to pay or provide for all creditors’ claims.
Although we will seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. Marcum, our independent registered public accounting firm, and the underwriters of the offering, will not execute agreements with us waiving such claims to the monies held in the trust account.
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. Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.10 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.10 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our sponsor to reserve for such indemnification obligations, nor have we independently verified whether our sponsor has sufficient funds to satisfy its indemnity obligations and believe that our
sponsor’s only assets are securities of our company. Therefore, we cannot assure you that our sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the trust account are reduced below (i) $10.10 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. We have not asked our sponsor to reserve for such indemnification obligations and we cannot assure you that our sponsor would be able to satisfy those obligations. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be less than $10.10 per public share.
We will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. Our sponsor will also not be liable as to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. We will have access to up to approximately $525,000 from the proceeds of this offering and the sale of the placement warrants with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000). In the event that we liquidate and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from our trust account could be liable for claims made by creditors. In the event that our offering expenses exceed our estimate of $675,000, we may fund such excess with funds from the funds not to be held in the trust account. In such case, the amount of funds we intend to be held outside the trust account would decrease by a corresponding amount. Conversely, in the event that the offering expenses are less than our estimate of $675,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding amount.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering may be considered a liquidating distribution under Delaware law. If the corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then
pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we are unable to complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following our 12th month (or up to 18th month, as applicable) and, therefore, we do not intend to comply with those procedures. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such date.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. As described above, pursuant to the obligation contained in our underwriting agreement, we will seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account. As a result of this obligation, the claims that could be made against us are significantly limited and the likelihood that any claim that would result in any liability extending to the trust account is remote. Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below (i) $10.10 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor will not be responsible to the extent of any liability for such third-party claims.
If we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return $10.10 per share to our public stockholders. Additionally, if we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. Furthermore, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or may have acted in bad faith, thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors. We cannot assure you that claims will not be brought against us for these reasons.
Our public stockholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i) the completion of our initial business combination, (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend any provisions of our amended and
restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, and (iii) the redemption of all of our public shares if we are unable to complete our business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, subject to applicable law. In no other circumstances will a stockholder have any right or interest of any kind to or in the trust account. In the event we seek stockholder approval in connection with our initial business combination, a stockholder’s voting in connection with the initial business combination alone will not result in a stockholder’s redeeming its shares to us for an applicable pro rata share of the trust account. Such stockholder must have also exercised its redemption rights as described above. These provisions of our amended and restated certificate of incorporation, like all provisions of our amended and restated certificate of incorporation, may be amended with a stockholder vote.
Comparison of Redemption or Purchase Prices in Connection with Our Initial Business Combination and if We Fail to Complete Our Initial Business Combination
The following table compares the redemptions and other permitted purchases of public shares that may take place in connection with the completion of our initial business combination and if we are unable to complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering.
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Redemptions in Connection
with our Initial Business
Combination
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Other Permitted Purchases of
Public Shares
by us or our Affiliates
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Redemptions if we fail to
Complete an Initial
Business Combination
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Calculation of redemption price
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Redemptions at the time of our initial business combination may be made pursuant to a tender offer or in connection with a stockholder vote. The redemption price will be the same whether we conduct redemptions pursuant to a tender offer or in connection with a stockholder vote. In either case, our public stockholders may redeem their public shares for cash equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination (which is initially anticipated to be $10.10 per public share), including interest earned on the funds held in the trust account and not previously released to us to pay our taxes divided by the number of then outstanding public shares, subject to the limitation that no redemptions will take place if all of the redemptions would cause our net tangible assets to be less than $5,000,001 as described elsewhere in this prospectus and any limitations (including but not limited to cash requirements) agreed to in connection with the negotiation of terms of a proposed initial business combination.
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If we seek stockholder approval of our initial business combination, our sponsor, directors, officers or their affiliates may purchase shares in privately negotiated transactions or in the open market prior to or following completion of our initial business combination. There is no limit to the prices that our sponsor, directors, officers or their affiliates may pay in these transactions.
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If we are unable to complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, we will redeem all public shares at a per-share price, payable in cash, equal to the aggregate amount, then on deposit in the trust account (which is initially anticipated to be $10.10 per public share) including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares. In the event we decide to exercise the extension option, investors will not have voting rights nor redemption rights in connection with such additional three-month extensions.
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Redemptions in Connection
with our Initial Business
Combination
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Other Permitted Purchases of
Public Shares
by us or our Affiliates
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Redemptions if we fail to
Complete an Initial
Business Combination
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Impact to remaining stockholders
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The redemptions in connection with our initial business combination will reduce the book value per share for our remaining stockholders, who will bear the burden of the deferred underwriting commissions and taxes payable.
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If the permitted purchases described above are made there would be no impact to our remaining stockholders because the purchase price would not be paid by us.
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The redemption of our public shares if we fail to complete our initial business combination will reduce the book value per share for the shares held by our initial stockholders, who will be our only remaining stockholders after such redemptions.
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Comparison of This Offering to Those of Blank Check Companies Subject to Rule 419
The following table compares the terms of this offering to the terms of an offering by a blank check company subject to the provisions of Rule 419. This comparison assumes that the gross proceeds, underwriting commissions and underwriting expenses of our offering would be identical to those of an offering undertaken by a company subject to Rule 419, and that the underwriters will not exercise their over-allotment option. None of the provisions of Rule 419 apply to our offering.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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Escrow of offering proceeds
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$101,000,000 of the net proceeds of this offering and the sale of the placement warrants will be deposited into a trust account in the United States with Continental Stock Transfer & Trust Company acting as trustee and J.P. Morgan Securities LLC acting as investment manager.
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Approximately $85,050,000 of the offering proceeds would be deposited into either an escrow account with an insured depositary institution or in a separate bank account established by a broker-dealer in which the broker-dealer acts as trustee for persons having the beneficial interests in the account.
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Investment of net proceeds
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$101,000,000 of the net offering proceeds and the sale of the placement warrants held in trust will be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations.
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Proceeds could be invested only in specified securities such as a money market fund meeting conditions of the Investment Company Act or in securities that are direct obligations of, or obligations guaranteed as to principal or interest by, the United States.
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Receipt of interest on escrowed funds
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Interest on proceeds from the trust account to be paid to stockholders is reduced by (i) any taxes paid or payable, and (ii) in the event of our liquidation for failure to complete our initial business combination within the allotted time, up to $100,000 of net interest that may be released to us should we have no or insufficient working capital to fund the costs and expenses of our dissolution and liquidation.
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Interest on funds in escrow account would be held for the sole benefit of investors, unless and only after the funds held in escrow were released to us in connection with our completion of a business combination.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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Limitation on fair value or net assets of target business
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Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination.
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The fair value or net assets of a target business must represent at least 80% of the maximum offering proceeds.
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Trading of securities issued
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We expect the units will begin trading on or promptly after the date of this prospectus. The Class A common stock, rights and warrants comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless the representative informs us of its decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. We will file the Current Report on Form 8-K promptly after the closing of this offering, which is anticipated to take place three business days from the date of this prospectus. If the over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, an additional Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the over-allotment option.
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No trading of the units or the underlying Class A common stock, rights and warrants would be permitted until the completion of a business combination. During this period, the securities would be held in the escrow or trust account.
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Exercise of the warrants
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The warrants cannot be exercised until the later of the date of the consummation of our initial business combination and 12 months from the closing of this offering.
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The warrants could be exercised prior to the completion of a business combination, but securities received and cash paid in connection with the exercise would be deposited in the escrow or trust account.
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Election to remain an investor
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We will provide our public stockholders with the opportunity to redeem their public shares for cash equal to their pro rata share of the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of our initial business combination, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, upon the completion of our initial business combination, subject to
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A prospectus containing information pertaining to the business combination required by the SEC would be sent to each investor. Each investor would be given the opportunity to notify the company in writing, within a period of no less than 20 business days and no more than 45 business days from the effective date of a post-effective amendment to the company’s registration statement, to decide if it
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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the limitations described herein. We may not be required by applicable law or stock exchange listing requirements to hold a stockholder vote. We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. If we are not required by applicable law or stock exchange listing requirements and do not otherwise decide to hold a stockholder vote, we will, pursuant to our amended and restated certificate of incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under the SEC’s proxy rules. In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. If, however, we hold a stockholder vote, we will, like many blank check companies, offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules.
If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. Additionally, each public stockholder may elect to redeem their public shares irrespective of whether they vote for or against the proposed transaction. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting.
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elects to remain a stockholder of the company or require the return of its investment. If the company has not received the notification by the end of the 45th business day, funds and interest or dividends, if any, held in the trust or escrow account are automatically returned to the stockholder. Unless a sufficient number of investors elect to remain investors, all funds on deposit in the escrow account must be returned to all of the investors and none of the securities are issued.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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Business combination deadline
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If we are unable to complete an initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
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If a business combination has not been completed within 18 months after the effective date of the company’s registration statement, funds held in the trust or escrow account are returned to investors.
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Limitation on redemption rights of stockholders holding more than 15% of the shares sold in this offering if we hold a stockholder vote
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If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder (including our affiliates), together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to Excess Shares (more than an aggregate of 15%
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Many blank check companies provide no restrictions on the ability of stockholders to redeem shares based on the number of shares held by such stockholders in connection with an initial business combination.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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of the shares sold in this offering). Our public stockholders’ inability to redeem Excess Shares will reduce their influence over our ability to complete our initial business combination and they could suffer a material loss on their investment in us if they sell any Excess Shares in open market transactions.
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Tendering stock certificates in connection with redemption rights
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We may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent up to two business days prior to the vote on the proposal to approve the initial business combination, or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s DWAC System, at the holder’s option. The proxy materials that we will furnish to holders of our public shares in connection with our initial business combination will indicate whether we are requiring public stockholders to satisfy such delivery requirements. Accordingly, a public stockholder would have up to two days prior to the vote on the initial business combination to tender its shares if it wishes to seek to exercise its redemption rights.
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In order to perfect redemption rights in connection with their business combinations, holders could vote against a proposed initial business combination and check a box on the proxy card indicating such holders were seeking to exercise their redemption rights. After the business combination was approved, the company would contact such stockholders to arrange for them to deliver their certificate to verify ownership.
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Release of funds
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Except with respect to interest earned on the funds held in the trust account that may be released to us to pay our tax obligations and up to $100,000 of interest that may be used for our dissolution expenses, the proceeds held in the trust account will not be released until the earliest to occur of: (i) the completion of our initial business combination, (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we
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The proceeds held in the escrow account are not released until the earlier of the completion of a business combination or the failure to effect a business combination within the allotted time.
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Terms of Our Offering
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Terms Under a Rule 419 Offering
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decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity and (iii) the redemption of 100% of our public shares if we are unable to complete an within the prescribed time frame (subject to the requirements of applicable law). On the completion of our initial business combination, all amounts held in the trust account will be released to us, less amounts released to a separate account controlled by the trustee for disbursal to redeeming stockholders. We will use these funds to pay amounts due to any public stockholders who exercise their redemption rights as described above under “Redemption rights for public stockholders upon completion of our initial business combination,” to pay the underwriters their deferred underwriting commissions, to pay all or a portion of the consideration payable to the target or owners of the target of our initial business combination and to pay other expenses associated with our initial business combination.
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Competition
In identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic business combinations. 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 we do. 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 initial business combination of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding rights and warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Facilities
Our executive offices are located at 419 Webster Street, Monterey, California, and our telephone number is (831) 649-7388.
Commencing on the date of this prospectus, we have agreed to pay our sponsor, a total of $10,000 per month, for up to 12 months, for office space, utilities and secretarial and administrative support. We consider our current office space adequate for our current operations.
Employees
We currently have three officers. These individuals are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary, in the exercise of their respective business judgement, to our affairs until we have completed our initial business combination. The amount of time they will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the stage of the initial business combination process we are in. We do not intend to have any full-time employees prior to the completion of our initial business combination. We do not have an employment agreement with any member of our management team.
Periodic Reporting and Financial Information
We will register our units, Class A common stock, rights and warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual reports will contain financial statements audited and reported on by our independent registered public accountants.
We will provide stockholders with audited financial statements of the prospective target business as part of the tender offer materials or proxy solicitation materials sent to stockholders to assist them in assessing the target business. In all likelihood, these financial statements will need to be prepared in accordance with, or reconciled to, GAAP, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statement requirements may limit the pool of potential targets we may conduct an initial business combination with because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential business combination candidate will have financial statements prepared in accordance with GAAP or that the potential target business will be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that these requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential business combination candidates, we do not believe that this limitation will be material.
We will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2022 as required by the Sarbanes-Oxley Act. Only in the event we are deemed to be a large accelerated filer or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to have our internal control procedures audited. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such business combination. Prior to the date of this prospectus, we will file a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act. As a result, we will be subject to the rules and regulations promulgated under the Exchange Act. We have no current intention of filing a Form 15 to suspend our reporting or other obligations under the Exchange Act prior or subsequent to the consummation of our initial business combination.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our shares of Class A common stock that are held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. References herein to “emerging growth company” will have the meaning associated with it in the JOBS Act.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates equals or exceeds $250 million as of the end of that year’s second fiscal quarter, or (2) our annual revenues equaled or exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter.
Legal Proceedings
There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.
MANAGEMENT
Officers and Directors
Our officers and directors are as follows:
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Name
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Age
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Position
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Bala Padmakumar
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61
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Chief Executive Officer and Chairman of the Board
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Vivek Soni
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63
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Executive Vice President and Director
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Daniel Davis
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56
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Chief Financial Officer
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Leela Gray
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55
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Director
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Kathy Cuocolo
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70
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Director
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Stephen Markscheid
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68
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Director
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Bala Padmakumar, our Chief Executive Officer and the Chairman of our board of directors since September 2021, is a broad based entrepreneur and technologist with a strong background in strategic partnerships, product and business development, technology and operations, private equity, and venture capital environments. Since August 2020, Mr. Padmakumar has been a partner at Advantary LLC, where he specializes in business development and advises on strategic matters. Since January 2021, he has been actively partnering with the Asia practice of FocalPoint Partners LLC, a boutique investment bank on deal flow diligence in the clean transition space in Asia. Since June 2021, he has been an advisor to the Chief Executive Officer of NTherma Corporation on strategic relationships and capital raising activities. From July 2016 to December 2021, Mr. Padmakumar has also advised on deal flow and provided operational support to portfolio companies for a fund set up to support SK Telecom Co., Ltd.’s strategic interests. From 2007 through 2010, Mr. Padmakumar was a Venture Partner at X/Seed Capital Management, LLC, where he focused on transactions in the cleantech and materials sectors. Additionally, from 2011 to October 2020, Mr. Padmakumar was the Chief Executive Officer at Amperics, Inc., a developer and vendor of high energy density ultracap hybrid storage systems. Mr. Padmakumar also has extensive experience in the clean energy sectors, having been an advisor to Lionrock Batteries Ltd., which creates flexible batteries and high performance separator technology since 2019, an advisor to the board and CEO of Hyperscale Data Center Company, a company focused on energy usage efficiency in hyperscale data centers from 2018 to 2020, and an advisor to the chairman of Advanced Systems Automation Limited in Singapore, where he advised on issues surrounding urban transportation, High Energy Density Li Ion battery (NMC technology) and 3D printing technology from 2017 to 2019. Mr. Padmakumar also has broad experience advising on capital raising and corporate strategy, serving as a mentor to OneValley Inc., a global entrepreneurship platform for individuals, startups, and corporations seeking innovation and accelerated growth, and as an advisor to several early stage companies from audio technologies to SaaS products. Mr. Padmakumar has a Bachelor’s Degree in Technology from the University of Madras in Chemical Engineering and a Master of Science Degree in Chemical Engineering from Stanford University.
Vivek Soni, our Executive Vice President and a member of our board of directors since September 2021, has held board and crucial managerial positions at numerous businesses within the cleantech and venture space. Dr. Soni has been a member of Prithvi Ventures LLC since January 2021, a fund for investments in innovative cleantech companies, and has been a member of S CAP ClimateTech Opportunity Fund, LP, since July 2021, which is a late stage Climatech fund. With these funds, he has played a vital role in investing $22 million in 2021 in the clean transition sector that includes investments in energy storage, electrical vehicle (EV) technology, renewable energy, and novel materials companies. Since September 2017, Dr. Soni has been on the Advisory Board of Reading Municipal Light Department, the largest municipal electric utility in Massachusetts and currently is the Vice Chair. Since 2016, he has also been a Managing Director for TiE Boston Angels, where he created a robust process for syndication and due diligence, and also grew investments threefold over five years. From 2007 to 2011, he was a Venture Advisor to Nomura International plc’s New and Clean Energy Technology Ventures fund, a late stage Cleantech VC fund. Since 2006, Dr. Soni has also been the Managing Partner of Boston Cleantech, a company that enables investors and entrepreneurs to grow businesses in cleantech, energy, chemicals, materials and manufacturing. His responsibilities include promoting early-stage companies and impact investing in cleantech, carbon capture and sequestration, and solar energy. Dr. Soni is also a member of the boards of directors of A.T.E Private
Limited, A.T.E. Enterprises Private Limited and A.T.E. Huber Envirotech Private Limited, where he provides expertise on governance, technology, innovation, cleantech, fundraising, acquisitions and global expansion. Dr. Soni holds a Bachelor’s Degree in Technology from the Indian Institute of Technology, New Delhi, India, a Master of Science Degree in Polymer Science & Engineering from the University of Massachusetts, Amherst, a Ph.D. in Polymer Science & Engineering from the University of Massachusetts, Amherst, and an Executive Development Program certificate from the Kellogg School of Management at Northwestern University.
Daniel Davis, our Chief Financial Officer since 2021, is a skilled financial executive with a proven background in managing and growing companies. Mr. Davis has served as the Chief Administrative Officer of SeQure Dx, Inc., a company focused on providing off-target diagnostics in gene editing since April 2021. Prior to that, from 2007 through April 2020, Mr. Davis was a Director in the Life Sciences and Technology Practice at Accounting Management Solutions (“AMS”), and subsequently, following its acquisition, at CliftonLarsonAllen LLP, an accountancy firm. At AMS, Mr. Davis founded and managed the life sciences practice and provided strategic consulting on complex engagements surrounding fundraising and mergers and acquisitions strategies. Mr. Davis is also co-founder, acting Chief Financial Officer and Director of AngioWave Imaging, LLC, where he led an over-subscribed seed round, and was a key contributor to the strategic plan and drove the forecasting for the five-year plan. Mr. Davis received his B.A. in Political Science from Brown University and his M.B.A from the University of Pennsylvania, Wharton School of Business.
Leela Gray, a member of our board of directors since 2021, is a retired Brigadier General with 30 years in the U.S. Army, including seven in the U.S. Army Reserve while in corporate positions developing business expertise. Between November 2018 and May 2019, Ms. Gray served as Strategic Advisor to United States Army Cyber Command, playing a key role in innovating and modernizing cyber policy shaped by her market and stakeholder insights, including her tenure at the Department of State, where she created interagency and international partner initiatives in Cyber/Information Warfare. Prior to that, from August 2016 to July 2018, Ms. Gray served as a Deputy Commanding General at the U.S. Army Central Command guiding strategies to transform operations and logistics. As a National Security senior executive with Top Secret clearance, Ms. Gray represented the United States internationally, shaped policy, and advised logistics and governance, building on a global perspective that also included two combat operations and one peacekeeping mission. Since June 2020, Ms. Gray has been a mentor at Tampa Bay WAVE’s Tech Accelerator programs. From July 2019 to June 2021, Ms. Gray served on the Executive Board of Alpha Omicron Pi Fraternity, a $100 million international nonprofit with over 100,000 members. Ms. Gray currently serves on the Advisory Board of Empower Rideshare, SaaS ridesharing company alternative to Uber and Lyft and holds the National Association of Corporate Directors (NACD) Directorship Certification™. Ms. Gray earned a Master of Strategic Studies from the United States Army War College, an M.A. in Journalism from Ball State University, and a B.A. in Communications from Elon University.
Kathy Cuocolo, a member of our board of directors since 2021, is a versatile executive and director with demonstrated success in developing and managing financial services operations on a global basis. Ms. Cuocolo is currently a director and Audit Chair of Greenbacker Renewable Energy Company LLC and a director at Syntax ETF Trust. Her prior directorships include President and Director of The China Fund, Inc., which invests primarily in private placements in mainland China, Chairperson of Select Sector ETF Trust, and director of Guardian Life family of funds. From 2014 through March 2020, Ms. Cuocolo was the president of Syntax Advisors, LLC where she was responsible for all aspects of business operations and the development of its financial management products. Prior to that, from 2008 until 2013, Ms. Cuocolo was a Managing Director and Division Head for the Mutual Fund and global ETF Services for The Bank of New York Mellon Corporation, where she was responsible for the operations and strategic planning for these business lines. Prior to that, from 1982 until 2003, Ms. Cuocolo served in various roles at State Street Corporation, including as an Executive Vice President, Division Head of Investor Products and Services, where she was responsible for operations and strategic planning. Ms. Cuocolo was a member of the corporations’ Executive Operating Committee responsible for all aspects of business strategy. During her 22 years at State Street, Ms. Cuocolo led the firm to become the largest fund administrator in the U.S., with over $1.2 trillion in assets. Prior to State Street, Ms. Cuocolo was an auditor at PriceWaterhouseCoopers LLP. Ms. Cuocolo received her B.A. in Accounting, summa cum laude, from Boston College, and holds a Masters Professional Director Certificate from the American College of Corporate Governance. Ms. Cuocolo received her CPA license in the Commonwealth of Massachusetts in 1981.
Stephen Markscheid, a member of our board of directors since 2021, is currently the Chairman of Still Waters Green Technology Limited, a UK based renewable energy developer since December 2019 and currently serves as a director of Fanhua, Inc. (Nasdaq: FANH), JinkoSolar Holding Co., Ltd. (NYSE: JKS), Zhongjin Technology Services Group Company Limited (HKEX: Stock Code 08295), Xiaobai Maimai Inc. (Nasdaq: HX), UGE International Ltd. (TSXV: UGE.V), and the Global Corporate Social Responsibility Foundation. In addition, Mr. Markscheid is currently the Chief Financial Officer of ChildWise International Corporation and serves as a Board Advisor to several companies, including NanoGraf Corporation, Intelligent Generation LLC, SeedVantage LLC, Clean Energy Trust, and Kearsarge Energy L.P. Mr. Markscheid also serves as a trustee emeritus of Princeton-in-Asia. From 1998 until 2006, Mr. Markscheid served as a Director of Business Development and Senior Vice President and led GE Capital’s business development activities in China and the Asia Pacific region, primarily focusing on acquisitions and direct investments. Prior to GE, Mr. Markscheid worked with the Boston Consulting Group throughout Asia. Mr. Markscheid was a banker for ten years in London, Chicago, New York, Hong Kong and Beijing with Chase Manhattan Bank and First National Bank of Chicago. Mr. Markscheid began his career with the US-China Business Council, in Washington D.C. and Beijing. Mr. Markscheid earned a B.A. in East Asian Studies from Princeton University in 1976, an M.A. in international affairs from Johns Hopkins University in 1980, and an MBA from Columbia University in 1991, where he was class valedictorian.
Number and Terms of Office of Officers and Directors
We will have five directors upon completion of this offering. Our board of directors will be divided into two classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a two-year term. In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on Nasdaq. The term of office of the first class of directors, consisting of Kathy Cuocolo, Leela Gray and Stephen Markscheid will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Bala Padmakumar and Vivek Soni, will expire at the second annual meeting of stockholders.
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President, Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices as may be determined by the board of directors.
Director Independence
Nasdaq listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. We expect that our board of directors will determine that all of our directors, other than Messrs. Mr. Padmakumar and Dr. Soni, are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.
Officer and Director Compensation
None of our officers has received any cash compensation for services rendered to us. Commencing on the date of this prospectus, we have agreed to pay our sponsor, a total of $10,000 per month, for up to 12 months, for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees. No compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers or directors or any affiliate of our sponsor, officers or directors, prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, these individuals
will be reimbursed for any out-of-pocket expenses actually incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review and approve on a quarterly basis all payments that were made to our sponsor, officers or directors or our or their affiliates. Any such payments prior to an initial business combination will be made using funds held outside the trust account. Other than quarterly audit committee review of such payments, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses actually incurred in connection with identifying and consummating an initial business combination. On October 28, 2021, our sponsor transferred 25,000 founder shares to each of Kathy Cuocolo, Leela Gray and Stephen Markscheid. The 75,000 shares in the aggregate that were transferred will not be subject to forfeiture in the event the underwriters’ over-allotment is not exercised.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed initial business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed initial business combination, because the directors of the post-combination business will be responsible for determining officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment.
Committees of the Board of Directors
Our board of directors will have two standing committees: an audit committee and a compensation committee. Subject to phase-in rules and a limited exception, Nasdaq rules and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and Nasdaq rules require that the compensation committee of a listed company be comprised solely of independent directors.
Audit Committee
Prior to the consummation of this offering, we will establish an audit committee of the board of directors. Kathy Cuocolo, Stephen Markscheid, and Leela Gray will serve as members of our audit committee, and Kathy Cuocolo will chair the audit committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent. Each of Kathy Cuocolo, Stephen Markscheid, and Leela Gray meet the independent director standard under Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act.
Each member of the audit committee is financially literate and our board of directors has determined that Kathy Cuocolo qualifies as an “audit committee financial expert” as defined in applicable SEC rules.
We will adopt an audit committee charter, which will detail the principal functions of the audit committee, including:
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the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm engaged by us;
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pre-approving all audit and permitted non-audit services to be provided by the independent registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;
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setting clear hiring policies for employees or former employees of the independent registered public accounting firm, including but not limited to, as required by applicable laws and regulations;
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setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
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obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (i) the independent registered public accounting firm’s internal quality-control procedures, (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues and (iii) all relationships between the independent registered public accounting firm and us to assess the independent registered public accounting firm’s independence;
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reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and
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reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.
Compensation Committee
Prior to the consummation of this offering, we will establish a compensation committee of the board of directors. Kathy Cuocolo, Stephen Markscheid, and Leela Gray will serve as members of our compensation committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the compensation committee, all of whom must be independent. Kathy Cuocolo, Stephen Markscheid, and Leela Gray are independent, and Stephen Markscheid will chair the compensation committee.
We will adopt a compensation committee charter, which will detail the principal functions of the compensation committee, including:
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reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, if any is paid by us, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;
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reviewing and approving on an annual basis the compensation, if any is paid by us, of all of our other officers;
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reviewing on an annual basis our executive compensation policies and plans;
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implementing and administering our incentive compensation equity-based remuneration plans;
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assisting management in complying with our proxy statement and annual report disclosure requirements;
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approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;
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if required, producing a report on executive compensation to be included in our annual proxy statement; and
•
reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
Notwithstanding the foregoing, as indicated above, other than the payment to our sponsor, of $10,000 per month, for up to 12 months, for the office space, utilities, and secretarial and administrative support, no
compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The charter will also provide that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Director Nominations
We do not have a standing nominating committee though we intend to form a corporate governance and nominating committee as and when required to do so by law or Nasdaq rules. In accordance with Rule 5605 of the Nasdaq rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. Our independent directors will participate in the consideration and recommendation of director nominees. In accordance with Rule 5605 of the Nasdaq rules, all such directors are independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
The board of directors will also consider director candidates recommended for nomination by our stockholders during such times as they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Our stockholders that wish to nominate a director for election to our board of directors should follow the procedures set forth in our bylaws.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.
Code of Ethics
Prior to the consummation of this offering, we will have adopted a Code of Ethics applicable to our directors, officers and employees. We will file a copy of our Code of Ethics and our audit and compensation committee charters as exhibits to the registration statement of which this prospectus is a part. You will be able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K. See the section of this prospectus entitled “Where You Can Find Additional Information.”
Conflicts of Interest
Subject to pre-existing fiduciary or contractual duties as described below, our officers and directors have agreed to present any business opportunities presented to them in their capacity as a director or officer of our company to us. Certain of our officers and directors presently have fiduciary or contractual obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such opportunity to such entity. We believe, however, that the fiduciary duties or contractual obligations of
our officers or directors will not materially affect our ability to complete our initial business combination. Our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Our officers and directors may become officers or directors of another special purpose acquisition company with a class of securities intended to be registered under the Exchange Act, even prior to us entering into a definitive agreement for our initial business combination.
Potential investors should also be aware of the following other potential conflicts of interest:
•
None of our officers or directors is required to commit his or her full time to our affairs and, accordingly, may have conflicts of interest in allocating his or her time among various business activities.
•
In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to us as well as the other entities with which they are affiliated. Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
•
Our initial stockholders have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the consummation of our initial business combination. Additionally, our initial stockholders have agreed to waive their redemption rights with respect to any founder shares held by them if we fail to consummate our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering. If we do not complete our initial business combination within such applicable prescribed time frame, the proceeds of the sale of the placement warrants held in the trust account will be used to fund the redemption of our public shares, and the placement securities will expire worthless. With certain limited exceptions, the founder shares will not be transferable, assignable by our sponsor until the earlier to occur of: (A) 180 days after the completion of our initial business combination and (B) subsequent to our initial business combination, (x) if the reported last sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. With certain limited exceptions, the placement warrants and the Class A common stock underlying such warrants, will not be transferable, assignable or saleable by our sponsor or its permitted transferees until the completion of our initial business combination. Since our sponsor and officers and directors may directly or indirectly own common stock, rights and warrants following this offering, our officers and directors may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination.
•
Our officers and directors may have a conflict of interest with respect to evaluating a particular business combination if the retention or resignation of any such officers and directors was included by a target business as a condition to any agreement with respect to our initial business combination.
•
Our sponsor, officers or directors may have a conflict of interest with respect to evaluating a business combination and financing arrangements as we may obtain loans from our sponsor or an affiliate of our sponsor or any of our officers or directors to finance transaction costs in connection with an intended initial business combination. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender, upon consummation of our initial business combination. The warrants would be identical to the placement warrants.
The conflicts described above may not be resolved in our favor.
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
•
the corporation could financially undertake the opportunity;
•
the opportunity is within the corporation’s line of business; and
•
it would not be fair to our company and its stockholders for the opportunity not to be brought to the attention of the corporation.
Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. Furthermore, our amended and restated certificate of incorporation will provide that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
Below is a table summarizing the entities to which our executive officers and directors currently have fiduciary duties or contractual obligations:
|
Individual(1)
|
|
|
Entity(2)
|
|
|
Entity’s Business
|
|
|
Affiliation
|
|
|
Bala Padmakumar
|
|
|
Advantary LLC
|
|
|
Management
Accelerator
|
|
|
Partner
|
|
| |
|
|
Lionrock Batteries
|
|
|
Battery Technology
|
|
|
Advisor
|
|
|
Vivek Soni
|
|
|
A.T.E Private Limited
|
|
|
Manufacturing
|
|
|
Director
|
|
| |
|
|
A.T.E. Enterprises Private Limited
|
|
|
Holding Company
|
|
|
Director
|
|
| |
|
|
A.T.E. Huber Envirotech Private Limited
|
|
|
Wastewater Solutions
|
|
|
Director
|
|
| |
|
|
Reading Municipal Light Department
|
|
|
Utility
|
|
|
Vice-Chair, Advisory Board
|
|
| |
|
|
TiE Boston Angels
|
|
|
Angel Investment Group
|
|
|
Managing Director
|
|
|
Daniel Davis
|
|
|
AngioWave Imaging, LLC
|
|
|
Angiography Company
|
|
|
Director
|
|
| |
|
|
SeQure Dx, Inc.
|
|
|
Gene-Editing Diagnostics
|
|
|
Chief Administrative Officer
|
|
|
Leela Gray
|
|
|
Empower Rideshare
|
|
|
Rideshare Company
|
|
|
Board Advisor
|
|
|
Kathy Cuocolo
|
|
|
Syntax ETF Trust
|
|
|
ETF Fund
|
|
|
Director
|
|
| |
|
|
Greenbacker Renewable Energy Company LLC
|
|
|
Private Equity Firm
|
|
|
Director and Audit Chair
|
|
|
Individual(1)
|
|
|
Entity(2)
|
|
|
Entity’s Business
|
|
|
Affiliation
|
|
|
Stephen Markscheid
|
|
|
Fanhua, Inc.
|
|
|
Insurance Brokerage Firm
|
|
|
Director
|
|
| |
|
|
JinkoSolar Holding Co., Ltd.
|
|
|
Solar PV Manufacturer
|
|
|
Director
|
|
| |
|
|
Zhongjin Technology Services Group Company Limited
|
|
|
Call Center Business
|
|
|
Director
|
|
| |
|
|
Xiaobai Maimai Inc.
|
|
|
Social E-Commerce Platform
|
|
|
Director
|
|
| |
|
|
UGE International Limited
|
|
|
Solar and Renewable Energy Solutions
|
|
|
Director
|
|
| |
|
|
Global Corporate Social Responsibility Foundation
|
|
|
Non-Profit Organization
|
|
|
Director
|
|
| |
|
|
ChildWise International Corporation
|
|
|
Education Training
|
|
|
Chief Financial Officer
|
|
| |
|
|
Still Waters Green Technology Limited
|
|
|
Asset Management
|
|
|
Chairman
|
|
| |
|
|
NanoGraf Corporation
|
|
|
Battery Development
|
|
|
Board Advisor
|
|
| |
|
|
Intelligent Generation LLC
|
|
|
Software Development
|
|
|
Board Advisor
|
|
| |
|
|
SeedVantage LLC
|
|
|
Startup Accelerator
|
|
|
Board Advisor
|
|
| |
|
|
Clean Energy Trust
|
|
|
Startup Accelerator
|
|
|
Board Advisor
|
|
| |
|
|
Kearsarge Energy L.P.
|
|
|
Renewable Energy
|
|
|
Board Advisor
|
|
| |
|
|
SlowVoice Pty Ltd.
|
|
|
Collective Intelligence
|
|
|
Partner
|
|
(1)
Each person has a fiduciary duty with respect to the listed entities next to their respective names.
(2)
Each of the entities listed in this table has priority and preference relative to our company with respect to the performance by each individual listed in this table of his obligations and the presentation by each such individual of business opportunities.
Accordingly, if any of the above executive officers or directors becomes aware of a business combination opportunity which is suitable for any of the above entities to which he or she has current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, and only present it to us if such entity rejects the opportunity.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with such a company, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions, that such an initial business combination is fair to our company from a financial point of view.
In the event that we submit our initial business combination to our public stockholders for a vote, pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote any founder shares held by them and any public shares purchased during or after the offering (including in open market and privately negotiated transactions) in favor of our initial business combination.
Limitation on Liability and Indemnification of Officers and Directors
Our amended and restated certificate of incorporation will provide that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future
be amended. In addition, our amended and restated certificate of incorporation will provide that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.
We will enter into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation. Our bylaws also will permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We will purchase a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.
These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.
We believe that these provisions, the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership of our common stock as of the date of this prospectus, and as adjusted to reflect the sale of our common stock included in the units offered by this prospectus, and assuming no purchase of units in this offering, by:
•
each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
•
each of our executive officers and directors that beneficially owns shares of our common stock; and
•
all our executive officers and directors as a group.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect record or beneficial ownership of the placement warrants as these warrants are not exercisable within 60 days of the date of this prospectus.
On October 6, 2021, our sponsor purchased 2,875,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.009 per share. On October 28, 2021, our sponsor transferred 25,000 founder shares to each of Kathy Cuocolo, Leela Gray and Stephen Markscheid. The 75,000 shares in the aggregate that were transferred will not be subject to forfeiture in the event the underwriters’ over-allotment is not exercised. In addition, our sponsor has committed, pursuant to a written agreement, to purchase an aggregate of 3,200,000 placement warrants for a purchase price of $1.00 per warrant in a private placement that will occur simultaneously with the closing of this offering (assuming the underwriters do not exercise their over-allotment option). The following table presents the number of shares and percentage of our common stock beneficially owned as of the filing date, before and after this offering, by each person, or group of persons, known to us who beneficially owns more than 5% of our capital stock, each named executive officer, each of our directors and all directors and executive officers as a group. The post-offering numbers and percentages presented assume that the underwriters do not exercise their over-allotment option, that our sponsor forfeits 375,000 founder shares on a pro rata basis, and that there are 13,650,000 shares of our common stock issued and outstanding after this offering, consisting of (i) 11,000,000 shares of our Class A common stock, (ii) 2,500,000 shares of our Class B common stock, issued and outstanding after this offering, (iii) 150,000 representative shares, issued and outstanding after this offering, and (iv) none of the anchor investors purchase the units that may be allocated to them.
| |
|
|
Before Offering
|
|
|
After Offering
|
|
|
Name and Address of Beneficial Owner(1)
|
|
|
Number of
Shares
Beneficially
Owned(2)
|
|
|
Approximate
Percentage
of
Outstanding
Common
Stock
|
|
|
Number of
Shares
Beneficially
Owned(2)
|
|
|
Approximate
Percentage
of
Outstanding
Common
Stock
|
|
|
Monterrey Acquisition Sponsor, LLC(1)(2)
|
|
|
|
|
2,800,000 |
|
|
|
|
|
97.4% |
|
|
|
|
|
2,425,000 |
|
|
|
|
|
17.8% |
|
|
|
Bala Padmakumar(1)
|
|
|
|
|
2,800,000 |
|
|
|
|
|
97.4% |
|
|
|
|
|
2,425,000 |
|
|
|
|
|
17.8% |
|
|
|
Kathy Cuocolo(3)(4)
|
|
|
|
|
25,000 |
|
|
|
|
|
* |
|
|
|
|
|
25,000 |
|
|
|
|
|
* |
|
|
|
Stephen Markscheid(3)(4)
|
|
|
|
|
25,000 |
|
|
|
|
|
* |
|
|
|
|
|
25,000 |
|
|
|
|
|
* |
|
|
|
Leela Gray(3)(4)
|
|
|
|
|
25,000 |
|
|
|
|
|
* |
|
|
|
|
|
25,000 |
|
|
|
|
|
* |
|
|
|
Vivek Soni(1)(4)
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
Daniel Davis(1)(4)
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
All executive officers and directors as a group (6 individuals)
|
|
|
|
|
2,875,000 |
|
|
|
|
|
100% |
|
|
|
|
|
2,500,000 |
|
|
|
|
|
18.3% |
|
|
*
Less than 1%.
(1)
Monterrey Acquisition Sponsor, LLC, our sponsor, is the record holder of the securities reported herein. Bala Padmakumar is the managing member of our sponsor. Mr. Padmakumar shares voting and dispositive power over the founder shares held by our sponsor and may be deemed to beneficially
own such shares. Bala Padmakumar, Daniel Davis, and Vivek Soni are each members of our sponsor. Each such person disclaims any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or indirectly.
(2)
Interests shown consist solely of founder shares, classified as shares of Class B common stock. Founder shares are convertible into shares of Class A common stock on a one-for-one basis, subject to adjustment, as described in the section of this prospectus entitled “Description of Securities.”
(3)
Reflects the shares transferred to each of the individuals named.
(4)
Does not include any securities held by Monterrey Acquisition Sponsor, LLC, our sponsor, of which each person is a member. Each such person disclaims beneficial ownership of the reported shares other than to the extent of his ultimate pecuniary interest therein.
After giving effect to the issuance of founder shares and representative shares and the sale of the placement warrants, our initial stockholders will own approximately 19.41% of the outstanding common stock following the offering (assuming they do not purchase any units in this offering or the public market). Because of this ownership block, our initial stockholders will have significant influence over the outcome of all matters requiring approval by our stockholders, including the election of directors, amendments to our amended and restated certificate of incorporation and approval of significant corporate transactions other than approval of our initial business combination. If we increase or decrease the size of the offering, we will effect a stock dividend or a share contribution back to capital, or other appropriate mechanism, as applicable, with respect to our Class B common stock immediately prior to the consummation of the offering in such amount as to maintain the ownership of our initial stockholders at 20% of the issued and outstanding shares of our common stock (excluding the placement warrants and the underlying Class A common stock and assuming they do not purchase any units in this offering) upon the consummation of this offering. The initial stockholders have agreed (A) to vote any shares owned by them in favor of any proposed initial business combination and (B) not to redeem any shares in connection with a stockholder vote to approve a proposed initial business combination.
Our sponsor, executive officers and directors are deemed to be our “promoters” as such term is defined under the federal securities laws.
Expressions of Interest
Up to ten anchor investors have each expressed to us an interest in purchasing up to 990,000 units in this offering at the offering price of $10.00 per unit, and such allocations will be determined by the underwriters.
Pursuant to such units, the anchor investors have not been granted any stockholder or other rights in addition to those afforded to our other public stockholders. Further, the anchor investors are not required to (i) hold any units, shares of Class A common stock, rights or warrants they may purchase in this offering or thereafter for any amount of time, (ii) vote any shares of Class A common stock they may own at the applicable time in favor of our initial business combination or (iii) refrain from exercising their right to redeem their public shares at the time of our initial business combination. The anchor investors will have the same rights to the funds held in the trust account with respect to shares of Class A common stock underlying the units they may purchase in this offering as the rights afforded to our other public stockholders.
There can be no assurance that the anchor investors will acquire any units in this offering, or as to the amount of such units the anchor investors will retain, if any, prior to or upon the consummation of our initial business combination. There is also no guarantee that all ten anchor investors will participate in the offering. We will be required to meet certain minimum initial listing standards with respect to liquidity to list on the Nasdaq, which may result in a lower number of units being allocated to our anchor investors. In the event that the anchor investors purchase all of the units that they have expressed an interest in purchasing in this offering, hold all such units until prior to consummation of our initial business combination and vote their public shares in favor of our initial business combination, in addition to the founder shares, no affirmative votes from other public stockholders would be required to approve our initial business combination. The anchor investors are not required to vote any of their public shares in favor of our initial business combination or for or against any other matter presented for a stockholder vote.
Each anchor investor has entered into separate investment agreements with us and our sponsor pursuant to which each anchor investor agreed to purchase 75,000 founder shares (up to 750,000 founder shares in the aggregate) from our sponsor at the closing of this offering, subject to such anchor investor’s acquisition of 100% of the units allocated to it by the underwriters in this offering. Pursuant to the investment agreements, the anchor investors have agreed to (a) vote any founder shares held by them in favor of our initial business combination and (b) subject any founder shares held by them to the same lock-up restrictions as the founder shares held by our sponsor and independent directors. Since our sponsor is transferring founder shares held by it to the anchor investors and we are not issuing any new shares of Class A common stock, there will be no dilutive impact on the other investors in this offering.
Restrictions on Transfers of Founder Shares and Placement Warrants
The founder shares (other than the founder shares that may be transferred to the anchor investors), and placement warrants, and securities contained therein, are each subject to transfer restrictions pursuant to lock-up provisions in a letter agreement with us to be entered into by our sponsor, officers and directors. Those lock-up provisions provide that such securities are not transferable or salable (i) in the case of the founder shares (or shares of common stock issuable upon conversion thereof), until the earlier to occur of: (A) 180 days after the completion of our initial business combination and (B) subsequent to our initial business combination, (x) if the reported last sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property, and (ii) in the case of the placement warrants, including the underlying Class A common stock therein, until the completion of our initial business combination, except in each case (a) to our officers or directors, any affiliates or family members of any of our officers or directors, any members of our sponsor, or any affiliates of our sponsor, (b) in the case of an individual, by gift to a member of one of the members of the individual’s immediate family or to a trust, the beneficiary of which is a member of one of the individual’s immediate family, an affiliate of such person or to a charitable organization; (c) in the case of an individual, by virtue of laws of descent and distribution upon death of any of our officers, our directors, the initial stockholders or members of our sponsor; (d) in the case of an individual, pursuant to a qualified domestic relations order; (e) by private sales or transfers made in connection with the consummation of an initial business combination at prices no greater than the price at which the securities were originally purchased; (f) in the event of our liquidation prior to the completion of our initial business combination; (g) by virtue of the laws of Delaware or our sponsor’s limited liability company agreement upon dissolution of our sponsor; or (h) in the event of our liquidation, merger, capital stock exchange, reorganization or other similar transaction which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property subsequent to our completion of our initial business combination; provided, however, that in the case of clauses (a) through (e) or (g) these permitted transferees must enter into a written agreement agreeing to be bound by these transfer restrictions and the other restrictions contained in the letter agreements and by the same agreements entered into by our sponsor with respect to such securities (including provisions relating to voting, the trust account and liquidating distributions described elsewhere in this prospectus).
Registration Rights
The holders of the founder shares, placement warrants (including securities contained therein) and placement warrants (including securities contained therein) that may be issued upon conversion of working capital loans, and any shares of Class A common stock issuable upon the exercise of the placement warrants and any shares of Class A common stock and warrants (and underlying Class A common stock) that may be issued upon conversion of the units issued as part of the working capital loans and Class A common stock issuable upon conversion of the founder shares, will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of this offering, requiring us to register such securities for resale (in the case of the founder shares, only after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our
completion of our initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering our securities. We will bear the expenses incurred in connection with the filing of any such registration statements.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
On October 6, 2021, our sponsor purchased 2,875,000 founder shares for an aggregate purchase price of $25,000, or approximately $0.009 per share. On October 28, 2021, our sponsor transferred 25,000 founder shares to each of Kathy Cuocolo, Leela Gray and Stephen Markscheid. The 75,000 shares in the aggregate that were transferred will not be subject to forfeiture in the event the underwriters’ over-allotment is not exercised. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the outstanding shares upon completion of this offering (excluding the placement warrants and underlying Class A common stock and the representative shares). If we increase or decrease the size of the offering we will effect a stock dividend or a share contribution back to capital or other appropriate mechanism, as applicable, with respect to our Class B common stock immediately prior to the consummation of the offering in such amount as to maintain the ownership of our initial stockholders at 20.0% of the issued and outstanding shares of our common stock (excluding the placement warrants and the underlying Class A common stock and assuming they do not purchase any units in this offering) upon the consummation of this offering. Up to 375,000 founder shares held by our sponsor are subject to forfeiture by our sponsor depending on the extent to which the underwriters’ over-allotment option is exercised. The founder shares (including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
Our sponsor has agreed to purchase an aggregate of 3,200,000 placement warrants at a price of $1.00 per unit for an aggregate purchase price of $3,200,000. If the over-allotment option is exercised in full, the amount of placement warrants sold will be 3,500,000 for an aggregate purchase price of $3,500,000. There will be no redemption rights or liquidating distributions from the trust account with respect to the founder shares or placement warrants, which will expire worthless if we do not consummate a business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering.
Commencing on the date of this prospectus, we have agreed to pay our sponsor, a total of $10,000 per month, for up to 12 months, for office space, utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation, we will cease paying these monthly fees.
Other than the foregoing, no compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers or directors or any affiliate of our sponsor, officers or directors prior to, or in connection with any services rendered in order to effectuate, the consummation of an initial business combination (regardless of the type of transaction that it is). However, these individuals will be reimbursed for any out-of-pocket expenses actually incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review and approve on a quarterly basis all payments that were made to our sponsor, officers, directors or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses actually incurred by such persons in connection with activities on our behalf.
Prior to the closing of this offering, our sponsor has agreed to loan us up to $400,000 to be used for a portion of the expenses of this offering. These loans are non-interest bearing, unsecured and are due at the earlier of June 24, 2022 or the closing of this offering. The loan will be repaid upon the closing of this offering out of the offering proceeds not held in the trust account. The value of our sponsor’s interest in this transaction corresponds to the principal amount outstanding under any such loan.
In addition, in order to fund working capital deficiencies and finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds on a non-interest bearing basis as may be required. If we complete an initial business combination, we would repay such loaned amounts. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender, upon consummation of our initial business combination. The
warrants would be identical to the placement warrants. Other than as described above, the terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans.
We do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive and director compensation.
The holders of the founder shares, placement warrants, and warrants that may be issued upon conversion of working capital loans (and in each case holders of their component securities, as applicable) will have registration rights to require us to register a sale of any of our securities held by them pursuant to a registration rights agreement to be signed prior to or on the effective date of this offering. These holders will be entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by us.
We will enter into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our amended and restated certificate of incorporation. Our bylaws also will permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We will purchase a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.
Related Party Policy
We have not yet adopted a formal policy for the review, approval or ratification of related party transactions. Accordingly, the transactions discussed above were not reviewed, approved or ratified in accordance with any such policy.
Prior to the consummation of this offering, we will adopt a code of ethics requiring us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by our board of directors (or the appropriate committee of our board) or as disclosed in our public filings with the SEC. Under our code of ethics, conflict of interest situations will include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the company. A form of the code of ethics that we plan to adopt prior to the consummation of this offering is filed as an exhibit to the registration statement of which this prospectus is a part.
In addition, our audit committee, pursuant to a written charter that we will adopt prior to the consummation of this offering, will be responsible for reviewing and approving related party transactions to the extent that we enter into such transactions. An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present will be required in order to approve a related party transaction. A majority of the members of the entire audit committee will constitute a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee will be required to approve a related party transaction. A form of the audit committee charter that we plan to adopt prior to the consummation of this offering is filed as an exhibit to the registration statement of which this prospectus is a part. We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
To further minimize conflicts of interest, we have agreed not to consummate an initial business combination with an entity that is affiliated with any of our sponsor, officers or directors unless we, or a committee of independent directors, have obtained an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that our initial business combination is fair to our company from a financial point of view. Furthermore, no finder’s fees, reimbursements, consulting fee, monies in respect of any payment of a loan or other compensation will be paid by us to our sponsor, officers or directors or any affiliate of our sponsor, officers or directors prior to, for services rendered to us prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). However, the following payments will be made to our sponsor, officers or directors, or our or their affiliates, none of which will be made from the proceeds of this offering held in the trust account prior to the completion of our initial business combination:
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Repayment of up to an aggregate of $400,000 in loans made to us by our sponsor to cover offering-related and organizational expenses;
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Payment to our sponsor, of $10,000 per month, for up to 12 months, for office space, utilities and secretarial and administrative support;
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Reimbursement for any out-of-pocket expenses actually incurred related to identifying, investigating and completing an initial business combination; and
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Repayment of non-interest bearing loans which may be made by our sponsor or an affiliate of our sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination, the terms of which (other than as described above) have not been determined nor have any written agreements been executed with respect thereto. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender, upon consummation of our initial business combination. The warrants would be identical to the placement warrants.
Our audit committee will review and approve on a quarterly basis all payments that were made to our sponsor, officers, directors or our or their affiliates.
DESCRIPTION OF SECURITIES
Pursuant to our amended and restated certificate of incorporation, our authorized capital stock consists of 100,000,000 shares of Class A common stock, $0.0001 par value, 10,000,000 shares of Class B common stock, $0.0001 par value, and 1,000,000 shares of undesignated preferred stock, $0.0001 par value. The following description summarizes the material terms of our capital stock. Because it is only a summary, it may not contain all the information that is important to you.
Units
Each unit has an offering price of $10.00 and consists of one share of Class A common stock, one redeemable warrant and one right to receive one-tenth (1/10) of one share of Class A common stock. Each warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as described below. Pursuant to the warrant agreement, a warrant holder may exercise his, her or its warrants only for a whole number of shares of Class A common stock. Each right entitles the holder thereof to receive one-tenth (1/10) of one share of Class A common stock upon consummation of our initial business combination. In addition, we will not issue fractional shares in connection with an exchange of rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the DGCL. As a result, you must hold rights in multiples of 10 in order to receive shares for all of your rights upon consummation of our initial business combination.
We expect the Class A common stock, warrants and rights comprising the units will begin separate trading on the 52nd day following the date of this prospectus unless the representative informs us of its decision to allow earlier separate trading, subject to our having filed the Current Report on Form 8-K described below and having issued a press release announcing when such separate trading will begin. Once the shares of Class A common stock, warrants and rights commence separate trading, holders will have the option to continue to hold units or separate their units into the component securities. Holders will need to have their brokers contact our transfer agent in order to separate the units into shares of Class A common stock, warrants and rights.
In no event will the Class A common stock, warrants and rights be traded separately until we have filed with the SEC a Current Report on Form 8-K which includes an audited balance sheet reflecting our receipt of the gross proceeds at the closing of this offering. We will file a Current Report on Form 8-K which includes this audited balance sheet upon the completion of this offering, which is anticipated to take place three business days after the date of this prospectus. If the underwriters’ over-allotment option is exercised following the initial filing of such Current Report on Form 8-K, a second or amended Current Report on Form 8-K will be filed to provide updated financial information to reflect the exercise of the underwriters’ over-allotment option.
Placement Warrants
The placement warrants are identical to the public warrants sold in this offering except that (a) the placement warrants and the underlying Class A common stock will not be transferable, assignable or salable until after the consummation of our initial business combination except to permitted transferees, (b) the placement warrants will be entitled to registration rights as set forth in this prospectus.
Common Stock
Upon the closing of this offering, 12,650,000 shares of our common stock will be outstanding (assuming no exercise of the underwriters’ over-allotment option and the corresponding forfeiture of 375,000 founder shares by our sponsor), consisting of:
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10,000,000 shares of our Class A common stock underlying the units being offered in this offering;
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2,500,000 shares of Class B common stock held by our initial stockholders; and
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150,000 shares of our Class A common stock issuable to the representative upon the consummation of this offering.
Our sponsor has agreed to purchase an aggregate of 3,200,000 placement warrants at a price of $1.00 per warrant, for an aggregate purchase price of $3,200,000. The initial stockholders will hold an aggregate of approximately 19.41% of the issued and outstanding common stock following the offering and the expiration of the underwriters’ over-allotment option (assuming they do not purchase any units in this offering or the public market). If we increase or decrease the size of the offering we will effect a stock dividend or a share contribution back to capital or other appropriate mechanism, as applicable, with respect to our Class B common stock immediately prior to the consummation of the offering in such amount as to maintain the ownership of our initial stockholders at 20.0% of the issued and outstanding shares of our common stock (excluding the placement warrants and the underlying Class A common stock and assuming they do not purchase any units in this offering) upon the consummation of this offering.
Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders, except as required by law. Unless specified in our amended and restated certificate of incorporation or bylaws, or as required by applicable provisions of the DGCL or applicable stock exchange rules, the affirmative vote of a majority of our shares of common stock that are voted is required to approve any such matter voted on by our stockholders. Our board of directors will be divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors. Our stockholders are entitled to receive ratable dividends when, as and if declared by the board of directors out of funds legally available therefor.
Because our amended and restated certificate of incorporation authorizes the issuance of up to 100,000,000 shares of Class A common stock, if we were to enter into an initial business combination, we may (depending on the terms of such an initial business combination) be required to increase the number of shares of Class A common stock which we are authorized to issue at the same time as our stockholders vote on the initial business combination to the extent we seek stockholder approval in connection with our initial business combination.
In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until no later than one year after our first fiscal year end following our listing on Nasdaq. Under Section 211(b) of the DGCL, we are, however, required to hold an annual meeting of stockholders for the purposes of electing directors in accordance with our bylaws, unless such election is made by written consent in lieu of such a meeting. We may not hold an annual meeting of stockholders to elect new directors prior to the consummation of our initial business combination, and thus we may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting. Therefore, if our stockholders want us to hold an annual meeting prior to the consummation of our initial business combination, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL.
We will provide our stockholders with the opportunity to redeem all or a portion of their public shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of our initial business combination including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is initially anticipated to be approximately $10.10 per public share. The per-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. Our sponsor, officers and directors will enter into a letter agreement with us, pursuant to which they will agree to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination. The anchor investors will not be entitled to redemption rights with respect to any founder shares held by them, in connection with the completion of our initial business combination.
Unlike many blank check companies that hold stockholder votes and conduct proxy solicitations in conjunction with their initial business combinations and provide for related redemptions of public shares for cash upon completion of such initial business combinations even when a vote is not required by applicable
law or stock exchange requirements, if a stockholder vote is not required by law and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC, and file tender offer documents with the SEC prior to completing our initial business combination. Our amended and restated certificate of incorporation will require these tender offer documents to contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under the SEC’s proxy rules. If, however, a stockholder approval of the transaction is required by applicable law or stock exchange requirements, or we decide to obtain stockholder approval for business or other legal reasons, we will, like many blank check companies, offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If we seek stockholder approval, we will complete our initial business combination only if a majority of the outstanding shares of common stock voted are voted in favor of the initial business combination. A quorum for such meeting will consist of the holders present in person or by proxy of shares of outstanding capital stock of the company representing a majority of the voting power of all outstanding shares of capital stock of the company entitled to vote at such meeting. The underwriters will have the same redemption rights as a public stockholder with respect to any public shares it acquires. The representative has informed us that it has no current commitments, plans or intentions to acquire any public shares for its own account; however, if they do acquire public shares, it will do so in the ordinary course of business or in the types of transaction described in the first paragraph under “Proposed Business — Effecting our Initial Business Combination — Permitted purchases of our securities.” The underwriters will not make any such purchases when in possession of any material nonpublic information not disclosed to the seller, during a restricted period under Regulation M under the Exchange Act, in transactions that would violate Section 9(a)(2) or Rule 10(b)-5 under the Exchange Act, or if prohibited by applicable state securities laws or broker-dealer regulations. To the extent our initial stockholders or purchasers of placement warrants transfer any of these securities to certain permitted transferees, such permitted transferees will agree, as a condition to such transfer, to waive these same redemption rights. Also, our sponsor has committed to purchase 3,200,000 placement warrants (or up to 3,500,000 placement warrants if the over-allotment option is exercised in full) at the price of $1.00 per warrant in a private placement that will occur simultaneously with the completion of this offering. If we submit our initial business combination to our public stockholders for a vote, our sponsor, the other initial stockholders, our officers and our directors have agreed to vote their respective founder shares and any public shares held by them in favor of our initial business combination. The anchor investors have agreed to vote any founder shares held by them in favor of our initial business combination.
The participation of our sponsor, officers, directors or their affiliates in privately-negotiated transactions (as described in this prospectus), if any, could result in the approval of our initial business combination even if a majority of our public stockholders vote, or indicate their intention to vote, against such business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non-votes will have no effect on the approval of our initial business combination once a quorum is obtained. We intend to give approximately 30 days (but not less than 10 days nor more than 60 days) prior written notice of any such meeting, if required, at which a vote shall be taken to approve our initial business combination. These quorum and voting thresholds, and the voting agreements of our initial stockholders and anchor investors, may make it more likely that we will consummate our initial business combination.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares of common stock sold in this offering, which we refer to as the Excess Shares. However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Our stockholders’ inability to redeem the Excess Shares will reduce their influence over our ability to complete our initial business combination, and such stockholders could suffer a material loss in their investment if they sell such Excess Shares on the open market. Additionally, such stockholders will not receive redemption distributions with respect to the Excess Shares if we complete the initial business combination. And, as a result, such stockholders will continue to hold that number of shares exceeding 15% and, in order to dispose such shares would be required to sell their stock in open market transactions, potentially at a loss.
If we seek stockholder approval in connection with our initial business combination, pursuant to the letter agreement our sponsor, officers and directors have agreed to vote any founder shares held by them and any public shares they may acquire during or after this offering (including in open market and privately negotiated transactions) in favor of our initial business combination. As a result, in addition to our initial stockholders’ founder shares, we would need 512,501 or 5.13%, of the 10,000,000 public shares sold in this offering to be voted in favor of an initial business combination (assuming only the minimum number of shares representing a quorum are voted) in order to have our initial business combination approved (assuming the over-allotment option is not exercised, that the initial stockholders do not purchase any units in this offering or units or shares in the after-market and the representative shares are voted in favor of the initial business combination). In the event that all shares of our outstanding common stock are voted, we would need 3,675,001 or 36.75%, of the 10,000,000 public shares sold in this offering to be voted in favor of an initial business combination in order to have our initial business combination approved (assuming the over-allotment option is not exercised, and that the initial stockholders do not purchase any units in this offering or units or shares in the after-market and the representative shares are voted in favor of the initial business combination). Additionally, each public stockholder may elect to redeem its public shares irrespective of whether they vote for or against the proposed transaction (subject to the limitation described in the preceding paragraph).
Pursuant to our amended and restated certificate of incorporation, if we are unable to complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter subject to lawfully available funds therefor, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In the event we decide to exercise the extension option, investors will not have voting rights nor redemption rights in connection with such additional three-month extensions. Our sponsor, officers and directors will enter into a letter agreement with us, pursuant to which they will agree to waive their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering. The anchor investors will not be entitled to rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within the prescribed time frame. However, if our sponsor, officers, directors and anchor investors acquire public shares in or after this offering, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the prescribed time frame.
In the event of a liquidation, dissolution or winding up of the company after an initial business combination, our stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. Our stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the common stock, except that we will provide our stockholders with the opportunity to redeem their public shares for cash equal to their pro rata share of the aggregate amount then on deposit in the trust account, upon the completion of our initial business combination, subject to the limitations described herein.
Founder Shares
The founder shares are identical to the shares of Class A common stock included in the units being sold in this offering, and holders of founder shares have the same stockholder rights as public stockholders,
except that (i) the founder shares are subject to certain transfer restrictions, as described in more detail below, (ii) our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed (A) to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination, (B) to waive their redemption rights with respect to their founder shares and any public shares in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (x) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (y) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity and (C) to waive their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within such prescribed time frame, (iii) the founder shares are shares of our Class B common stock that will automatically convert into shares of our Class A common stock at the time of the consummation of our initial business combination, on a one-for-one basis, subject to adjustment as described herein, (iv) the anchor investors will not be entitled to (A) redemption rights with respect to any founder shares held by them in connection with the completion of our business combination, (B) redemption rights with respect to any founder shares held by them in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated an initial business combination within the prescribed time frame or (C) rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our business combination within the prescribed time frame, although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our business combination within the prescribed time frame, and (v) the founder shares are entitled to registration rights. If we submit our initial business combination to our public stockholders for a vote, our sponsor, officers and directors have agreed pursuant to the letter agreement to vote any founder shares held by them and any public shares purchased during or after this offering (including in open market and privately negotiated transactions) in favor of our initial business combination.
The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the consummation of our initial business combination on a one-for-one basis (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like), and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in this prospectus and related to the closing of the initial business combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon completion of this offering (excluding and the placement warrants and underlying Class A common stock) plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial business combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial business combination, any private placement-equivalent warrants and their underlying Class A common stock issued to our sponsor or its affiliates upon conversion of loans made to us and the representative shares). We cannot determine at this time whether a majority of the holders of our Class B common stock at the time of any future issuance would agree to waive such adjustment to the conversion ratio. They may waive such adjustment due to (but not limited to) the following: (i) closing conditions which are part of the agreement for our initial business combination; (ii) negotiation with Class A stockholders
on structuring an initial business combination; or (iii) negotiation with parties providing financing which would trigger the anti-dilution provisions of the Class B common stock. If such adjustment is not waived, the issuance would not reduce the percentage ownership of holders of our Class B common stock, but would reduce the percentage ownership of holders of our Class A common stock. If such adjustment is waived, the issuance would reduce the percentage ownership of holders of both classes of our common stock. Securities could be “deemed issued” for purposes of the conversion rate adjustment if such shares are issuable upon the conversion or exercise of convertible securities, warrants or similar securities.
With certain limited exceptions, the founder shares are not transferable, assignable or saleable (except to our officers and directors and other persons or entities affiliated with our sponsor, each of whom will be subject to the same transfer restrictions) until the earlier to occur of: (A) 180 days after the completion of our initial business combination and (B) subsequent to our initial business combination, (x) if the reported last sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Preferred Stock
Our amended and restated certificate of incorporation will provide that shares of preferred stock may be issued from time to time in one or more series. Our board of directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our board of directors will be able to, without stockholder approval, issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of our board of directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management. We have no preferred stock outstanding at the date hereof. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future. No shares of preferred stock are being issued or registered in this offering.
Redeemable Warrants
Public Stockholders’ Warrants
Each warrant entitles the registered holder to purchase one share of our Class A common stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing on the later of 12 months from the closing of this offering and the date of the consummation of our initial business combination. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of Class A common stock.
The warrants will expire five years after the completion of our initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
We will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will we be required to net cash settle any warrant. In the event that a registration statement is not effective for the
exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock underlying such unit.
We are not registering the shares of Class A common stock issuable upon exercise of the warrants at this time. However, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the foregoing, if a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended, or the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
Once the warrants become exercisable, we may call the warrants for redemption:
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in whole and not in part;
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at a price of $0.01 per warrant;
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upon not less than 30 days’ prior written notice of redemption given after the warrants become exercisable (the “30-day redemption period”) to each warrant holder; and
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if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, right issuances, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending three days before we send the notice of redemption to the warrant holders.
If and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in this offering.
We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the warrants, each warrant holder will be entitled to exercise its warrant prior to the scheduled redemption date. However, the price of the Class A common stock may fall below the $18.00 redemption trigger price (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) as well as the $11.50 warrant exercise price after the redemption notice is issued.
If we call the warrants for redemption as described above, our management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of our warrants. If our management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the
“fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third day prior to the date on which the notice of redemption is sent to the holders of warrants. If our management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of Class A common stock to be received upon exercise of the warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. We believe this feature is an attractive option to us if we do not need the cash from the exercise of the warrants after our initial business combination.
A holder of a warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (or such other amount as a holder may specify) of the shares of Class A common stock outstanding immediately after giving effect to such exercise.
If the number of outstanding shares of Class A common stock is increased by a stock dividend payable in shares of Class A common stock, or by a split-up of shares of Class A common stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Class A common stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of Class A common stock. A rights offering to holders of Class A common stock entitling holders to purchase shares of Class A common stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of Class A common stock equal to the product of (i) the number of shares of Class A common stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Class A common stock) and (ii) one (1) minus the quotient of (x) the price per share of Class A common stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Class A common stock, in determining the price payable for Class A common stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of Class A common stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of Class A common stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if we, at any time while the warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the holders of Class A common stock on account of such shares of Class A common stock (or other shares of our capital stock into which the warrants are convertible), other than (a) as described above, (b) certain ordinary cash dividends, (c) to satisfy the redemption rights of the holders of Class A common stock in connection with a proposed initial business combination, (d) to satisfy the redemption rights of the holders of Class A common stock in connection with a stockholder vote to amend our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our Class A common stock if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, or (e) in connection with the redemption of our public shares upon our failure to complete our initial business combination, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Class A common stock in respect of such event.
If the number of outstanding shares of our Class A common stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Class A common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Class A common stock issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding shares of Class A common stock.
Whenever the number of shares of Class A common stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Class A common stock purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Class A common stock so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding shares of Class A common stock (other than those described above or that solely affects the par value of such shares of Class A common stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding shares of Class A common stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of our Class A common stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event.
The warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. You should review a copy of the warrant agreement, which will be filed as an exhibit to the registration statement of which this prospectus is a part, for a complete description of the terms and conditions applicable to the warrants. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any mistake, including to conform the provisions of the warrant agreement to the description of the terms of the warrants and the warrant agreement set forth in this prospectus, or defective provision, but requires the approval by the holders of at least a majority of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants.
In addition, if (x) we issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at a Newly Issued Price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by our board of directors and, in the case of any such issuance to our sponsor or its affiliates, without taking into account any founder shares held by our sponsor or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and (z) the Market Value is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of Class A common stock and any voting rights until they exercise their warrants and receive shares of Class A common stock. After the issuance of shares of Class A common stock upon exercise of the warrants, each holder will be entitled to one (1) vote for each share held of record on all matters to be voted on by stockholders.
No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of Class A common stock to be issued to the warrant holder.
We have agreed that, subject to applicable law, any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and we irrevocably submit to such jurisdiction, which jurisdiction will be the exclusive forum for any such action, proceeding or claim. See “Risk Factors — Our warrant agreement will designate the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of our warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.” This provision applies to claims under the Securities Act but does not apply to claims under the Exchange Act or any claim for which the federal district courts of the United States of America are the sole and exclusive forum.
Placement warrants
Except as described below, the placement warrants have terms and provisions that are identical to those of the warrants being sold as part of the units in this offering, including as to exercise price, exercisability and exercise period. The placement warrants (including the Class A common stock issuable upon exercise of the placement warrants) will not be transferable, assignable or salable until the completion of our initial business combination (except, among other limited exceptions as described under the section of this prospectus entitled “Principal Stockholders — Restrictions on Transfers of Founder Shares and Placement Warrants,” to our officers and directors and other persons or entities affiliated with our sponsor). The placement warrants will be redeemable by us on the same basis as the public warrants.
In addition, holders of our placement warrants are entitled to certain registration rights.
In order to fund working capital deficiencies and finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender, upon consummation of our initial business combination. The warrants would be identical to the placement warrants. However, as the warrants would not be issued until consummation of our initial business combination, such warrants would not be able to be voted on an amendment to the warrant agreement in connection with such business combination.
Our sponsor has agreed not to transfer, assign or sell any of the placement warrants (including the Class A common stock issuable upon exercise of any of these warrants) until the date we complete our initial business combination, except that, among other limited exceptions as described under the section of this prospectus entitled “Principal Stockholders — Restrictions on Transfers of Founder Shares and Placement Warrants” made to our officers and directors and other persons or entities affiliated with our sponsor.
Rights
Each holder of a right will automatically receive one-tenth (1/10) of one Class A common stock upon consummation of our initial business combination, even if the holder of such right converted all Class A common stock held by him, her, or it in connection with the initial business combination or an amendment to our amended and restated certificate of incorporation with respect to our pre-initial business combination activities. No additional consideration will be required to be paid by a holder of rights in order to receive his, her, or its additional Class A common stock upon consummation of an initial business combination. The Class A common stock issuable upon exchange of the rights will be freely tradable (except to the extent held by affiliates of ours).
If we are unable to complete an initial business combination within the prescribed time frame, and we liquidate the funds held in the trust account, holders of rights will not receive any of such funds for their rights, nor will they receive any distribution from our assets held outside of the trust account with respect to such rights, and the rights will expire worthless.
We will not issue fractional shares in connection with an exchange of rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable
provisions of the DGCL, and any rounding down and extinguishment may be done with or without any in lieu cash payment or other compensation being made to the holder of the relevant rights. As a result, you must hold rights in multiples of 10 in order to receive shares for all of your rights upon closing of a business combination.
Dividends
We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of an initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial conditions subsequent to completion of an initial business combination. The payment of any cash dividends subsequent to an initial business combination will be within the discretion of our board of directors at such time. If we increase or decrease the size of the offering we will effect a stock dividend or a share contribution back to capital or other appropriate mechanism, as applicable, with respect to our Class B common stock immediately prior to the consummation of the offering in such amount as to maintain the ownership of our initial stockholders at 20.0% of the issued and outstanding shares of our common stock (excluding the placement warrants and the underlying Class A common stock and assuming they do not purchase any units in this offering) upon the consummation of this offering. Further, if we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Our Transfer Agent, Rights Agent and Warrant Agent
The transfer agent for our common stock, rights agent for our rights and warrant agent for our warrants is Continental Stock Transfer & Trust Company. We have agreed to indemnify Continental Stock Transfer & Trust Company in its roles as transfer agent, rights agent and warrant agent, its agents and each of its stockholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted for its activities in that capacity, except for any liability due to any gross negligence, willful misconduct or bad faith of the indemnified person or entity.
Our Amended and Restated Certificate of Incorporation
Our amended and restated certificate of incorporation will contain certain requirements and restrictions relating to this offering that will apply to us until the completion of our initial business combination. These provisions cannot be amended without the approval of the holders of at least 65% of our common stock. Our initial stockholders, who will collectively beneficially own approximately 19.41% of our common stock upon the closing of this offering (assuming they do not purchase any units in this offering), will participate in any vote to amend our amended and restated certificate of incorporation and will have the discretion to vote in any manner they choose. Specifically, our amended and restated certificate of incorporation provides, among other things, that:
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If we are unable to complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter subject to lawfully available funds therefor, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (ii) above to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In the event we decide to exercise the extension option, investors will not have voting rights nor redemption rights in connection with such additional three-month extensions;
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Prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial business combination;
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Although we do not intend to enter into an initial business combination with a target business that is affiliated with our sponsor, our directors or our officers, we are not prohibited from doing so. In the event we enter into such a transaction, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions that such an initial business combination is fair to our company from a financial point of view;
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If a stockholder vote on our initial business combination is not required by law and we do not decide to hold a stockholder vote for business or other legal reasons, we will offer to redeem our public shares pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, and will file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about our initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act; whether or not we maintain our registration under the Exchange Act or our listing on Nasdaq, we will provide our public stockholders with the opportunity to redeem their public shares by one of the two methods listed above;
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So long as we obtain and maintain a listing for our securities on Nasdaq, Nasdaq rules require that we must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination;
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If our stockholders approve an amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 12 months, or if we decide to extend the period of time to complete our initial business combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust, within 18 months, from the closing of this offering or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, we will provide our public stockholders with the opportunity to redeem all or a portion of their shares of Class A common stock upon such approval at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes, divided by the number of then outstanding public shares; and
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We will not effectuate our initial business combination with another blank check company or a similar company with nominal operations.
In addition, our amended and restated certificate of incorporation will provide that under no circumstances will we redeem our public shares unless our net tangible assets are at least $5,000,001 either immediately prior to or upon consummation of our initial business combination and after payment of underwriters’ fees and commissions.
Certain Anti-Takeover Provisions of Delaware Law and our Amended and Restated Certificate of Incorporation and Bylaws
We will be subject to the provisions of Section 203 of the DGCL regulating corporate takeovers upon completion of this offering. This statute prevents certain Delaware corporations, under certain circumstances, from engaging in a “business combination” with:
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a stockholder who owns 15% or more of our outstanding voting stock (otherwise known as an “interested stockholder”);
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an affiliate of an interested stockholder; or
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an associate of an interested stockholder, for three years following the date that the stockholder became an interested stockholder.
A “business combination” includes a merger or sale of more than 10% of our assets. However, the above provisions of Section 203 do not apply if:
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our board of directors approves the transaction that made the stockholder an “interested stockholder,” prior to the date of the transaction;
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after the completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of common stock; or
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on or subsequent to the date of the transaction, the initial business combination is approved by our board of directors and authorized at a meeting of our stockholders, and not by written consent, by an affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder.
Our amended and restated certificate of incorporation will provide that our board of directors will be classified into three classes of directors. As a result, in most circumstances, a person can gain control of our board only by successfully engaging in a proxy contest at two or more annual meetings.
Our authorized but unissued common stock and preferred stock are available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Exclusive forum for certain lawsuits
Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and certain other actions may be brought only in the Court of Chancery in the State of Delaware, except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery or (C) for which the Court of Chancery does not have subject matter jurisdiction. If an action is brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel. Although we believe this provision benefits us by providing increased consistency in the application of law in the types of lawsuits to which it applies, a court may determine that this provision is unenforceable, and to the extent it is enforceable, the provision may have the effect of discouraging lawsuits against our directors and officers.
Our amended and restated certificate of incorporation will provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, or the rules and regulations promulgated thereunder. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Special meeting of stockholders
Our bylaws provide that special meetings of our stockholders may be called only by a majority vote of our board of directors, by our Chief Executive Officer or by our Chairman.
Advance notice requirements for stockholder proposals and director nominations
Our bylaws provide that stockholders seeking to bring business before our annual meeting of stockholders, or to nominate candidates for election as directors at our annual meeting of stockholders, must provide timely notice of their intent in writing. To be timely, a stockholder’s notice will need to be received by the company secretary at our principal executive offices not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day prior to the anniversary date of the immediately preceding annual meeting of stockholders. Pursuant to Rule 14a-8 of the Exchange Act, proposals seeking inclusion in our annual proxy statement must comply with the notice periods contained therein. Our bylaws also specify certain requirements as to the form and content of a stockholders’ meeting. These provisions may preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders.
Action by written consent
Subsequent to the consummation of the offering, any action required or permitted to be taken by our common stockholders must be effected by a duly called annual or special meeting of such stockholders and may not be effected by written consent of the stockholders other than with respect to our Class B common stock.
Classified Board of Directors
Our board of directors will initially be divided into three classes, Class I, Class II and Class III, with members of each class serving staggered three-year terms. Our amended and restated certificate of incorporation will provide that the authorized number of directors may be changed only by resolution of the board of directors. Subject to the terms of any preferred stock, any or all of the directors may be removed from office at any time, but only for cause and only by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class. Any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of our directors then in office.
Class B Common Stock Consent Right
For so long as any shares of Class B common stock remain outstanding, we may not, without the prior vote or written consent of the holders of a majority of the shares of Class B common stock then outstanding, voting separately as a single class, amend, alter or repeal any provision our certificate of incorporation, whether by merger, consolidation or otherwise, if such amendment, alteration or repeal would alter or change the powers, preferences or relative, participating, optional or other or special rights of the Class B common stock. Any action required or permitted to be taken at any meeting of the holders of Class B common stock may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of the outstanding Class B common stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of Class B common stock were present and voted.
Securities Eligible for Future Sale
Immediately after the consummation of this offering (assuming no exercise of the underwriters’ over-allotment option) we will have 12,650,000 (or 14,547,500 if the underwriters’ over-allotment option is exercised in full) shares of common stock outstanding. Of these shares, the 10,000,000 shares (or 11,500,000 if the underwriters’ over-allotment option is exercised in full) sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by one of our affiliates within the meaning of Rule 144 under the Securities Act. All of the remaining 2,500,000 (or
2,875,000 if the underwriters’ over-allotment option is exercised in full) founder shares, all 3,200,000 placement warrants (or 3,500,000 if the underwriters’ over-allotment option is exercised in full, including component securities contained therein) are restricted securities under Rule 144, in that they were issued in private transactions not involving a public offering, and the shares of Class B common stock and placement warrants (including the underlying Class A common stock) are subject to transfer restrictions as set forth elsewhere in this prospectus. These restricted securities will be entitled to registration rights as more fully described below under “— Registration Rights.”
Rule 144
Pursuant to Rule 144, a person who has beneficially owned restricted shares of our common stock, rights or warrants for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the 18 months (or such shorter period as we were required to file reports) preceding the sale.
Persons who have beneficially owned restricted shares of our common stock, rights or warrants for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
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1% of the total number of shares of Class A common stock then outstanding, which will equal 125,000 shares immediately after this offering (or 143,750 if the underwriters exercise their over-allotment option in full); or
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the average weekly reported trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
Sales by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about us.
Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies
Rule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met:
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the issuer of the securities that was formerly a shell company has ceased to be a shell company;
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the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
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the issuer of the securities has filed all Exchange Act reports and materials required to be filed, as applicable, during the preceding 18 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and
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at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.
As a result, our initial stockholders will be able to sell their founder shares and placement warrants (including the underlying Class A common stock), as applicable, pursuant to Rule 144 without registration one year after we have completed our initial business combination.
Registration Rights
The holders of the founder shares, the representative shares and placement warrants (including the underlying Class A common stock) that may be issued upon conversion of working capital loans, any shares of Class A common stock issuable upon the exercise of the placement warrants and any shares of Class A common stock and warrants (and underlying Class A common stock) that may be issued upon
conversion of the units issued as part of the working capital loans and Class A common stock issuable upon conversion of the founder shares, will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of this offering, requiring us to register such securities for resale (in the case of the founder shares, only after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our completion of our initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering our securities. We will bear the expenses incurred in connection with the filing of any such registration statements. We will bear the expenses incurred in connection with the filing of any such registration statements.
Listing of Securities
We have applied to list our units, Class A common stock, rights and warrants on Nasdaq under the symbols “MCACU,” “MCAC,” “MCACR,” and “MCACW,” respectively. We expect that our units will be listed on Nasdaq on or promptly after the effective date of the registration statement. Following the date the shares of our Class A common stock, rights and warrants are eligible to trade separately, we anticipate that the shares of our Class A common stock, rights and warrants will be listed separately and as a unit on Nasdaq. We cannot guarantee that our securities will be approved for listing on Nasdaq.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain material U.S. federal income tax considerations of the acquisition, ownership and disposition of our units, shares of Class A common stock, rights and warrants, which we refer to collectively as our securities. Because the components of a unit are separable at the option of the holder, the holder of a unit generally should be treated, for U.S. federal income tax purposes, as the owner of the underlying Class A common stock, one right to receive one-tenth (1/10) of one share of Class A common stock and one redeemable warrant components of the unit, as the case may be. As a result, the discussion below with respect to actual holders of Class A common stock, rights and warrants should also apply to holders of units (as the deemed owners of the underlying Class A common stock, rights and warrants that comprise the units). This discussion applies only to securities that are held as capital assets for U.S. federal income tax purposes and is applicable only to holders who purchased units in this offering.
This discussion assumes that the Class A common stock, rights and warrants will trade separately and that any distributions made (or deemed made) by us on our Class A common stock and any consideration received (or deemed received) by a holder in consideration for the sale or other disposition of our securities will be in U.S. dollars.
This summary is based upon U.S. federal income tax laws as of the date of this prospectus, which is subject to change or differing interpretations, possibly with retroactive effect. This discussion is a summary only and does not describe all of the tax consequences that may be relevant to you in light of your particular circumstances, including but not limited to the alternative minimum tax, the Medicare tax on certain net investment income and the different consequences that may apply if you are subject to special rules that apply to certain types of investors, including but not limited to:
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financial institutions or financial services entities;
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broker-dealers;
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governments or agencies or instrumentalities thereof;
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regulated investment companies;
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real estate investment trusts;
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expatriates or former long-term residents of the United States;
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persons that actually or constructively own five percent or more (by vote or value) of our shares;
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persons that acquired our securities pursuant to an exercise of employee share options, in connection with employee share incentive plans or otherwise as compensation;
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insurance companies;
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dealers or traders subject to a mark-to-market method of accounting with respect to the securities;
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persons holding the securities as part of a “straddle,” constructive sale, hedge, conversion or other integrated transaction or similar transaction;
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U.S. holders (as defined below) whose functional currency is not the U.S. dollar;
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partnerships (or entities or arrangements classified as partnerships or other pass-through entities for U.S. federal income tax purposes) and any beneficial owners of such entities;
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tax-exempt entities;
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controlled foreign corporations; and
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passive foreign investment companies.
If you are a partnership (including an entity or arrangement treated as a partnership or other pass-through entity for U.S. federal income tax purposes), the U.S. federal income tax treatment of your partners, members or other beneficial owners will generally depend on the status of your partners, members or other beneficial owners and your activities, in addition to certain determinations made at the partner, member or other beneficial owner level. If you are a partner, member or other beneficial owner of a partnership
(including an entity or arrangement treated as a partnership or other pass-through entity for U.S. federal income tax purposes) holding our securities, you are urged to consult your tax advisor regarding the tax consequences of the acquisition, ownership and disposition of our securities.
This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations as of the date hereof, which are subject to change, possibly on a retroactive basis, and changes to any of which subsequent to the date of this prospectus may affect the tax consequences described herein. This discussion does not address any aspect of state, local or non-U.S. taxation, or any U.S. federal taxes other than income taxes (such as gift and estate taxes).
We have not sought, and will not seek, a ruling from the U.S. Internal Revenue Service (the “IRS”) as to any U.S. federal income tax consequence described herein. The IRS may disagree with the discussion herein, and its determination may be upheld by a court. Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy of the statements in this discussion. You are urged to consult your tax advisor with respect to the application of U.S. federal tax laws to your particular situation, as well as any tax consequences arising under the laws of any state, local or foreign jurisdiction.
THIS DISCUSSION IS ONLY A SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS ASSOCIATED WITH THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR SECURITIES. EACH PROSPECTIVE INVESTOR IN OUR SECURITIES IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY U.S. FEDERAL NON-INCOME, STATE, LOCAL, AND NON-U.S. TAX LAWS.
Personal Holding Company Status
We could be subject to a second level of U.S. federal income tax on a portion of our income if we are determined to be a personal holding company, or PHC, for U.S. federal income tax purposes. A U.S. corporation generally will be classified as a PHC for U.S. federal income tax purposes in a given taxable year if (i) at any time during the last half of such taxable year, five or fewer individuals (without regard to their citizenship or residency and including as individuals for this purpose certain entities such as certain tax-exempt organizations, pension funds and charitable trusts) own or are deemed to own (pursuant to certain constructive ownership rules) more than 50% of the stock of the corporation by value and (ii) at least 60% of the corporation’s adjusted ordinary gross income, as determined for U.S. federal income tax purposes, for such taxable year consists of PHC income (which includes, among other things, dividends, interest, certain royalties, annuities and, under certain circumstances, rents).
At least 60% of our adjusted ordinary gross income may consist of PHC income, depending on the date and size of our initial business combination. In addition, depending on the concentration of our stock in the hands of individuals, including the members of our sponsor and certain tax-exempt organizations, pension funds and charitable trusts, it is possible that more than 50% of our stock may be owned or deemed owned (pursuant to the constructive ownership rules) by such persons during the last half of a taxable year. Thus, no assurance can be given that we will not be a PHC following this offering or in the future. If we are or were to become a PHC in a given taxable year, we would be subject to an additional PHC tax, currently imposed at a rate of 20%, on our undistributed PHC income, which generally includes our taxable income, subject to certain adjustments.
Allocation of Purchase Price and Characterization of a Unit
No statutory, administrative or judicial authority directly addresses the treatment of a unit or any instrument similar to a unit for U.S. federal income tax purposes and, therefore, that treatment is not entirely clear. The acquisition of a unit should be treated for U.S. federal income tax purposes as the acquisition of one share of our Class A common stock, one right to receive one-tenth (1/10) of one share of our Class A common stock and one warrant to acquire one share of our Class A common stock. For U.S. federal income tax purposes, each holder of a unit must allocate the purchase price paid by such holder for
such unit between the one share of Class A common stock, the one right to receive one-tenth (1/10) of one share of Class A common stock and the one warrant based on the relative fair market value of each at the time of issuance. Under U.S. federal income tax law, each investor must make his or her own determination of such value based on all the relevant facts and circumstances. Therefore, we strongly urge each investor to consult his or her tax adviser regarding the determination of value for these purposes. The price allocated to each share of Class A common stock, one right to receive one-tenth (1/10) of one share of Class A common stock and the one warrant should be the stockholder’s tax basis in such share, right or one warrant, as the case may be. Any disposition of a unit should be treated for U.S. federal income tax purposes as a disposition of the share of Class A common stock, one right to receive one-tenth (1/10) of one share of Class A common stock and the one warrant comprising the unit, and the amount realized on the disposition should be allocated between the share of Class A common stock, one right to receive one-tenth (1/10) of one share of Class A common stock and the one warrant based on their respective relative fair market values (as determined by each such unit holder based on all the relevant facts and circumstances) at the time of disposition. The separation of shares of Class A common stock, rights and warrants comprising units should not be a taxable event for U.S. federal income tax purposes.
The foregoing treatment of the units, shares of Class A common stock, rights and warrants and a holder’s purchase price allocation are not binding on the IRS or the courts. Because there are no authorities that directly address instruments that are similar to the units, no assurance can be given that the IRS or the courts will agree with the characterization described above or the discussion below. Accordingly, each prospective investor is urged to consult its own tax advisors regarding the tax consequences of an investment in a unit (including alternative characterizations of a unit). The balance of this discussion assumes that the characterization of the units described above will be respected for U.S. federal income tax purposes.
U.S. Holders
This section applies to you if you are a “U.S. holder.” A U.S. holder is a beneficial owner of our units, shares of Class A common stock, rights or warrants who or that is, for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity taxable as a corporation) organized in or under the laws of the United States, any state thereof or the District of Columbia;
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an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
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a trust, if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons (as defined in the Code) have authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under Treasury Regulations to be treated as a United States person.
Taxation of Distributions. If we pay distributions in cash or other property (other than certain distributions of our stock or rights to acquire our stock) to U.S. holders of shares of our Class A common stock, such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. holder’s adjusted tax basis in our Class A common stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the Class A common stock and will be treated as described under “U.S. Holders — Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock, Rights and Warrants” below.
Dividends we pay to a U.S. holder that is a taxable corporation generally will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are met, dividends we pay to a non-corporate U.S. holder may constitute “qualified dividend income” that will be subject to tax at preferential long-term capital gains rates. It is unclear whether the redemption rights with respect to the Class A common stock described
in this prospectus may prevent a U.S. holder from satisfying the applicable holding period requirements with respect to the dividends received deduction or the preferential tax rate on qualified dividend income, as the case may be. If the holding period requirements are not satisfied, then a corporation may not be able to qualify for the dividends received deduction and would have taxable income equal to the entire dividend amount, and non-corporate U.S. holders may be subject to tax on such dividend at regular ordinary income tax rates instead of the preferential rate that applies to qualified dividend income.
Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock, Rights and Warrants. Upon a sale or other taxable disposition of our Class A common stock, rights or warrants (which, in general, would include a redemption of Class A common stock, rights or warrants that is treated as a sale of such securities as described below, including as a result of a dissolution and liquidation in the event we do not consummate an initial business combination within the prescribed time frame), a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. holder’s adjusted tax basis in the Class A common stock, rights or warrants. Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. holder’s holding period for the Class A common stock, rights or warrants so disposed of exceeds one year. It is unclear, however, whether the redemption rights with respect to the Class A common stock described in this prospectus may suspend the running of the applicable holding period for this purpose. If the running of the holding period for the Class A common stock is suspended, then non-corporate U.S. holders may not be able to satisfy the one-year holding period requirement for long-term capital gain treatment, in which case any gain on a sale or taxable disposition of the shares would be subject to short-term capital gain treatment and would be taxed at regular ordinary income tax rates. Long-term capital gains recognized by non-corporate U.S. holders may be eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations.
Generally, the amount of gain or loss recognized by a U.S. holder is an amount equal to the difference between (i) the sum of the amount of cash and the fair market value of any property received in such disposition (or, if the Class A common stock, rights or warrants are held as part of units at the time of the disposition, the portion of the amount realized on such disposition that is allocated to the Class A common stock, rights or the warrants based upon the then relative fair market values of the Class A common stock, rights or the warrants included in the units) and (ii) the U.S. holder’s adjusted tax basis in its Class A common stock, rights or warrants so disposed of. A U.S. holder’s adjusted tax basis in its Class A common stock, rights or warrants generally will equal the U.S. holder’s acquisition cost (that is, as discussed above, the portion of the purchase price of a unit allocated to a share of Class A common stock, one right to receive one-tenth (1/10) of one share of Class A common stock or one warrant or, as discussed below, the U.S. holder’s initial basis for Class A common stock received upon exercise of warrants) less, in the case of a share of Class A common stock, any prior distributions treated as a return of capital.
Redemption of Class A Common Stock. In the event that a U.S. holder’s Class A common stock is redeemed pursuant to the redemption provisions described in this prospectus under the section of this prospectus entitled “Description of Securities — Common Stock” or if we purchase a U.S. holder’s Class A common stock in an open market transaction (each of which we refer to as a “redemption”), the treatment of the transaction for U.S. federal income tax purposes will depend on whether the redemption qualifies as a sale of the Class A common stock under Section 302 of the Code. If the redemption qualifies as a sale of Class A common stock, the U.S. holder will be treated as described under “U.S. Holders — Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock, Rights and Warrants” above. If the redemption does not qualify as a sale of Class A common stock, the U.S. holder will be treated as receiving a corporate distribution with the tax consequences described above under “U.S. Holders — Taxation of Distributions.” Whether a redemption qualifies for sale treatment will depend largely on the total number of shares of our stock treated as held by the U.S. holder (including any stock constructively owned by the U.S. holder as a result of owning warrants) relative to all of our shares outstanding both before and after the redemption. The redemption of Class A common stock generally will be treated as a sale of the Class A common stock (rather than as a corporate distribution) if the redemption (i) is “substantially disproportionate” with respect to the U.S. holder, (ii) results in a “complete termination” of the U.S. holder’s interest in us or (iii) is “not essentially equivalent to a dividend” with respect to the U.S. holder. These tests are explained more fully below.
In determining whether any of the foregoing tests are satisfied, a U.S. holder takes into account not only stock actually owned by the U.S. holder, but also shares of our stock that are constructively owned by
it. A U.S. holder may constructively own, in addition to stock owned directly, stock owned by certain related individuals and entities in which the U.S. holder has an interest or that have an interest in such U.S. holder, as well as any stock the U.S. holder has a right to acquire by exercise of an option, which would generally include Class A common stock which could be acquired pursuant to the exercise of the warrants. In order to meet the substantially disproportionate test, the percentage of our outstanding voting stock actually and constructively owned by the U.S. holder immediately following the redemption of Class A common stock must, among other requirements, be less than 80% of the percentage of our outstanding voting stock actually and constructively owned by the U.S. holder immediately before the redemption. There will be a complete termination of a U.S. holder’s interest if either (i) all of the shares of our stock actually and constructively owned by the U.S. holder are redeemed or (ii) all of the shares of our stock actually owned by the U.S. holder are redeemed and the U.S. holder is eligible to waive, and effectively waives in accordance with specific rules, the attribution of stock owned by certain family members and the U.S. holder does not constructively own any other shares of our stock (including any stock constructively owned by the U.S. holder as a result of owning warrants). The redemption of the Class A common stock will not be essentially equivalent to a dividend if a U.S. holder’s redemption results in a “meaningful reduction” of the U.S. holder’s proportionate interest in us. Whether the redemption will result in a meaningful reduction in a U.S. holder’s proportionate interest in us will depend on the particular facts and circumstances. However, the IRS has indicated in a published ruling that even a small reduction in the proportionate interest of a small minority stockholder in a publicly held corporation who exercises no control over corporate affairs may constitute such a “meaningful reduction.” A U.S. holder should consult with its own tax advisors as to the tax consequences of a redemption.
If none of the foregoing tests is satisfied, then the redemption of any Class A common stock will be treated as a corporate distribution and the tax effects will be as described under “U.S. Holders — Taxation of Distributions,” above. After the application of those rules, any remaining tax basis of the U.S. holder in the redeemed Class A common stock will be added to the U.S. holder’s adjusted tax basis in its remaining stock, or, if it has none, to the U.S. holder’s adjusted tax basis in its warrants or possibly in other stock constructively owned by it.
Exercise, Lapse or Redemption of a Warrant. A U.S. holder generally will not recognize taxable gain or loss on the acquisition of our Class A common stock upon exercise of a warrant for cash. The U.S. holder’s tax basis in the share of our Class A common stock received upon exercise of the warrant generally will be an amount equal to the sum of the U.S. holder’s initial investment in the warrant (i.e., the portion of the U.S. holder’s purchase price for a unit that is allocated to the warrant, as described above under “Allocation of Purchase Price and Characterization of a Unit”) and the exercise price. It is unclear whether the U.S. holder’s holding period for the Class A common stock received upon exercise of the warrants will begin on the date following the date of exercise or on the date of exercise of the warrants; in either case, the holding period will not include the period during which the U.S. holder held the warrants. If a warrant is allowed to lapse unexercised, a U.S. holder generally will recognize a capital loss equal to such holder’s tax basis in the warrant.
The tax consequences of a cashless exercise of a warrant are not clear under current tax law. A cashless exercise may not be taxable, either because the exercise is not a realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either situation, a U.S. holder’s basis in the Class A common stock received would equal the holder’s basis in the warrants exercised therefor. If the cashless exercise were treated as not being a realization event, it is unclear whether a U.S. holder’s holding period in the Class A common stock would be treated as commencing on the date following the date of exercise or on the date of exercise of the warrant; in either case, the holding period would not include the period during which the U.S. holder held the warrants. If the cashless exercise were treated as a recapitalization, the holding period of the Class A common stock would include the holding period of the warrants exercised therefor.
It is also possible that a cashless exercise could be treated in part as a taxable exchange in which gain or loss would be recognized. In such event, a U.S. holder could be deemed to have surrendered a number of warrants equal to the number of shares of Class A common stock having an aggregate fair market value equal to the exercise price for the total number of warrants to be exercised. The U.S. holder would recognize capital gain or loss in an amount equal to the difference between the fair market value of the Class A common stock received in respect of the warrants deemed surrendered and the U.S. holder’s tax basis in such
warrants. Such gain or loss would be long-term or short-term, depending on the U.S. holder’s holding period in the warrants deemed surrendered. In this case, a U.S. holder’s aggregate tax basis in the Class A common stock received would equal the sum of the U.S. holder’s initial investment in the warrants deemed exercised (i.e., the portion of the U.S. holder’s purchase price for the units that is allocated to the warrants, as described above under “Allocation of Purchase Price and Characterization of a Unit”) and the exercise price of such warrants. It is unclear whether a U.S. holder’s holding period for the Class A common stock would commence on the date following the date of exercise or on the date of exercise of the warrant; in either case, the holding period would not include the period during which the U.S. holder held the warrant.
Due to the absence of authority on the U.S. federal income tax treatment of a cashless exercise, including when a U.S. holder’s holding period would commence with respect to the Class A common stock received, there can be no assurance regarding which, if any, of the alternative tax consequences and holding periods described above would be adopted by the IRS or a court of law. Accordingly, U.S. holders should consult their tax advisors regarding the tax consequences of a cashless exercise.
If we redeem warrants for cash pursuant to the redemption provisions described in the section of this prospectus entitled “Description of Securities — Redeemable Warrants — Public Stockholders’ Warrants” or if we purchase warrants in an open market transaction, such redemption or purchase generally will be treated as a taxable disposition to the U.S. holder, taxed as described above under “U.S. Holders — Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock, Rights and Warrants.”
Possible Constructive Distributions. The terms of each warrant provide for an adjustment to the number of shares of Class A common stock for which the warrant may be exercised or to the exercise price of the warrant in certain events, as discussed in the section of this prospectus entitled “Description of Securities — Redeemable Warrants — Public Stockholders’ Warrants.” An adjustment which has the effect of preventing dilution generally is not taxable. The U.S. holders of the warrants would, however, be treated as receiving a constructive distribution from us if, for example, the adjustment to the number of such shares or to such exercise price increases the warrant holders’ proportionate interest in our assets or earnings and profits (e.g., through an increase in the number of shares of Class A common stock that would be obtained upon exercise or through a decrease in the exercise price of the warrant), which adjustment may be made as a result of a distribution of cash or other property, such as other securities, to the holders of shares of our Class A common stock, or as a result of the issuance of a stock dividend to holders of shares of our Class A common stock, in each case, which is taxable to the U.S. holders of such shares as a distribution. Such constructive distribution would be subject to tax as described under “U.S. Holders — Taxation of Distributions” in the same manner as if the U.S. holders of the warrants received a cash distribution from us equal to the fair market value of such increased interest.
Information Reporting and Backup Withholding. In general, information reporting requirements may apply to dividends paid to a U.S. holder and to the proceeds of the sale or other disposition of our units, shares of Class A common stock, rights and warrants, unless the U.S. holder is an exempt recipient. Backup withholding may apply to such payments if the U.S. holder fails to provide a taxpayer identification number, a certification of exempt status or has been notified by the IRS that it is subject to backup withholding (and such notification has not been withdrawn).
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a credit against a U.S. holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided the required information is timely furnished to the IRS.
Non-U.S. Holders
This section applies to you if you are a “Non-U.S. holder.” As used herein, the term “Non-U.S. holder” means a beneficial owner of our units, Class A common stock, rights or warrants who or that is for U.S. federal income tax purposes:
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a non-resident alien individual (other than certain former citizens and residents of the United States subject to U.S. tax as expatriates);
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a foreign corporation; or
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an estate or trust that is not a U.S. holder;
but generally does not include an individual who is present in the United States for 183 days or more in the taxable year of the disposition of our units (as such days are calculated pursuant to Section 7701(b)(3) of the Code), Class A common stock,rights or warrants. If you are such an individual, you should consult your tax advisor regarding the U.S. federal income tax consequences of the acquisition, ownership or sale or other disposition of our securities.
Taxation of Distributions. In general, any distributions (including constructive distributions) we make to a Non-U.S. holder of shares of our Class A common stock, to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute dividends for U.S. federal income tax purposes and, provided such dividends are not effectively connected with the Non-U.S. holder’s conduct of a trade or business within the United States, we will be required to withhold tax from the gross amount of the dividend at a rate of 30%, unless such Non-U.S. holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN or W-8BEN-E). In the case of any constructive dividend, it is possible that this tax would be withheld from any amount owed to a Non-U.S. holder by us or the applicable withholding agent, including cash distributions on other property or sale proceeds from warrants or other property subsequently paid or credited to such holder. Any distribution not constituting a dividend will be treated first as reducing (but not below zero) the Non-U.S. holder’s adjusted tax basis in its shares of our Class A common stock and, to the extent such distribution exceeds the Non-U.S. holder’s adjusted tax basis, as gain realized from the sale or other disposition of the Class A common stock, which will be treated as described under “Non-U.S. Holders — Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock, Rights and Warrants” below. In addition, if we determine that we are likely to be classified as a “United States real property holding corporation” (see “Non-U.S. Holders — Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock, Rights and Warrants” below), we generally will withhold 15% of any distribution that exceeds our current and accumulated earnings and profits.
The withholding tax generally does not apply to dividends paid to a Non-U.S. holder who provides a Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. holder’s conduct of a trade or business within the United States. Instead, the effectively connected dividends will be subject to regular U.S. federal income tax as if the Non-U.S. holder were a U.S. resident, subject to an applicable income tax treaty providing otherwise. A corporate Non-U.S. holder receiving effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower applicable treaty rate).
Exercise, Lapse or Redemption of a Warrant. The U.S. federal income tax treatment of a Non-U.S. holder’s exercise of a warrant, or the lapse of a warrant held by a Non-U.S. holder, generally will correspond to the U.S. federal income tax treatment of the exercise or lapse of a warrant by a U.S. holder, as described under “U.S. Holders — Exercise, Lapse or Redemption of a Warrant” above, although to the extent a cashless exercise results in a taxable exchange, the consequences would be similar to those described below in “Non-U.S. Holders — Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock, Rights and Warrants.”
The characterization for U.S. federal income tax purposes of the redemption of the Non-U.S. holder’s warrants generally will correspond to the U.S. federal income tax treatment of such a redemption of a U.S. holder’s warrants, as described under “U.S. Holders — Exercise, Lapse or Redemption of a Warrant” above, and the consequences of the redemption to the Non-U.S. holder will be as described below under the heading “Non-U.S. Holders — Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock, Rights and Warrants” depending on such characterization.
Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock, Rights and Warrants. A Non-U.S. holder generally will not be subject to U.S. federal income or withholding tax in respect of gain recognized on a sale, taxable exchange or other taxable disposition of our Class A common stock, which would include a dissolution and liquidation in the event we do not complete an initial business combination within the prescribed time frame, rights or warrants (including an expiration or redemption of our warrants), in each case without regard to whether those securities were held as part of a unit, unless:
•
the gain is effectively connected with the conduct by the Non-U.S. holder of a trade or business within the United States (and, under certain income tax treaties, is attributable to a United States permanent establishment or fixed base maintained by the Non-U.S. holder); or
•
we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the Non-U.S. holder held our Class A common stock, and, in the case where shares of our Class A common stock are regularly traded on an established securities market, the Non-U.S. holder has owned, directly or constructively, more than 5% of our Class A common stock at any time within the shorter of the five-year period preceding the disposition or such Non-U.S. holder’s holding period for the shares of our Class A common stock. There can be no assurance that our Class A common stock will be treated as regularly traded on an established securities market for this purpose.
Unless an applicable treaty provides otherwise, gain described in the first bullet point above will be subject to tax at generally applicable U.S. federal income tax rates as if the Non-U.S. holder were a U.S. resident. Any gains described in the first bullet point above of a Non-U.S. holder that is a foreign corporation may also be subject to an additional “branch profits tax” imposed at a 30% rate (or lower treaty rate).
If the second bullet point above applies to a Non-U.S. holder, gain recognized by such holder on the sale, exchange or other disposition of our Class A common stock, rights or warrants will be subject to tax at generally applicable U.S. federal income tax rates. In addition, a buyer of our Class A common stock, rights or warrants from such holder may be required to withhold U.S. federal income tax at a rate of 15% of the amount realized upon such disposition. We cannot determine whether we will be a “United States real property holding corporation” in the future until we complete an initial business combination. We will be classified as a United States real property holding corporation if the fair market value of our “United States real property interests” equals or exceeds 50% of the sum of the fair market value of our worldwide real property interests plus our other assets used or held for use in a trade or business, as determined for U.S. federal income tax purposes.
Redemption of Class A Common Stock. The characterization for U.S. federal income tax purposes of the redemption of a Non-U.S. holder’s Class A common stock pursuant to the redemption provisions described in the section of this prospectus entitled “Description of Securities — Common Stock” generally will correspond to the U.S. federal income tax characterization of such a redemption of a U.S. holder’s Class A common stock, as described under “U.S. Holders — Redemption of Class A Common Stock” above, and the consequences of the redemption to the Non-U.S. holder will be as described above under “Non-U.S. Holders — Taxation of Distributions” and “Non-U.S. Holders — Gain on Sale, Taxable Exchange or Other Taxable Disposition of Class A Common Stock, Rights and Warrants,” as applicable.
Because it may not be certain at the time a Non-U.S. holder is redeemed whether such Non-U.S. holder’s redemption will be treated as a sale of shares or a distribution constituting a dividend, and because such determination will depend in part on a Non-U.S. holder’s particular circumstances, we or the applicable withholding agent may not be able to determine whether (or to what extent) a Non-U.S. holder is treated as receiving a dividend for U.S. federal income tax purposes. Therefore, we or the applicable withholding agent may withhold tax at a rate of 30% on the gross amount of any consideration paid to a Non-U.S. holder in redemption of such Non-U.S. holder’s Class A common stock unless special procedures are available to Non-U.S. holders to certify that they are entitled to exemptions from, or reductions in, such withholding tax. However, there can be no assurance that such special certification procedures will be available. A Non-U.S. holder generally may obtain a refund of any such excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. holders should consult their own tax advisors regarding the application of the foregoing rules in light of their particular facts and circumstances.
Possible Constructive Distributions. The terms of each warrant provide for an adjustment to the number of shares of Class A common stock for which the warrant may be exercised or to the exercise price of the warrant in certain events, as discussed in the section of this prospectus entitled “Description of Securities — Redeemable Warrants — Public Stockholders’ Warrants.” An adjustment which has the effect of preventing dilution generally is not a taxable event. Nevertheless, a Non-U.S. holder of warrants would be treated as receiving a constructive distribution from us if, for example, the adjustment increases
the holder’s proportionate interest in our assets or earnings and profits (e.g., through an increase in the number of shares of Class A common stock that would be obtained upon exercise or through a decrease in the exercise price of the warrants), which adjustment may be made as a result of a distribution of cash or other property, such as other securities, to the holders of shares of our Class A common stock, or as a result of the issuance of a stock dividend to holders of shares of our Class A common stock, in each case, which is taxable to such holders as a distribution. Any constructive distribution received by a Non-U.S. holder would be subject to U.S. federal income tax (including any applicable withholding) in the same manner as if such Non-U.S. holder received a cash distribution from us equal to the fair market value of such increased interest without any corresponding receipt of cash. It is possible that any withholding tax on such a constructive distribution might be satisfied by us or the applicable withholding agent through a sale of a portion of the Non-U.S. holder’s shares of Class A common stock, warrants or other property held or controlled by us or the applicable withholding agent on behalf of the Non-U.S. holder or might be withheld from distributions or proceeds subsequently paid or credited to the Non-U.S. holder.
Information Reporting and Backup Withholding. Information returns will be filed with the IRS in connection with payments of dividends and the proceeds from a sale or other disposition of our units, shares of Class A common stock, rights and warrants. A Non-U.S. holder may have to comply with certification procedures to establish that it is not a United States person in order to avoid information reporting and backup withholding requirements. The certification procedures required to claim a reduced rate of withholding under a treaty generally will satisfy the certification requirements necessary to avoid the backup withholding as well. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a Non-U.S. holder will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
FATCA Withholding Taxes. Provisions commonly referred to as “FATCA” impose withholding of 30% on payments of dividends (including constructive dividends) on our Class A common stock to “foreign financial institutions” (which is broadly defined for this purpose and in general includes investment vehicles) and certain other non-U.S. entities unless various U.S. information reporting and due diligence requirements (generally relating to ownership by United States persons of interests in or accounts with those entities) have been satisfied by, or an exemption applies to, the payee (typically certified as to by the delivery of a properly completed IRS Form W-8BEN-E). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Under certain circumstances, a Non-U.S. holder might be eligible for refunds or credits of such withholding taxes, and a Non-U.S. holder might be required to file a U.S. federal income tax return to claim such refunds or credits. The withholding provisions described above currently apply to payments of dividends. The U.S. Treasury Department has released proposed Treasury Regulations which, if finalized in their present form, would eliminate the federal withholding tax of 30% applicable to the gross proceeds of a disposition of our common stock. In its preamble to such proposed Treasury Regulations, the U.S. Treasury Department stated that taxpayers may generally rely on the proposed regulations until final Treasury Regulations are issued. Prospective investors are encouraged to consult with their own tax advisors regarding the possible implications of FATCA on their investment in our securities.
UNDERWRITING
EF Hutton is acting as the sole book-running manager of the offering and as representative of the underwriters named below. Subject to the terms and conditions of the underwriting agreement dated the date of this prospectus, the underwriters named below, through the representative, have severally agreed to purchase, and we have agreed to sell to the underwriters, the following respective number of units set forth opposite the underwriters’ name.
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Underwriters
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|
|
Number of
Units
|
|
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EF Hutton, division of Benchmark Investments, LLC
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|
|
|
|
|
|
|
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Total
|
|
|
|
|
10,000,000 |
|
|
The underwriting agreement provides that the obligations of the underwriters to purchase the units included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all of the units (other than those covered by the over-allotment option described below) if they purchase any of the units.
Units sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any units sold by the underwriters to securities dealers may be sold at a discount from the initial public offering price not to exceed $ per unit. If all of the units are not sold at the initial offering price, the underwriters may change the offering price and the other selling terms. The underwriters have advised us that they do not intend to make sales to discretionary accounts.
If the underwriters sell more units than the total number set forth in the table above, we have granted to the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase up to 1,500,000 additional units at the public offering price less the underwriting discount. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, in connection with this offering. Any units issued or sold under the option will be issued and sold on the same terms and conditions as the other units that are the subject of this offering.
We, our sponsor and our officers and directors have agreed that, for a period of 180 days from the date of this prospectus, we and they will not, without the prior written consent of the representative, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the company; (ii) file or caused to be filed any registration statement with the SEC relating to the offering of any shares of capital stock of the company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the company; (iii) complete any offering of debt securities of the company, other than entering into a line of credit with a traditional bank or (iv) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the company, whether any such transaction described in clause (i), (ii), (iii) or (iv) above is to be settled by delivery of shares of capital stock of the company or such other securities, in cash or otherwise, subject to certain exceptions. The representative in its sole discretion may release any of the securities subject to these lock-up agreements at any time without notice, other than in the case of the officers and directors, which shall be with notice. Our sponsor, officers and directors are also subject to separate transfer restrictions on their founder shares and placement warrants pursuant to the letter agreement as described herein.
Our initial stockholders have agreed not to transfer, assign or sell any of their founder shares (or shares of common stock issuable upon conversion thereof) until the earlier to occur of: (A) 180 days after the completion of our initial business combination or (B) subsequent to our initial business combination, (x) if the reported last sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, right issuances, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property (except with respect to permitted transferees as described
herein under the section of this prospectus entitled “Principal Stockholders — Restrictions on Transfers of Founder Shares and Placement Warrants”). The placement warrants (including the Class A common stock issuable upon exercise of the placement warrants) will not be transferable, assignable or salable until the date of the completion of our initial business combination (except with respect to permitted transferees as described herein under the section of this prospectus entitled “Principal Stockholders — Restrictions on Transfers of Founder Shares and Placement Warrants”).
Prior to this offering, there has been no public market for our securities. Consequently, the initial public offering price for the units was determined by negotiations between us and the underwriters. Among the factors considered in determining the initial public offering price were the history and prospects of companies whose principal business is the acquisition of other companies, prior offerings of those companies, our management, our capital structure, and currently prevailing general conditions in the equity securities markets, including current market valuations of publicly traded companies considered comparable to our company. We cannot assure you, however, that the price at which the units, Class A common stock, rights or warrants will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our units, Class A common stock, or warrants will develop and continue after this offering.
We have applied to list our units on Nasdaq under the symbol “MCACU.” We cannot guarantee that our securities will be approved for listing on Nasdaq. We expect that our units will be listed on Nasdaq on or promptly after the date of this prospectus. We expect that our Class A common stock, rights and warrants will be listed under the symbols “MCAC,” “MCACR” and “MCACW,” respectively, once the Class A common stock, rights and warrants begin separate trading.
The following table shows the underwriting discounts and commissions that we are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ over-allotment option. The upfront portion of the underwriting discounts and commissions will be $0.10 per unit.
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Payable by Monterey Capital
Acquisition Corporation
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|
| |
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No Exercise
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|
|
Full Exercise
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|
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Per Unit(1)
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|
|
|
$ |
0.50 |
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|
|
|
$ |
0.50 |
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|
|
Total(1)
|
|
|
|
$ |
5,000,000 |
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|
|
|
$ |
5,750,000 |
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|
(1)
Includes $0.40 per unit, or $4,000,000 (or $4,600,000 if the underwriters’ over-allotment option is exercised in full) in the aggregate payable to the underwriters for deferred underwriting commissions to be placed in a trust account located in the United States as described herein. The deferred commissions will be released to the representative only on completion of an initial business combination as described in this prospectus.
If we do not complete our initial business combination and subsequently liquidate, the underwriters have agreed that (i) they will forfeit any rights or claims to their deferred underwriting discounts and commissions, including any accrued interest thereon, then in the trust account upon liquidation, and (ii) that the deferred underwriters’ discounts and commissions will be distributed on a pro rata basis, including interest earned on the funds held in the trust account and not previously released to us to pay our taxes to the public stockholders.
Representative Shares
We have agreed to issue to EF Hutton and/or its designees, 150,000 shares of Class A common stock (172,500 shares if the underwriters exercise their over-allotment option in full) upon the consummation of this offering. EF Hutton has agreed not to transfer, assign or sell any such shares of Class A common stock until the completion of our initial business combination. In addition, EF Hutton has agreed (i) to waive its redemption rights with respect to such shares of Class A common stock in connection with the completion of our initial business combination and (ii) to waive its rights to liquidating distributions from the trust
account with respect to such shares of Class A common stock if we fail to complete our initial business combination within the prescribed time frame.
The shares of Class A common stock have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the commencement of sales of the registration statement of which this prospectus forms a part pursuant to Rule 5110(e)(1) of FINRA’s NASD Conduct Rules. Pursuant to FINRA Rule 5110(e)(1), these securities may not be sold, transferred, assigned, pledged or hypothecated or the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement of which this prospectus forms a part, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the commencement of sales of this offering except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners, registered persons or affiliates or as otherwise permitted under Rule 5110(e)(2).
Stabilization
In connection with the offering, the underwriters may purchase and sell units in the open market. Purchases and sales in the open market may include short sales, purchases to cover short positions, which may include purchases pursuant to the over-allotment option and stabilizing purchases, in accordance with Regulation M under the Exchange Act.
•
Short sales involve secondary market sales by the underwriters of a greater number of units than it is required to purchase in the offering.
•
“Covered” short sales are sales of units in an amount up to the number of units represented by the underwriters’ over-allotment option.
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“Naked” short sales are sales of units in an amount in excess of the number of units represented by the underwriters’ over-allotment option.
•
Covering transactions involve purchases of units either pursuant to the over-allotment option or in the open market after the distribution has been completed in order to cover short positions.
•
To close a naked short position, the underwriters must purchase units in the open market after the distribution has been completed. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the units in the open market after pricing that could adversely affect investors who purchase in the offering.
•
To close a covered short position, the underwriters must purchase units in the open market after the distribution has been completed or must exercise the over-allotment option. In determining the source of units to close the covered short position, the underwriters will consider, among other things, the price of units available for purchase in the open market as compared to the price at which they may purchase units through the over-allotment option.
•
Stabilizing transactions involve bids to purchase units so long as the stabilizing bids do not exceed a specified maximum.
Purchases to cover short positions and stabilizing purchases, as well as other purchases by the underwriters for their own account, may have the effect of preventing or retarding a decline in the market price of the units. They may also cause the price of the units to be higher than the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions in the over-the-counter market or otherwise. If the underwriters commence any of these transactions, it may discontinue them at any time.
We estimate that our portion of the total expenses of this offering payable by us will be $675,000, excluding underwriting discounts and commissions. We have agreed to reimburse the underwriters for all expenses and fees related to the review by FINRA, including legal fees which will not exceed $125,000 in the aggregate.
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities.
We are not under any contractual obligation to engage the underwriters to provide any services for us after this offering, and have no present intent to do so. However, the underwriters may introduce us to potential target businesses or assist us in raising additional capital in the future. If the underwriters provide services to us after this offering, we may pay the underwriters fair and reasonable fees that would be determined at that time in an arm’s length negotiation; provided that no agreement will be entered into with the underwriters and no fees for such services will be paid to the underwriters prior to the date that is 90 days from the date of this prospectus, unless FINRA determines that such payment would not be deemed underwriters’ compensation in connection with this offering and we may pay the underwriters of this offering or any entity with which it is affiliated a finder’s fee or other compensation for services rendered to us in connection with the completion of an initial business combination.
The underwriters and their affiliates may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates, for which it may in the future receive, customary fees and commissions for any such transactions.
The underwriters and their respective affiliates are financial institutions engaged in various activities, which may include, among other things, securities trading, commercial and investment banking, financial advisory, investment management, financing and brokerage activities. Such underwriters and their affiliates have in the past, in the ordinary course of business, provided certain of these services to affiliates of our sponsor, and have arrangements in place whereby they may currently or in the future provide such services to affiliates of our sponsor, for which they have received and may receive customary fees, interest, commissions and other compensation.
In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
A prospectus in electronic format may be made available by e-mail or on the web sites or through online services maintained by one or more of the underwriters or their affiliates. In those cases, prospective investors may view offering terms online and may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of common shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations. Other than the prospectus in electronic format, the information on the underwriters’ web sites and any information contained in any other web site maintained by any of the underwriters is not part of this prospectus, has not been approved and/or endorsed by us or the underwriters and should not be relied upon by investors.
Selling Restrictions
Notice to Prospective Investors in the European Economic Area and the United Kingdom
In relation to each member state of the European Economic Area and the United Kingdom (each, a “relevant state”), no units have been offered or will be offered pursuant to the offering to the public in that relevant state prior to the publication of a prospectus in relation to the units that has been approved by the competent authority in that relevant state or, where appropriate, approved in another relevant state and notified to the competent authority in that relevant state, all in accordance with the Prospectus Regulation, except that offers of our units may be made to the public in that relevant state at any time under the following exemptions under the Prospectus Regulation:
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to any legal entity which is a qualified investor as defined under the Prospectus Regulation;
•
to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the representative for any such offer; or
•
in any other circumstances falling within Article 1(4) of the Prospectus Regulation.
provided that no such offer of units shall require the issuer or the representative to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
Each person in a relevant state who initially acquires any units or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with the company and the representative that it is a qualified investor within the meaning of the Prospectus Regulation.
In the case of any units being offered to a financial intermediary as that term is used in Article 5(1) of the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the units acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer to the public other than their offer or resale in a relevant state to qualified investors, in circumstances in which the prior consent of the representative has been obtained to each such proposed offer or resale.
We, the representative and each of our and the representative’s respective affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements.
For the purposes of this provision, the expression an “offer to the public” in relation to any units in any relevant state means the communication in any form and by any means of sufficient information on the terms of the offer and any units to be offered so as to enable an investor to decide to purchase or subscribe for any units, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
References to the Prospectus Regulation include, in relation to the United Kingdom, the Prospectus Regulation as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018.
The above selling restriction is in addition to any other selling restrictions set out below.
In connection with the offering, the representative is not acting for anyone other than the issuer and will not be responsible to anyone other than the issuer for providing the protections afforded to its clients nor for providing advice in relation to the offering.
Notice to Prospective Investors in the United Kingdom
This prospectus is for distribution only to persons who (i) have professional experience in matters relating to investments and who qualify as investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Financial Promotion Order”), (ii) are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of the Financial Promotion Order, (iii) are outside the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This document is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons.
Notice to Prospective Investors in France
Neither this prospectus nor any other offering material relating to the units described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or of the competent
authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The units have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the units has been or will be:
•
released, issued, distributed or caused to be released, issued or distributed to the public in France; or
•
used in connection with any offer for subscription or sale of the units to the public in France. Such offers, sales and distributions will be made in France only:
•
To qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint d’investisseurs), in each case investing for their own account, all as defined in, and in accordance with, articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier;
•
to investment services providers authorized to engage in portfolio management on behalf of third parties; or
•
in a transaction that, in accordance with article L.411-2-II-1° -or-2° -or 3° of the French Code monétaire et financier and article 211-2 of the General Regulations (Règlement Général) of the Autorité des Marchés Financiers, does not constitute a public offer (appel public à l’épargne).
The units may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.
Notice to Prospective Investors in Hong Kong
The units have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the units has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to units which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
Notice to Prospective Investors in Japan
The units have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, “Japanese Person” shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, the units were not offered or sold or caused to be made the subject of an invitation for subscription or purchase and will not be offered or sold or caused to be made the subject of an invitation for subscription or purchase, and this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the units, has not been circulated or distributed, nor will it be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time (the “SFA”)) pursuant to Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or
any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the units are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a)
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b)
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the units pursuant to an offer made under Section 275 of the SFA except:
(a)
to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(b)
where no consideration is or will be given for the transfer;
(c)
where the transfer is by operation of law; or
(d)
as specified in Section 276(7) of the SFA.
Notice to Prospective Investors in Canada
The units may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the units must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Notice to Prospective Investors in the Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (“DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The securities to which this prospectus relates may be illiquid and/or subject to restrictions on their resale.
Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
Notice to Prospective Investors in Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (“ASIC”), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act. Any offer in Australia of the securities may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act.
The securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 18 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions. This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Notice to Prospective Investors in Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, the company, the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of securities.
Notice to Prospective Investors in Israel
In the State of Israel, this prospectus shall not be regarded as an offer to the public to purchase securities under the Israeli Securities Law, 5728 – 1968, which requires a prospectus to be published and authorized by the Israel Securities Authority, if it complies with certain provisions of Section 15 of the Israeli Securities Law, 5728 – 1968, including, inter alia, if: (i) the offer is made, distributed or directed to not more than 35 investors, subject to certain conditions (the “Addressed Investors”); or (ii) the offer is made, distributed or directed to certain qualified investors defined in the First Addendum of the Israeli Securities Law, 5728 – 1968, subject to certain conditions (the “Qualified Investors”). The Qualified Investors shall not be taken into account in the count of the Addressed Investors and may be offered to purchase securities in addition to the 35 Addressed Investors. The company has not and will not take any action that would require it to publish a prospectus in accordance with and subject to the Israeli Securities Law, 5728 – 1968. We have not and will not distribute this prospectus or make, distribute or direct an offer to subscribe for our securities to any person within the State of Israel, other than to Qualified Investors and up to 35 Addressed Investors.
Qualified Investors may have to submit written evidence that they meet the definitions set out in of the First Addendum to the Israeli Securities Law, 5728 – 1968. In particular, we may request, as a condition to be offered securities, that Qualified Investors will each represent, warrant and certify to us and/or to anyone acting on our behalf: (i) that it is an investor falling within one of the categories listed in the First Addendum to the Israeli Securities Law, 5728 – 1968; (ii) which of the categories listed in the First Addendum to the Israeli Securities Law, 5728 – 1968 regarding Qualified Investors is applicable to it; (iii) that it will abide by all provisions set forth in the Israeli Securities Law, 5728 – 1968 and the regulations promulgated thereunder in connection with the offer to be issued securities; (iv) that the securities that it will be issued are, subject to exemptions available under the Israeli Securities Law, 5728 – 1968: (a) for its own account; (b) for investment purposes only; and (c) not issued with a view to resale within the State of Israel, other than in accordance with the provisions of the Israeli Securities Law, 5728 – 1968; and (v) that it is willing to provide further evidence of its Qualified Investor status. Addressed Investors may have to submit written evidence in respect of their identity and may have to sign and submit a declaration containing, inter alia, the Addressed Investor’s name, address and passport number or Israeli identification number.
We have not authorized and do not authorize the making of any offer of securities through any financial intermediary on our behalf, other than offers made by the underwriters and their respective affiliates, with a view to the final placement of the securities as contemplated in this document. Accordingly, no purchaser of the shares, other than the underwriters, is authorized to make any further offer of shares on our behalf or on behalf of the underwriters.
LEGAL MATTERS
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts, is acting as counsel in connection with the registration of our securities under the Securities Act, and as such, will pass upon the validity of the securities offered in this prospectus. Certain legal matters will be passed upon on behalf of the underwriters by Seward & Kissel LLP.
EXPERTS
The financial statements of Monterey Capital Acquisition Corporation as of December 31, 2021, and for the period from September 23, 2021 (inception) through December 31, 2021 appearing in this prospectus have been audited by Marcum LLP, independent registered public accounting firm, as stated in their report herein (which contains an explanatory paragraph relating to substantial doubt about the ability of Monterey Capital Acquisition Corporation to continue as a going concern as described in Note 1 to the financial statements), appearing elsewhere in this prospectus, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the securities we are offering by this prospectus. This prospectus does not contain all of the information included in the registration statement. For further information about us and our securities, you should refer to the registration statement and the exhibits and schedules filed with the registration statement. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are materially complete but may not include a description of all aspects of such contracts, agreements or other documents, and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document.
Upon completion of this offering, we will be subject to the information requirements of the Exchange Act and will file annual, quarterly and current event reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at www.sec.gov.
MONTEREY CAPITAL ACQUISITION CORPORATION
INDEX TO FINANCIAL STATEMENTS
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F-2 |
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F-3 |
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F-4 |
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F-5 |
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F-6 |
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F-7
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Monterey Capital Acquisition Corporation
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Monterey Capital Acquisition Corporation (the “Company”) as of December 31, 2021, the related statements of operations, stockholders’ equity and cash flows for the period from September 23, 2021 (inception) through December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the period from September 23, 2021 (inception) through December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph — Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company’s business plan is dependent upon its completion of the proposed initial public offering and issuance of private warrants. The Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Marcum llp
Marcum llp
We have served as the Company’s auditor since 2021.
New York, NY
April 22, 2022
Monterey Capital Acquisition Corporation
Balance Sheet
DECEMBER 31, 2021
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ASSETS:
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Current assets – Cash
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$ |
5,056 |
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Deferred offering costs
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329,606 |
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Total Assets
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$ |
334,662 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Accrued offering costs
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240,193 |
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Accrued expenses
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9,358 |
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Promissory note – related party
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80,000 |
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Total Current Liabilities
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329,551 |
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Commitments and Contingencies (Note 6)
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Stockholders’ Equity
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Preference shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
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— |
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Class A common stock, $0.0001 par value; 100,000,000 shares authorized; none issued and outstanding
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— |
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Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 2,875,000 shares
issued and outstanding(1)
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288 |
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Additional paid-in capital
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24,712 |
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Accumulated deficit
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(19,889) |
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Total Stockholders’ Equity
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5,111 |
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Total Liabilities and Stockholders’ Equity
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$ |
334,662 |
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(1)
Includes an aggregate of up to 375,000 shares subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters (See Note 7).
The accompanying notes are an integral part of these financial statements
MONTEREY CAPITAL ACQUISITION CORPORATION
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 23, 2021 (INCEPTION) THROUGH DECEMBER 31, 2021
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General and administration expenses
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$ |
19,889 |
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Net loss
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$ |
(19,889) |
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Weighted average shares outstanding, basic and diluted(1)
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2,500,000 |
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Basic and diluted net loss per share
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$ |
(0.01) |
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(1)
Excludes an aggregate of up to 375,000 shares subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriters (See Note 7).
The accompanying notes are an integral part of these financial statements
MONTEREY CAPITAL ACQUISITION CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM SEPTEMBER 23, 2021 (INCEPTION) THROUGH DECEMBER 31, 2021
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Class B
Common Stock
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Additional
Paid-In
Capital
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Accumulated
Deficit
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Total
Stockholders’
Equity
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Shares
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Amount
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Balance as of September 23, 2021 (inception)
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— |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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Issuance of common shares to Sponsor(1)
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2,875,000 |
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288 |
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24,712 |
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— |
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25,000 |
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Net loss
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— |
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— |
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— |
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(19,889) |
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(19,889) |
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Balance – December 31, 2021
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2,875,000 |
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$ |
288 |
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$ |
24,712 |
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$ |
(19,881) |
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|
$ |
5,111 |
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(1)
Includes an aggregate of up to 375,000 shares of Class B common stock subject to forfeiture depending on the extent to which the underwriters’ over-allotment option is exercised (see Note 5).
The accompanying notes are an integral part of these financial statements
MONTEREY CAPITAL ACQUISITION CORPORATION
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM SEPTEMBER 23, 2021 (INCEPTION) THROUGH DECEMBER 31, 2021
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Cash Flows from Operating Activities:
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Net loss
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$ |
(19,889) |
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Adjustments to reconcile net loss to net cash used in operating activities:
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Accrued expenses
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9,358 |
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|
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Net cash used in operating activities
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|
|
|
(10,531)
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|
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Cash Flows from Financing Activities:
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Proceeds from promissory note
|
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|
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80,000 |
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Payment of deferred offering costs
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|
|
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(89,413) |
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|
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Proceeds from issuance of Class B common stock
|
|
|
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|
25,000 |
|
|
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Net cash provided by financing activities
|
|
|
|
|
15,587
|
|
|
| |
Net Change in Cash
|
|
|
|
|
5,056 |
|
|
| |
Cash – beginning of period
|
|
|
|
|
— |
|
|
| |
Cash – end of period
|
|
|
|
$ |
5,056 |
|
|
| |
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
| |
Offering costs included in accrued offering costs
|
|
|
|
$ |
240,193 |
|
|
The accompanying notes are an integral part of these financial statements
MONTEREY CAPITAL ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1 — Organization, Business Operation and going concern
Monterey Capital Acquisition Corporation (the “Company”) is a blank check company incorporated as a Delaware company on September 23, 2021. The Company was formed for the purpose of acquiring, merging with, engaging in capital stock exchange with, purchasing all or substantially all of the assets of, engaging in contractual arrangements, or engaging in any other similar business combination with a single operating entity, or one or more related or unrelated operating entities operating in any sector (“Business Combination”). The Company may pursue a business combination opportunity in any business or industry and intends to target businesses with enterprise values of approximately $250 million to $1 billion except for any entity with its principal business operations in China (including Hong Kong and Macau). The Company plans to initially target companies in the clean transition economy.
The Company has not selected any specific business combination target and the Company has not, nor has anyone on its behalf, initiated any substantive discussions, directly or indirectly, with any business combination target with respect to the Business Combination.
As of December 31, 2021, the Company had not commenced any operations. All activity for the period from September 23, 2021 (inception) through December 31, 2021 relates to the Company’s formation and the proposed initial public offering described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Proposed Public Offering (as defined below).
The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is Monterrey Acquisition Sponsor, LLC, a Delaware limited liability company (the “Sponsor”). The Company’s ability to commence operations is contingent upon obtaining adequate financial resources through a proposed public offering (the “Proposed Public Offering”) of 10,000,000 units (each, a “Unit” and collectively, the “Units”) at $10.00 per Unit (or 11,500,000 units if the underwriters’ over-allotment option is exercised in full), which is discussed in Note 3, and the proposed sale of 3,200,000 warrants (or up to 3,500,000 warrants if the underwriters’ over-allotment option is exercised in full) (the “Private Warrants”) at a price of $1.00 per Private Warrant in a private placement to the Sponsor that will close simultaneously with the Proposed Public Offering. Each Unit is expected to consist of one share of common stock, one redeemable warrant and one right to receive one-tenth (1/10) of one share of common stock. Each right entitles the holder thereof to receive one-tenth (1/10) of one share of Class A common stock upon consummation of our initial business combination. Each warrant will entitle the holder thereof to purchase one share of common stock at a price of $11.50 per share, subject to adjustment as described in this Proposed Public Offering.
It is expected that up to 10 qualified institutional buyers or institutional accredited investors, which are not affiliated with the Company (the “Anchor Investors”), will express an interest in purchasing up to 990,000 Units each in the Proposed Public Offering at the offering price of $10.00 through investment agreements. The allocations to the Anchor Investors will be determined by the underwriters. The Anchor Investors as a group may purchase no more than 9,900,000 Units in the aggregate (or 11,385,000 units in the aggregate if the underwriters’ over-allotment option is exercised in full), up to 99.0% of the units issued in this Proposed Public Offering. Such amounts will be allocated among the anchor investors proportionally based on their expression of interest. It is expected that the number of Units the Anchor Investors will purchase would, in general, be increased or decreased proportionately in the event the number of units offered is increased or decreased, respectively. The Anchor Investors have no obligation to acquire the Units and there can be no assurance that the Anchor Investors will acquire any units in this Proposed Public offering, or as to the amount of such units the Anchor Investors will retain, if any, prior to or upon the consummation of the initial business combination. There is also no guarantee that all ten Anchor Investors will participate in the offering. Subject to each Anchor Investor purchasing 100% of the Units allocated to it, in connection with the closing of the Proposed Public Offering the Sponsor will sell 75,000 Class B common stock shares (the “Founders Shares”) to each anchor investor at their original purchase price of approximately $0.009.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Proposed Public Offering and the Private Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (excluding the taxes payable on interest earned and less any interest earned thereon that is released for taxes) at the time of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act 1940, as amended (the “Investment Company Act”).
Upon the closing of the Proposed Public Offering, management has agreed that an amount equal to at least $10.10 per Unit sold in the Proposed Public Offering (an expected aggregate of $101,000,000 if 10,000,000 Units are issued and the underwriters’ overallotment option is not exercised), will be held in a trust account (“Trust Account”), invested only in U.S. government securities, with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its tax obligations, the proceeds from this Proposed Public Offering will not be released from the Trust Account until the earlier of: (a) the completion of the Company’s initial business combination, or (b) the redemption of the Company’s public shares if the Company is unable to complete its initial business combination in the prescribed time frame, as defined below.
In connection with any proposed initial business combination, the Company will either (1) seek stockholder approval of such initial business combination at a meeting called for such purpose at which stockholders may seek to convert their shares, regardless of whether they vote for or against the proposed business combination or don’t vote at all, into their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable), or (2) provide its stockholders with the opportunity to sell their shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable), in each case subject to the limitations described herein.
If the Company determines to engage in a tender offer, such tender offer will be structured so that each stockholder may tender all of his, her or its shares rather than some pro rata portion of his, her or its shares. The decision as to whether the Company will seek stockholder approval of a proposed business combination or will allow stockholders to sell their shares to the Company in a tender offer will be made by the Company, solely in the Company’s discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek stockholder approval. If the Company determines to allow stockholders to sell their shares to the Company in a tender offer, it will file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial business combination as is required under the SEC’s proxy rules.
The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.
If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination.
If, however, stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules.
Additionally, each public stockholder may elect to redeem their public shares irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing redemption rights, if the Company seeks stockholder approval of its initial business combination and the Company does not conduct redemptions in connection with its initial business combination pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in this Proposed Public Offering, referred to as Excess Shares. However, the Company’s stockholders will not be restricted to vote all of their shares (including Excess Shares) for or against our initial business combination. Additionally, such stockholders will not receive redemption distributions with respect to the Excess Shares if the Company completes the initial business combination.
The Company’s sponsor, officers and directors (the “initial stockholders”) have agreed not to propose any amendment to the Amended and Restated Certificate of Incorporation that would affect the Company’s public stockholders’ ability to convert or sell their shares to the Company in connection with a business combination as described herein or affect the substance or timing of the Company’s obligation to redeem 100% of its public shares if the Company does not complete a business combination within 12 months (or if the Company decides to extend the period of time to complete the initial business combination up to two times by an additional three months each time, at $0.10 per unit per extension, for a total of $0.20 per unit in the aggregate in trust, within 18 months) from the closing of the Proposed Public Offering (the “Combination Period”) unless the Company provides its public stockholders with the opportunity to convert their shares of common stock upon the approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest not previously released to the Company but net of franchise and income taxes payable, divided by the number of then outstanding public shares.
If the Company is unable to complete its initial business combination within the Combination Period, the Company will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including any interest not previously released to the Company (net of taxes payable), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and its board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. The Company cannot assure you that it will have funds sufficient to pay or provide for all creditors’ claims.
The Company’s initial stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to any founder shares held by them if the Company fails to complete its initial business combination within the Combination Period. However, if the initial stockholders acquire public shares in or after the Proposed Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares if the Company fails to complete a Business Combination within the prescribed time frame. The underwriter has agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Proposed Public Offering price per Unit ($10.00).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.10 per Public Share or (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the
Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriter of the Proposed Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Going Concern Consideration
As of December 31, 2021, the Company had $5,056 in cash and a working capital deficit of $324,495. The Company has incurred, and expects to continue to incur, significant costs in pursuit of its financing and acquisition plans. These conditions raise substantial doubt about the Company’s ability to continue as a going concern one year from the issuance date of the financial statements. Management plans to address this uncertainty through a Proposed Public Offering as discussed in Note 3 and issuance of Private Warrants discussed in Note 4, and, as necessary, through the working capital loans if and when made available to the Company as discussed in Note 5. There is no assurance that the Company’s plans to raise capital beyond the amounts received at the IPO or to consummate a Business Combination will be successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Emerging Growth Company
The Company is an “emerging growth company”, as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company intends to take advantage of the benefits of this extended transition period.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Deferred Offering Costs
Deferred offering costs consist of underwriting, legal, accounting and other expenses incurred through the balance sheet date that are directly related to the Proposed Public Offering and that will be charged to temporary equity, equity and/or expense upon the completion of the Proposed Public Offering. Should the Proposed Public Offering prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be charged to operations. The fair value of the Representative Shares to be accounted for as compensation under ASC 718, Stock compensation, will be included in the offering costs. In addition, under the guidance in Staff Accounting Bulletin 107 Topic 5T, Accounting for Expenses or Liabilities Paid by Principal Stockholder(s), the Company will also include in offering costs amounts incurred by the Sponsor through the sale of Founder Shares to Anchor Investors on behalf of the Company (Note 5). The excess of the fair value of the Founder Shares will be deemed a contribution from the Sponsor for offering costs.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Share-Based Payment Arrangements
The Company accounts for stock awards in accordance with Accounting Standards Codification (“ASC”) 718, “Compensation — Stock Compensation,” which requires that all equity awards be accounted for at their fair value. Fair value is measured on the grant date and is equal to the underlying value of the stock.
Costs equal to these fair values are recognized ratably over the requisite service period based on the number of awards that are expected to vest, or in the period of grant for awards that vest immediately and have no future service condition. For awards that vest over time, cumulative adjustments in later periods are recorded to the extent actual forfeitures differ from the Company’s initial estimates; previously recognized compensation cost is reversed if the service or performance conditions are not satisfied, and the award is forfeited.
Net Loss Per Common Share
Net loss per share is computed by dividing net loss by the weighted average number of common stock outstanding during the period, excluding common stock subject to forfeiture. Weighted average shares were reduced for the effect of an aggregate of 375,000 shares that are subject to forfeiture if the over-allotment option is not exercised by the underwriter (see Note 7). As of December 31, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into shares and then share in the earnings of the Company.
As a result, diluted net loss per share is the same as basic net loss per share for the period presented.
Common Stock Subject to Possible Redemption
The Company will account for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity” (ASC 480). Common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock to be sold as part of the Proposed
Public Offering, features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, all common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Derivative Financial Instruments
The Company will issue warrants to its investors and will account for warrant instruments as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in ASC 480 and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.
The Public Warrants and Rights (see Note 3) and Private Warrants (see Note 4) will be accounted for as equity instruments as they meet all of the requirements for equity classification under ASC 815 based on current expected terms, which are subject to change.
The over-allotment option (see Note 6) is deemed to be a freestanding financial instrument indexed to the contingently redeemable shares and will be accounted for as a liability pursuant to ASC 480, when issued.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes”. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of December 31, 2021.
The Company’s management determined that the United States is the Company’s only major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties for the period from September 23, 2021 (inception) through December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is subject to income tax examinations by major taxing authorities since inception. These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws.
The provision for income taxes was deemed to be immaterial for the period ending December 31, 2021.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Recent Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This guidance changes how entities account for convertible instruments and contracts in an entity’s own equity and simplifies the accounting for convertible instruments by removing certain separation models for convertible instruments. This guidance also modifies the guidance on diluted earnings per share calculations. This new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, but allows for early adoption. The Company adopted this standard effective January 1, 2022 and the adoption did not have material impact on the Company’s financial statements. The Company does not expect any other recently issued standards to have a material impact on the Company’s financial statements.
Note 3 — Proposed Public Offering
Pursuant to the Proposed Public Offering, the Company intends to offer for sale 10,000,000 Units, (or 11,500,000 Units if the underwriters’ over-allotment option (see Note 6) is exercised in full) at a price of $10.00 per Unit. Each Unit consists of one share of Common Stock, par value $0.0001 per share, one redeemable warrant (each, a “Public Warrant”), and one right to receive one-tenth (1/10) of one share of Common Stock upon consummation of our initial business combination (each a “Right”). Each Right entitles the holder thereof to receive one-tenth (1/10) of one share of Class A common stock upon consummation of the initial Business Combination. Each Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share. Each warrant will become exercisable 30 days after the completion of the initial Business Combination and will expire five years after the completion of the initial Business Combination, or earlier upon redemption or liquidation (see Note 7).
Note 4 — Private Placement
The Company’s Sponsor has agreed to purchase an aggregate of 3,200,000 warrants (or 3,500,000 warrants if the over-allotment option (see Note 6) is exercised in full) at a price of $1.00 per warrant, for an aggregate purchase price of $3,200,000, or $3,500,000 if the over-allotment option (see Note 6) is exercised in full (“Private Warrant”). Each Private Warrant entitles the holder to purchase one share of Class A common stock, subject to adjustment. The private placement will occur simultaneously with the closing of the Proposed Public Offering. The proceeds from the private placement of the Private Warrants will be used to fund the issuance costs as well as the future operations prior to the business combination. If the Company does not complete an initial business combination within the Combination Period, the remaining proceeds, after payments from the sale of the Private Warrants, will be included in the liquidating distribution to our public stockholders and the Private Warrants will be worthless (see Note 7).
Note 5 — Related Party Transactions
Founder Shares
In October 2021, the Sponsor paid $25,000, or approximately $0.009 per share, to cover certain offering costs in consideration for 2,875,000 shares of Class B common stock, par value $0.0001 (the “Founder Shares”). Up to 375,000 Founder Shares are subject to forfeiture to the extent that the over-allotment option (see Note 6) is not exercised in full by the underwriter. The forfeiture will be adjusted to the extent that the over-allotment option (see Note 6) is not exercised in full by the underwriter so that the Founder Shares will represent 20.0% of the Company’s issued and outstanding stocks after the Proposed Public Offering. If the Company increases or decreases the size of the Proposed Public Offering, the Company will effect a share capitalization or share contribution back to capital, as applicable, immediately prior to the consummation of the Proposed Public Offering in such amount as to maintain the Founder Share ownership of the Company’s stockholders prior to the Proposed Public Offering at 20.0% of the Company’s issued and outstanding common stock upon the consummation of the Proposed Public Offering.
On October 28, 2021, the Sponsor transferred 25,000 Founder Shares to each of Kathy Cuocolo, Leela Gray and Stephen Markscheid, the Board of Directors nominees (see Note 8).
In addition, subject to each Anchor Investor purchasing 100% of the Units allocated to it, in connection with the closing of the Initial Public Offering, the Sponsor will sell 75,000 of Founder Shares to each Anchor Investor, or up to an aggregate of 990,000 Founders Shares to up to 10 Anchor Investors. At the IPO date, the excess of the fair value of the Founder Shares over the transfer price will be accounted for as a contribution from the Sponsor for offering costs in accordance with Staff Accounting Bulletin Topic 5T. These offering costs will be allocated between the Public Shares, Public Warrants, Rights and Overallotment liability. The offering costs allocated to the Public Shares will be offset against the temporary equity, the costs allocated to the Public Warrants and Rights will be offset against Additional Paid-In Capital and those allocated to the Overallotment liability will be expensed upon the completion of the Initial Public Offering.
Promissory Note — Related Party
The Sponsor has agreed to loan the Company an aggregate of up to $400,000 to cover expenses related to the Proposed Public Offering pursuant to a promissory note (the “Note”). This loan is non-interest bearing and payable on the earlier of June 24, 2022, the consummation of the Proposed Public Offering or the abandonment of the Proposed Public Offering. The Company intends to repay the promissory note from the proceeds of the Proposed Public Offering not being placed in the Trust Account. As of December 31, 2021, the Company has outstanding borrowings of $80,000 under the promissory note.
Working Capital Loans
In order to fund working capital deficiencies and finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into Private Warrants at a price of $1.00 per warrant. As of December 31, 2021, the Company had no borrowings under the Working Capital Loans.
Administrative Support Agreement
Commencing on the date of the final prospectus related to the Proposed Public Offering, the Company will enter into the administrative support agreement under which it will pay the Sponsor a total of $10,000 per month, for up to 12 months, for office space, secretarial and administrative services. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees.
Note 6 — Commitments and Contingencies
Registration Rights
The holders of the Founder Shares, placement warrants (including securities contained therein) issued in connection with the Proposed Public Offering and placement warrants (including securities contained therein) that may be issued upon conversion of Working Capital Loans (see Note 5), and any shares of Class A common stock issuable upon the exercise of the placement warrants and warrants (and underlying Class A common stock) that may be issued upon conversion of the Working Capital Loans and Class A common stock issuable upon conversion of the founder shares, will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective date of the Proposed Public Offering, requiring us to register such securities for resale (in the case of the founder shares, only after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed
subsequent to the completion of the initial business combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering our securities.
Underwriting Agreement
The Company will grant the underwriter a 45-day option from the date of the Proposed Offering to purchase up to 1,500,000 additional Units to cover over-allotments, if any, at the price paid by the underwriter in the Proposed Public Offering. The underwriter will be entitled to an underwriting discount of $0.10 per unit, or $1.0 million in the aggregate (or $1.15 million in the aggregate if the underwriters’ over-allotment option is exercised in full), payable upon the closing of the Proposed Public Offering. In addition, $0.40 per share, or $4.0 million in the aggregate (or $4.6 million in the aggregate if the underwriters’ over-allotment option is exercised in full) will be payable to the underwriter for deferred underwriting commissions. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
In addition, in conjunction with this Proposed Public Offering, The Company will issue to the underwriter 150,000 shares of Class A common stock (172,500 if the underwriters exercise their over-allotment option in full) for nominal consideration (the “Representative Shares”). The holders of the Representative Shares will agree (i) that they will not transfer, assign or sell any such shares without the Company’s prior consent until the completion of the initial Business Combination, (ii) to waive their redemption rights (or right to participate in any tender offer) with respect to such shares in connection with the completion of our initial Business Combination and (iii) to waive their rights to liquidating distributions from the trust account with respect to such shares if the Company fails to complete the initial Business Combination within the Combination Period. The representative shares are deemed to be underwriters’ compensation by FINRA pursuant to FINRA Rule 5110. The representative shares will have registration rights.
Note 7 — Stockholders’ Equity
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 and with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Shares — The Company is authorized to issue 100,000,000 shares of Class A common stock, with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At December 31, 2021, there were no shares of Class A common stock issued or outstanding.
Class B Common Shares — The Company is authorized to issue 10,000,000 shares of Class B common stock, with a par value of $0.0001 per share. Holders of the Class B common stock are entitled to one vote for each share. The total number of 2,875,000 Class B shares were issued to the Sponsor during the period from September 23, 2021 to December 31, 2021. At December 31, 2021, there were 2,875,000 shares of Class B common stock issued and outstanding, of which an aggregate of up to 375,000 shares are subject to forfeiture to the extent that the underwriters’ over-allotment option (see Note 6) is not exercised in full or in part so that the number of Founder Shares will equal 20% of the Company’s issued and outstanding shares of common stock after the Proposed Public Offering.
Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all other matters submitted to a vote of the Company’s stockholders except as otherwise required by law.
The Class B common stock will automatically convert into Class A common stock at the time of a Business Combination at a ratio such that the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of shares of common stock issued and outstanding upon completion of Proposed Public Offering, plus (ii) the total number of shares of Class A common stock issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company
in connection with or in relation to the consummation of a Business Combination, excluding any shares of Class A common stock or equity-linked securities exercisable for or convertible into shares of Class A common stock issued, deemed issued, or to be issued, to any seller in the Business Combination and any Private Warrants issued to the Sponsor, its affiliates or any member of the Company’s management team upon conversion of Working Capital Loans. In no event will the Class B common stock convert into Class A common stock at a rate of less than one-to-one.
Warrants — The Public and Private Warrants (the “Warrants”) will be issued in the same form. Each Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at a Newly Issued Price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by our board of directors and, in the case of any such issuance to our sponsor or its affiliates, without taking into account any founder shares held by our sponsor or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and (z) the Market Value is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below will be adjusted (to the nearest cent) to be equal to 180% of the greater of the Market Value and the Newly Issued Price.
The Warrants will become exercisable 30 days after the completion of a Business Combination. However, no Warrant shall be exercisable for cash and the Company shall not be obligated to issue shares of common stock upon exercise of a Warrant unless the common stock issuable upon such Warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the Warrants. In the event that the condition in the immediately preceding sentence is not satisfied with respect to a Warrant, the holder of such Warrant shall not be entitled to exercise such Warrant for cash and such Warrant may have no value and expire worthless, in which case the purchaser of a Unit containing such Public Warrants shall have paid the full purchase price for the Unit solely for the shares of Common Stock underlying such Unit. Warrants may not be exercised by, or securities issued to, any registered holder in any state in which such exercise would be unlawful.
The Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
•
in whole and not in part;
•
at a price of $0.01 per warrant;
•
upon not less than 30 days’ prior written notice of redemption given after the warrants become exercisable (the “30-day redemption period”) to each warrant holder; and
•
if, and only if, the reported last sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending three days before we send the notice of redemption to the warrant holders.
If the Company call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” the Company’s management will consider, among other factors, the cash position, the number of warrants that are outstanding and the dilutive effect on the Company’s stockholders of issuing the maximum number of shares of Class A common stock issuable upon the exercise of the warrants. In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying
the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” for this purpose shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third day prior to the date on which the notice of redemption is sent to the holders of warrants.
Rights — Each holder of a Right will automatically receive one-tenth (1/10) of one share of Class A common stock upon consummation of the initial Business Combination. No additional consideration will be required to be paid by a holder of Rights in order to receive his, her, or its additional Class A common stock upon consummation of an initial business combination. The Class A common stock issuable upon exchange of the Rights will be freely tradable (except to the extent held by affiliates of the Company).
If the Company is unable to complete the initial Business Combination within the Combination Period, and the Company liquidates the funds held in the trust account, holders of Rights will not receive any of such funds for their rights, nor will they receive any distribution from our assets held outside of the trust account with respect to such rights, and the rights will expire worthless.
Note 8 — Stock-based Compensation
In October 2021, the Sponsor transferred 25,000 shares of Class B common stock to each of the three independent director nominees as compensation for their service on the Board. If the director nominee does not become a director of the Company at the time of the Company’s initial public offering, is removed from office as director, or voluntarily resigns his position with the Company before a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving the Company (“the Triggering Event”), all of such Purchaser’s Shares shall be returned to Sponsor. As such, the service period for these awards will not start until the IPO date. Further, considering that in case the business combination does not occur these awards will be forfeited, it was deemed that the above terms result in the vesting provision whereby the share awards would vest only upon the consummation of a business combination or change of control event. As a result, any compensation expense in relation to these grants would be not recognized until the Triggering Event. As a result, the Company recorded no compensation expense for the period from September 23, 2021 through December 31, 2021.
The fair value of the Founder Shares on the grant date was approximately $0.87 per share. The valuation performed by the Company determined the fair value of the shares on the date of grant by applying a discount based upon a) the probability of a successful IPO, b) the probability of a successful business combination, and c) the lack of marketability of the Founder Shares. The aggregate grant date fair value of the awards amounted to approximately $65,000.
A summary of the unvested stock awards for the period from September 23, 2021 through December 31, 2021 is as follows:
| |
|
|
Number of
Shares
|
|
|
Unvested Shares Outstanding at September 23, 2021 (inception)
|
|
|
|
|
— |
|
|
|
Granted
|
|
|
|
|
75,000 |
|
|
|
Forfeited
|
|
|
|
|
— |
|
|
|
Vested
|
|
|
|
|
— |
|
|
|
Unvested Outstanding at December 31, 2021
|
|
|
|
|
75,000
|
|
|
Total unrecognized compensation expense related to unvested Founder Shares at December 31, 2021 amounted to approximately $65,000 and is expected to be recognized upon the Triggering Event.
Note 9 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements except as noted below.
The Company made additional borrowings of $289,000 under the Note (See Note 5).
10,000,000 Units
Monterey Capital Acquisition Corporation
PRELIMINARY PROSPECTUS
, 2022
EF HUTTON
division of Benchmark Investments, LLC
Until , 2022 (25 days after the date of this prospectus), all dealers that buy, sell or trade our Class A common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to its unsold allotments or subscriptions.
You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.
No dealer, salesperson or any other person is authorized to give any information or make any representations in connection with this offering other than those contained in this prospectus and, if given or made, the information or representations must not be relied upon as having been authorized by us. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any security other than the securities offered by this prospectus, or an offer to sell or a solicitation of an offer to buy any securities by anyone in any jurisdiction in which the offer or solicitation is not authorized or is unlawful.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The estimated approximate expenses payable by us in connection with the offering described in this registration statement (other than the underwriting discount and commissions) will be as follows:
| |
SEC/FINRA Expenses
|
|
|
|
|
28,411 |
|
|
| |
Accounting fees and expenses
|
|
|
|
|
55,000 |
|
|
| |
Printing and engraving expenses
|
|
|
|
|
30,000 |
|
|
| |
Reimbursement to underwriters for expenses
|
|
|
|
|
125,000 |
|
|
| |
Legal fees and expenses
|
|
|
|
|
350,000 |
|
|
| |
Nasdaq listing and filing fees
|
|
|
|
|
75,000 |
|
|
| |
Miscellaneous
|
|
|
|
|
11,589 |
|
|
| |
Total
|
|
|
|
$ |
675,000 |
|
|
Item 14. Indemnification of Directors and officers.
Our amended and restated certificate of incorporation will provide that all of our directors, officers, employees and agents shall be entitled to be indemnified by us to the fullest extent permitted by Section 145 of the Delaware General Corporation Law (“DGCL”). Section 145 of the Delaware General Corporation Law concerning indemnification of officers, directors, employees and agents is set forth below.
Section 145. Indemnification of officers, directors, employees and agents; insurance.
(a)
A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.
(b)
A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
(c)
To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.
(d)
Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.
(e)
Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys’ fees) incurred by former officers and directors or other employees and agents may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.
(f)
The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office. A right to indemnification or to advancement of expenses arising under a provision of the certificate of incorporation or a bylaw shall not be eliminated or impaired by an amendment to such provision after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought, unless the provision in effect at the time of such act or omission explicitly authorizes such elimination or impairment after such action or omission has occurred.
(g)
A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under this section.
(h)
For purposes of this section, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the
same position under this section with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.
(i)
For purposes of this section, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this section.
(j)
The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
(k)
The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any by law, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation’s obligation to advance expenses (including attorneys’ fees).
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
In accordance with Section 102(b)(7) of the DGCL, our amended and restated certificate of incorporation, will provide that no director shall be personally liable to us or any of our stockholders for monetary damages resulting from breaches of their fiduciary duty as directors, except to the extent such limitation on or exemption from liability is not permitted under the DGCL. The effect of this provision of our amended and restated certificate of incorporation is to eliminate our rights and those of our stockholders (through stockholders’ derivative suits on our behalf) to recover monetary damages against a director for breach of the fiduciary duty of care as a director, including breaches resulting from negligent or grossly negligent behavior, except, as restricted by Section 102(b)(7) of the DGCL. However, this provision does not limit or eliminate our rights or the rights of any stockholder to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director’s duty of care.
If the DGCL is amended to authorize corporate action further eliminating or limiting the liability of directors, then, in accordance with our amended and restated certificate of incorporation, the liability of our directors to us or our stockholders will be eliminated or limited to the fullest extent authorized by the DGCL, as so amended. Any repeal or amendment of provisions of our amended and restated certificate of incorporation limiting or eliminating the liability of directors, whether by our stockholders or by changes in law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to further limit or eliminate the liability of directors on a retroactive basis.
Our amended and restated certificate of incorporation will also provide that we will, to the fullest extent authorized or permitted by applicable law, indemnify our current and former officers and directors,
as well as those persons who, while directors or officers of our corporation, are or were serving as directors, officers, employees or agents of another entity, trust or other enterprise, including service with respect to an employee benefit plan, in connection with any threatened, pending or completed proceeding, whether civil, criminal, administrative or investigative, against all expense, liability and loss (including, without limitation, attorney’s fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred or suffered by any such person in connection with any such proceeding.
Notwithstanding the foregoing, a person eligible for indemnification pursuant to our amended and restated certificate of incorporation will be indemnified by us in connection with a proceeding initiated by such person only if such proceeding was authorized by our board of directors, except for proceedings to enforce rights to indemnification.
The right to indemnification which will be conferred by our amended and restated certificate of incorporation is a contract right that includes the right to be paid by us the expenses incurred in defending or otherwise participating in any proceeding referenced above in advance of its final disposition, provided, however, that if the DGCL requires, an advancement of expenses incurred by our officer or director (solely in the capacity as an officer or director of our corporation) will be made only upon delivery to us of an undertaking, by or on behalf of such officer or director, to repay all amounts so advanced if it is ultimately determined that such person is not entitled to be indemnified for such expenses under our amended and restated certificate of incorporation or otherwise.
The rights to indemnification and advancement of expenses will not be deemed exclusive of any other rights which any person covered by our amended and restated certificate of incorporation may have or hereafter acquire under law, our amended and restated certificate of incorporation, our bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise.
Any repeal or amendment of provisions of our amended and restated certificate of incorporation affecting indemnification rights, whether by our stockholders or by changes in law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to provide broader indemnification rights on a retroactive basis, and will not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision with respect to any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision. Our amended and restated certificate of incorporation will also permit us, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other that those specifically covered by our amended and restated certificate of incorporation.
Our bylaws, which we intend to adopt immediately prior to the closing of this offering, include the provisions relating to advancement of expenses and indemnification rights consistent with those which will be set forth in our amended and restated certificate of incorporation. In addition, our bylaws provide for a right of indemnity to bring a suit in the event a claim for indemnification or advancement of expenses is not paid in full by us within a specified period of time. Our bylaws also permit us to purchase and maintain insurance, at our expense, to protect us and/or any director, officer, employee or agent of our corporation or another entity, trust or other enterprise against any expense, liability or loss, whether or not we would have the power to indemnify such person against such expense, liability or loss under the DGCL.
Any repeal or amendment of provisions of our bylaws affecting indemnification rights, whether by our board of directors, stockholders or by changes in applicable law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to provide broader indemnification rights on a retroactive basis, and will not in any way diminish or adversely affect any right or protection existing thereunder with respect to any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.
We will enter into indemnification agreements with each of our officers and directors a form of which is to be filed as an exhibit to this Registration Statement. These agreements will require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.
Pursuant to the Underwriting Agreement to be filed as Exhibit 1.1 to this Registration Statement, we have agreed to indemnify the underwriters and the underwriters have agreed to indemnify us against certain civil liabilities that may be incurred in connection with this offering, including certain liabilities under the Securities Act.
Item 15. Recent Sales of Unregistered Securities.
On October 6, 2021, Monterrey Acquisition Sponsor, LLC, our sponsor, purchased an aggregate of 2,875,000 founder shares, for an aggregate offering price of $25,000 at an average purchase price of approximately $0.009 per share. On October 28, 2021, our sponsor transferred 25,000 founder shares to each of Kathy Cuocolo, Leela Gray and Stephen Markscheid. The 75,000 shares in the aggregate that were transferred will not be subject to forfeiture in the event the underwriters’ over-allotment is not exercised. The number of founder shares issued was determined based on the expectation that the founder shares would represent 20% of the outstanding shares of common stock upon completion of this offering (excluding the placement warrants and underlying Class A common stock). All such securities were issued in connection with our organization pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Our sponsor is an accredited investor for purposes of Rule 501 of Regulation D.
On or before the date of the prospectus accompanying this registration statement, our sponsor has agreed to purchase an aggregate of 3,200,000 placement warrants (or 3,500,000 placement warrants if the over-allotment option is exercised in full), at a price of $1.00 per warrant, for an aggregate purchase price of $3,200,000 ($3,500,000 if the over-allotment option is exercised in full). These placement warrants will be issued pursuant to the exemption from registration contained in Section 4(2) of the Securities Act as they will be sold to “accredited investors” as defined in Rule 501(a) of the Securities Act. No underwriting discounts or commissions will be paid with respect to such sales. Subscription agreements will be entered into with our sponsor in connection with these placement warrants and copies of such agreements will be attached as exhibits to this registration statement.
Item 16. Exhibits and Financial Statement Schedules.
(a)
Exhibits. The list of exhibits preceding the signature page of this registration statement is incorporated herein by reference.
(b)
Financial Statements. See page F-1 for an index to the financial statements and schedules included in the registration statement.
Item 17. Undertakings.
(a)
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
(b)
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(c)
The undersigned registrant hereby undertakes that:
(1)
For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)
For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)
For the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(4)
For the purpose of determining liability of a registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of an undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by an undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
EXHIBIT INDEX
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Exhibit
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Description
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1.1
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3.1
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3.2
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3.3
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4.1
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4.2
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4.3
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4.4
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4.5
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4.6
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5.1
|
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10.1
|
|
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Form of Letter Agreement among the Registrant and our officers, directors and Monterrey Acquisition Sponsor, LLC
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10.2
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Promissory Note, dated October 6, 2021, issued to Monterrey Acquisition Sponsor, LLC
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10.3
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Amended and Restated Promissory Note, dated February 14, 2022, issued to Monterrey Acquisition Sponsor, LLC
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10.4
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10.5
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10.6
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10.7
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10.8
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10.9
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10.10
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14
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23.1
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23.2
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24
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Power of Attorney (included on the signature page to the initial filing of this Registration Statement) |
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99.1
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99.2
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Form of Compensation Committee Charter
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107
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Monterey, State of California, on the 22nd day of April, 2022.
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Monterey Capital Acquisition Corporation
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By:
/s/ Bala Padmakumar
Name: Bala Padmakumar
Title: Chief Executive Officer and Chairman of the Board
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KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Bala Padmakumar, Daniel Davis and Vivek Soni his or her true and lawful attorney-in-fact, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments including post-effective amendments to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
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NAME
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POSITION
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DATE
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/s/ Bala Padmakumar
Bala Padmakumar
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Chief Executive Officer and Chairman of the Board
(principal executive officer)
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April 22, 2022
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/s/ Daniel Davis
Daniel Davis
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Chief Financial Officer
(principal financial and accounting officer)
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April 22, 2022
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/s/ Vivek Soni
Vivek Soni
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Executive Vice President and Director
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April 22, 2022
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/s/ Leela Gray
Leela Gray
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Director
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April 22, 2022
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/s/ Kathy Cuocolo
Kathy Cuocolo
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Director
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April 22, 2022
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/s/ Stephen Markscheid
Stephen Markscheid
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Director
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April 22, 2022
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Exhibit 1.1
MONTEREY CAPITAL ACQUISITION CORPORATION
UNDERWRITING AGREEMENT
New
York, New York
[ ], 2022
EF Hutton,
division of Benchmark Investments LLC.
590 Madison Avenue, 39th Floor
New York, NY 10022
As Representative of the Underwriters
named on Schedule A hereto
Ladies and Gentlemen:
Monterey Capital Acquisition
Corporation, a Delaware corporation (the “Company”), hereby confirms its agreement with EF Hutton, division of Benchmark Investments
LLC (the “Representative”), as representative of the several underwriters named on Schedule A hereto (the “Underwriters”
or, each underwriter individually, an “Underwriter”), as follows:
1. Purchase
and Sale of Securities.
1.1 Firm
Securities.
1.1.1 Purchase
of Firm Units. On the basis of the representations and warranties contained herein, but subject to the terms and conditions herein
set forth, the Company agrees to issue and sell to the several Underwriters, severally and not jointly, and the Underwriters agree to
purchase from the Company, severally and not jointly, an aggregate of 10,000,000 units (the “Firm Units”) of the Company,
as set forth opposite the respective names of the Underwriters on Schedule A hereto, at a purchase price (net of discounts and commissions
and the Deferred Underwriting Commission described in Section 1.3 below) of $9.50 per Firm Unit. The Firm Units are to be offered
initially to the public (the “Offering”) at the offering price of $10.00 per Firm Unit. Each Firm Unit consists of one share
of the Class A common stock of the Company, par value $0.0001 per share (the “Common Stock”), one redeemable warrant
(the “Warrants”) and one right (the “Rights”) to receive one-tenth (1/10) of a share of Common Stock upon closing
of the Company’s initial Business Combination (as defined below). The Common Stock, Warrants and Rights included in the Firm Units
will trade separately on the 52nd business day following the date hereof unless the Representative determines to allow earlier separate
trading. Notwithstanding the immediately preceding sentence, in no event will the shares of Common Stock, Warrants and Rights included
in the Firm Units trade separately until (i) the Company has filed with the Securities and Exchange Commission (the “Commission”)
a Current Report on Form 8-K that includes an audited balance sheet reflecting the Company’s receipt of the proceeds of the
Offering and the Warrant Private Placement (as defined in Section 1.5.2) and updated financial information with respect to any proceeds
the Company receives from the exercise of the Over-allotment Option (defined below) if such option is exercised prior to the filing of
the Form 8-K, and (ii) the Company has filed with the Commission a Current Report on Form 8-K and issued a press release
announcing when such separate trading will begin. Each Warrant entitles its holder to purchase one share of Common Stock for $11.50 per
share, subject to adjustment, commencing on the later of twelve months from the Closing Date (defined below) or the date of the consummation
by the Company of a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization, or similar business
combination with one or more businesses (the “Business Combination”) and expiring on the five year anniversary of the consummation
by the Company of its initial Business Combination, or earlier upon redemption of the Common Stock or liquidation of the Company.
1.1.2 Payment
and Delivery. Delivery and payment for the Firm Units shall be made at 10:00 a.m., New York City time, on the second (2nd) Business
Day (as defined below) following the commencement of trading of the Units, or at such earlier time as shall be agreed upon by the Representative
and the Company, at the offices of Seward & Kissel LLP, counsel to the Underwriters (“Seward & Kissel”),
or at such other place as shall be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the
Firm Units is called the “Closing Date.” Payment for the Firm Units shall be made on the Closing Date by wire transfer in
Federal (same day) funds, payable as follows: $101,000,000 of the proceeds received by the Company for the Firm Units and the sale of
Placement Warrants (as defined in Section 1.5.2) shall be deposited in the trust account (“Trust Account”) established
by the Company for the benefit of the Public Stockholders (as defined below), as described in the Registration Statement (as defined in
Section 2.1.1) pursuant to the terms of an Investment Management Trust Agreement (the “Trust Agreement”) between the
Company and Continental Stock Transfer & Trust Company (“CST”). The funds deposited in the Trust Account shall include
an aggregate of $4,000,000 ($0.40 per Firm Unit), payable to the Underwriters as Deferred Underwriting Commission, in accordance with
Section 1.3 hereof. The remaining proceeds (less commissions and actual expense payments or other fees payable pursuant to this Agreement),
if any, shall be paid to the order of the Company upon delivery to the Representative of certificates (in form and substance satisfactory
to the Representative) representing the Firm Units (or through the facilities of the Depository Trust Company (“DTC”)) for
the account of the Underwriters. The Firm Units shall be registered in such name or names and in such authorized denominations as the
Representative may request in writing at least two (2) full Business Days prior to the Closing Date. The Company will permit the
Representative to examine and package the Firm Units for delivery, at least one (1) full Business Day prior to the Closing Date.
The Company shall not be obligated to sell or deliver any of the Firm Units except upon tender of payment by the Representative for all
the Firm Units. As used herein, the term “Public Stockholders” means the holders of shares of Common Stock sold as part of
the Units in the Offering or acquired in the aftermarket, including the Initial Stockholder (defined below) to the extent it acquires
such Units in the aftermarket (and solely with respect to such Units). “Business Day” means any day other than Saturday, Sunday
or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however,
for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”,
“shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any
physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for
wire transfers) of commercial banks in The City of New York are generally are open for use by customers on such day.
1.2 Over-Allotment
Option.
1.2.1 Option
Units. The Representative is hereby granted an option (the “Over-allotment Option”) to purchase up to an additional 1,500,000
units (the “Option Units”), the gross proceeds of which will be deposited in the Trust Account, for the purposes of covering
any over-allotments in connection with the distribution and sale of the Firm Units. Such Option Units shall be identical in all respects
to the Firm Units. Such Option Units shall be purchased for each account of the several Underwriters in the same proportion as the number
of Firm Units, set forth opposite such Underwriter’s name on Schedule A hereto, bears to the total number of Firm Units (subject
to adjustment by the Representative to eliminate fractions). The Firm Units and the Option Units are hereinafter collectively referred
to as the “Units,” and the Units, the shares of Common Stock, Warrants and Rights included in the Units, and the shares of
Common Stock issuable upon exercise of the Warrants and upon conversion of the Rights are hereinafter referred to collectively as the
“Public Securities.” No Option Units shall be sold or delivered unless the Firm Units previously have been, or simultaneously
are, sold and delivered. The right to purchase the Option Units, or any portion thereof, may be exercised from time to time and to the
extent not previously exercised may be surrendered and terminated at any time upon notice by the Representative to the Company. The purchase
price to be paid for each Option Unit will be the same price per Firm Unit set forth in Section 1.1.1 hereof.
1.2.2 Exercise
of Option. The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised by the Representative as to all
(at any time) or any part (from time to time) of the Option Units within 45 days after the effective date (“Effective Date”)
of the Registration Statement (as defined in Section 2.1.1 hereof). The Underwriters will not be under any obligation to purchase
any Option Units prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the
giving of written notice to the Company by the Representative (which such written notice may be given by electronic mail), which must
be confirmed in accordance with Section 10.1 herein setting forth the number of Option Units to be purchased and the date and time
for delivery of and payment for the Option Units (the “Option Closing Date”), which will not be later than five (5) full
Business Days after the date of the notice or such other time and in such other manner as shall be agreed upon by the Company and the
Representative, at the offices of Seward & Kissel or at such other place (including remotely by facsimile or other electronic
transmission) as shall be agreed upon by the Company and the Representative. If such delivery and payment for the Option Units does not
occur on the Closing Date, the Option Closing Date will be as set forth in the notice. Upon exercise of the Over-allotment Option, the
Company will become obligated to convey to the Underwriters, and, subject to the terms and conditions set forth herein, the Underwriters
will become obligated to purchase, the number of Option Units specified in such notice.
1.2.3 Payment
and Delivery. Payment for the Option Units shall be made on the Option Closing Date by wire transfer in Federal (same day) funds,
payable as follows: $[ ] per Option Unit shall be deposited in the Trust Account pursuant to the Trust Agreement against delivery to the
Representative of certificates (in form and substance satisfactory to the Representative) representing the Option Units (or through the
facilities of DTC) for the account of the Representative. The amount to be deposited in the Trust Account will include $0.40 per Option
Unit (up to $600,000), payable to the Underwriters, as Deferred Underwriting Commission, in accordance with Section 1.3 hereof. The
certificates representing the Option Units to be delivered will be in such denominations and registered in such names as the Representative
requests in writing not less than two full Business Days prior to the Closing Date or the Option Closing Date, as the case may be, and
will be made available to the Representative for inspection, checking and packaging at the aforesaid office of the Company’s transfer
agent or correspondent not less than one full Business Day prior to such Closing Date. The Company shall not be obligated to sell or deliver
the Option Units except upon tender of payment by the Underwriters for applicable Option Units.
1.3 Deferred
Underwriting Commission. The Underwriters agree that 4.0% of the gross proceeds from the sale of the Firm Units ($4,000,000) and the
Option Units (up to $600,000), if any (collectively, the “Deferred Underwriting Commission”), will be deposited and held in
the Trust Account and payable directly from the Trust Account, without accrued interest, to the Underwriters for their own accounts upon
consummation of the Company’s initial Business Combination. In the event that the Company is unable to consummate a Business Combination
and CST, as the trustee of the Trust Account (in this context, the “Trustee”), commences liquidation of the Trust Account
as provided in the Trust Agreement, the Underwriters agree that: (i) they shall forfeit any rights or claims to the Deferred Underwriting
Commission; and (ii) the Deferred Underwriting Commission, together with all other amounts on deposit in the Trust Account, shall
be distributed on a pro-rata basis among the Public Stockholders.
1.4 Private
Placements.
1.4.1 Founder
Shares. On October 6, 2021, the Company issued to Monterrey Acquisition Sponsor, LLC (the “Sponsor”), for an aggregate
consideration of $25,000, 2,875,000 shares of the Company’s Class B common stock, par value $0.0001 per share (the “Founders
Shares”). No underwriting discounts, commissions, or placement fees have been or will be payable in connection with the purchase
of Founder Shares. Except as described in the Registration Statement, none of the Founder Shares may be sold, assigned or transferred
by the Initial Stockholder until the earlier of: (i) 180 days following the consummation of the Business Combination; (ii) subsequent
to the consummation of a Business Combination, when the closing price of the Common Stock equals or exceeds $12.00 per share (as adjusted
for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period
commencing at least 150 days after the consummation of the Business Combination; or (iii) the date on which the Company completes
a liquidation, merger, capital stock exchange, reorganization or other similar transaction after the initial Business Combination that
results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other
property. The Founder Shares shall be subject to restrictions on transfer as set forth in the Insider Letters (as defined in Section 2.21.1
herein). The holders of Founder Shares shall have no right to any liquidating distributions with respect to any portion of the Founder
Shares in the event the Company fails to consummate a Business Combination within twelve (12) months (or up to eighteen (18) months, if
applicable) from the Closing Date of the Offering. The holders of the Founder Shares shall not have redemption rights with respect to
the Founder Shares. In the event that the Over-allotment Option is not exercised in full, the Sponsor will be required to forfeit such
number of Founder Shares (up to 375,000 Founder Shares) such that the Founder Shares then outstanding will comprise 20% of the issued
and outstanding shares of the Company (but not including any Representative’s Shares (as defined below) or Placement Shares (as
defined below)) after giving effect to the Offering and exercise, if any, of the Over-allotment Option.
1.4.2 Warrant
Private Placement. On or prior to the Closing Date, (x) the Sponsor (and/or its designees) will purchase from the Company pursuant
to a Sponsor Warrant Purchase Agreement (as defined in Section 2.21.2 below) an aggregate of 3,200,000 warrants of the Company (3,500,000
if the over-allotment option is exercised in full), which warrants are identical to the Warrants subject to certain exceptions (collectively,
the “Placement Warrants”), at a purchase price of $1.00 per Placement Warrant in a private placement (the “Warrant Private
Placement”) intended to be exempt from registration under the Act pursuant to Section 4(a)(2) of the Act or another available
exemption. The terms of the Placement Warrants are as described in the Prospectus (as defined in Section 2.1.1 below). Simultaneously
with the Option Closing Date (if any), the Sponsor will purchase from the Company pursuant to the Sponsor Warrant Purchase Agreement,
up to an additional 300,000 Placement Warrants at a purchase price of $1.00 per Placement Warrant in a private placement intended to be
exempt from registration under the Act pursuant to Section 4(a)(2) of the Act or another available exemption.
None of the Placement Warrants may be sold, assigned
or transferred by the Sponsor or the Representative or their respective transferees until the consummation of a Business Combination.
The purchase price for the Placement Warrants to be paid by the Sponsor has been delivered to CST or counsel to the Company or the Representative
to hold in a separate escrow account at least 24 hours prior to the date hereof so that such funds are readily available to be delivered
to the Trust Account on the Closing Date or the Option Closing Date, as the case may be.
1.4.3 The
Placement Warrants and the shares of Common Stock issuable upon exercise of the Placement Warrants are hereinafter referred to collectively
as the “Placement Securities”. No underwriting discounts, commissions, or placement fees have been or will be payable in connection
with the Placement Securities sold in the Warrant Private Placement. The Placement Warrants are identical to the Warrants except that
(i) the Placement Warrants will be non-redeemable by the Company, (ii) the Placement Warrants may be exercised on a cashless
basis so long as they are held by the initial purchasers or their permitted transferees, (iii) none of the Placement Securities may
be sold, assigned or transferred by the Sponsor, the Underwriters or their permitted transferees until consummation of the Company’s
initial Business Combination; and (iv) the Placement Warrants will be entitled to registration rights. The Public Securities, the
Representative’s Shares (defined below), the Placement Warrants and the Founder Shares are hereinafter referred to collectively
as the “Securities.”
1.4.4 Representative’s
Shares. As additional consideration, the Company hereby agrees to issue to the Representative (and/or its designees) on the Closing
Date or Option Closing Date, as applicable, 150,000 shares of Common Stock (or up to 172,500 shares of Common Stock if the Over-allotment
Option is exercised) (the “Representative’s Shares”). The Representative agrees not to transfer, assign or sell any
of the Representative’s Shares without the Company’s prior written consent until the completion of the Business Combination.
The Representative agrees (i) to waive its redemption rights with respect to such shares in connection with the completion of the
initial Business Combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to the
Representative’s Shares if the Company fails to complete its initial Business Combination within twelve (12) months from the Closing
Date (or up to eighteen (18) months from the Closing Date if the Company extends the period of time to consummate a Business Combination
pursuant to the terms of the Charter Documents). The Representative agrees by its acceptance of the Representative’s Shares, that
there are significant restrictions pursuant to FINRA Rule 5110 against transferring the Representative’s Shares during the
one hundred eighty (180) days after the Effective Date and by its acceptance thereof it will not: (a) sell, transfer, assign, pledge
or hypothecate the Representative’s Shares for a period of one hundred eighty (180) days following the Effective Date to anyone
other than: (i) an underwriter or a selected dealer participating in the Offering, or (ii) an officer, partner, registered person,
or affiliate of the Representative or of any such underwriter or selected dealer, in each case in accordance with FINRA Conduct Rules 5110(e)(1),
and only if any such transferee agrees to the foregoing lock-up restrictions, and (b) cause the Representative’s Shares to
be the subject of any hedging, short sale, derivative, put or call transaction, for a period of one hundred eighty (180) days following
the Effective Date, that would result in the effective economic disposition of the Representative’s Shares, except as provided for
in FINRA Rule 5110(e)(2).
1.5 Working
Capital. Upon consummation of the Offering, approximately $525,000 of the net proceeds from the sale of Units and Placement Warrants
will be released to the Company and held outside of the Trust Account to fund the working capital requirements of the Company.
1.6 Interest
Income. Prior to the Company’s consummation of a Business Combination or the Company’s liquidation, interest earned on
the Trust Account may be released to the Company from the Trust Account in accordance with the terms of the Trust Agreement to pay any
taxes incurred by the Company and up to $100,000 for liquidation expenses, all as more fully described in the Prospectus (as defined below).
2. Representations
and Warranties of the Company. The Company represents and warrants to the Underwriters as follows:
2.1 Filing
of Registration Statement.
2.1.1 Pursuant
to the Act. The Company has filed with the Commission a registration statement and any amendment thereto, on Form S-1 (File No. 333-[ ]),
including any related preliminary prospectus (the “Preliminary Prospectus”, including any prospectus that is included in the
registration statement immediately prior to the effectiveness of the registration statement), for the registration of the Public Securities
and Representative’s Shares under the Act, which registration statement and amendment or amendments have been prepared by the Company
in conformity with the requirements of the Act, and the rules and regulations (the “Regulations”) of the Commission under
the Act. The conditions for use of Form S-1 to register the Offering under the Act, as set forth in the General Instructions to such
Form, have been satisfied. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission
at the time the registration statement became effective, including the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of such time pursuant to
Rule 430A of the Regulations, together with the registration statement filed by the Company pursuant to Rule 462(b) under
the Act registering additional Public Securities (the “Rule 462(b) Registration Statement”), is hereinafter called
the “Registration Statement,” and the form of the final prospectus dated the Effective Date included in the Registration Statement
(or, if applicable, the form of final prospectus containing information permitted to be omitted at the time of effectiveness by Rule 430A
of the Regulations, filed by the Company with the Commission pursuant to Rule 424 of the Regulations), is hereinafter called the
“Prospectus.” For purposes of this Agreement, “Applicable Time,” as used in the Act, means 5:00 p.m. New
York City time, on the date of this Agreement. Prior to the Applicable Time, the Company prepared a Preliminary Prospectus, which was
included in the Registration Statement filed on [ ], 2022, for distribution by the Underwriters (such Preliminary Prospectus used most
recently prior to the Applicable Time, the “Statutory Prospectus”). Other than the Registration Statement, together with any
correspondence letters between the Company and/or counsel for the Company and the Commission, no other document with respect to the Registration
Statement has been filed under the Act with the Commission. All of the Public Securities have been or will be registered for public sale
under the Act pursuant to the Registration Statement. The Registration Statement has been declared effective by the Commission on the
date hereof. If, subsequent to the date of this Agreement, the Company or the Representative determines that, at the Applicable Time,
the Statutory Prospectus included an untrue statement of a material fact or omitted a statement of material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading and the Company and the Representative agree
to provide an opportunity to purchasers of the Units to terminate their old purchase contracts and enter into new purchase contracts,
then the Statutory Prospectus will be deemed to include any additional information available to purchasers at the time of entry into the
first such new purchase contract.
2.1.2 Pursuant
to the Exchange Act. The Company has filed with the Commission a Registration Statement on Form 8-A (File Number 001-[ ])
providing for the registration under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the Units, shares
of Common Stock, the Warrants and the Rights. The registration of the Units, shares of Common Stock, Warrants and Rights under the Exchange
Act has been declared effective by the Commission on the date hereof and the Units, shares of Common Stock, Warrants and Rights have been
registered pursuant to Section 12(b) of the Exchange Act.
2.1.3 No
Stop Orders, etc. Neither the Commission nor, to the Company’s knowledge, assuming reasonable inquiry, any federal, state
or other regulatory authority has issued any order or threatened to issue any order preventing or suspending the use of the Registration
Statement, any Preliminary Prospectus, the Statutory Prospectus or Prospectus or any part thereof, or has instituted or, to the Company’s
knowledge, assuming reasonable inquiry, threatened to institute any proceedings with respect to such an order.
2.2 Disclosures
in Registration Statement.
2.2.1 10b-5
Representation. At the time of effectiveness of the Registration Statement (or at the time of any post-effective amendment to the
Registration Statement) and at all times subsequent thereto up to the Closing Date and the Option Closing Date, if any, the Registration
Statement, the Statutory Prospectus and the Prospectus do and will contain all material statements that are required to be stated therein
in accordance with the Act and the Regulations, and did or will, in all material respects, conform to the requirements of the Act and
the Regulations. The Registration Statement, as of the Effective Date and at the Applicable Time, did not, and the amendments and supplements
thereto, as of their respective dates, will not contain any untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading. The Prospectus, as of its date and the Closing Date or
the Option Closing Date, as the case may be, did not, and the amendments and supplements thereto, as of their respective dates, will not,
include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The Statutory Prospectus, as of the Applicable Time (or such
subsequent Applicable Time pursuant to Section 2.1.1), did not include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
When any Preliminary Prospectus or the Statutory Prospectus was first filed with the Commission (whether filed as part of the Registration
Statement for the registration of the Public Securities or any amendment thereto or pursuant to Rule 424(a) of the Regulations)
and when any amendment thereof or supplement thereto was first filed with the Commission, such Preliminary Prospectus or the Statutory
Prospectus and any amendments thereof and supplements thereto complied or will have been corrected in the Statutory Prospectus and the
Prospectus to comply in all material respects with the applicable provisions of the Act and the Regulations and did not and will not contain
an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. The representation and warranty made in this Section 2.2.1 does
not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company
with respect to the Underwriters by the Representative expressly for use in the Registration Statement, the Statutory Prospectus or the
Prospectus or any amendment thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf
of the Underwriters consists solely of the following: the names of the Underwriters, the number of Units being purchased by each Underwriter,
information regarding selling concessions to dealers, the information with respect to stabilization transactions contained in the section
entitled “Underwriting – Stabilization,” the information with respect to the underwriting discounts and commissions
and the identity of counsel to the Underwriters contained in the section entitled “Legal Matters” (such information, collectively,
the “Underwriters’ Information”).
2.2.2 Disclosure
of Agreements. The agreements and documents described in the Registration Statement, the Statutory Prospectus and the Prospectus conform
to the descriptions thereof contained therein in all material respects and there are no agreements or other documents required to be described
in the Registration Statement, the Statutory Prospectus or the Prospectus or to be filed with the Commission as exhibits to the Registration
Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which
the Company is a party or by which its property or business is or may be bound or affected and (i) that is referred to in the Registration
Statement, Statutory Prospectus or the Prospectus or attached as an exhibit thereto, or (ii) that is material to the Company’s
business, has been duly authorized and validly executed by the Company, is in full force and effect and is enforceable against the Company
and, to the Company’s knowledge, assuming reasonable inquiry, the other parties thereto, in accordance with its terms, except (x) as
such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally,
(y) as enforceability of any indemnification or contribution provision may be limited under the foreign, federal and state securities
laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor may be brought, and no such agreement or instrument has
been assigned by the Company, and neither the Company nor, to the Company’s knowledge, assuming reasonable inquiry, any other party
is in breach or default thereunder and, to the Company’s knowledge, assuming reasonable inquiry, no event has occurred that, with
the lapse of time or the giving of notice, or both, would constitute a breach or default thereunder. To the Company’s knowledge,
assuming reasonable inquiry, the performance by the Company of the material provisions of such agreements or instruments will not result
in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic
or foreign, having jurisdiction over the Company or any of its assets or businesses, including, without limitation, those relating to
environmental laws and regulations.
2.2.3 Prior
Securities Transactions. No securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of,
any person or persons controlling, controlled by, or under common control with the Company since the date of the Company’s formation,
except as disclosed in the Registration Statement.
2.2.4 Regulations.
The disclosures in the Registration Statement, the Statutory Prospectus and Prospectus concerning the effects of federal, foreign, state
and local regulation on the Company’s business as currently contemplated are correct in all material respects and do not omit to
state a material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading.
2.3 Changes
After Dates in Registration Statement.
2.3.1 No
Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement, the Statutory
Prospectus and the Prospectus, except as otherwise specifically stated therein, (i) there has been no material adverse change in
the condition, financial or otherwise, or business prospects of the Company, (ii) there have been no material transactions entered
into by the Company, other than as contemplated pursuant to this Agreement, (iii) no member of the Company’s board of directors
(the “Board of Directors”) or management has resigned from any position with the Company and (iv) no event or occurrence
has taken place which materially impairs, or would likely materially impair, with the passage of time, the ability of the members of the
Board of Directors or management to act in their capacities with the Company as described in the Registration Statement, the Statutory
Prospectus and the Prospectus.
2.3.2 Recent
Securities Transactions. Subsequent to the respective dates as of which information is given in the Registration Statement, the Statutory
Prospectus and the Prospectus, and except as may otherwise be indicated or contemplated herein or therein, the Company has not: (i) issued
any securities or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend
or made any other distribution on or in respect to its share capital.
2.4 Independent
Accountants. Marcum LLP (“Marcum”), whose report is filed with the Commission as part of, and is included in, the Registration
Statement, the Statutory Prospectus, and the Prospectus, are, to the Company’s knowledge, independent registered public accountants
as required by the Act, the Regulations and the Public Company Accounting Oversight Board (the “PCAOB”), including the rules and
regulations promulgated by such entity. To the Company’s knowledge, assuming reasonable inquiry, Marcum is currently registered
with the PCAOB and in good standing. Marcum has not, during the periods covered by the financial statements included in the Registration
Statement, the Statutory Prospectus and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of
the Exchange Act.
2.5 Financial
Statements; Statistical Data.
2.5.1 Financial
Statements. The financial statements, including the notes thereto and supporting schedules (if any) included in the Registration Statement,
the Statutory Prospectus and the Prospectus fairly present the financial position, the results of operations and the cash flows of the
Company at the dates and for the periods to which they apply; such financial statements have been prepared in conformity with United States
generally accepted accounting principles (“GAAP”), consistently applied throughout the periods involved; and the supporting
schedules included in the Registration Statement, the Statutory Prospectus and the Prospectus present fairly the information required
to be stated therein in conformity with the Regulations. No other financial statements or supporting schedules are required to be included
or incorporated by reference in the Registration Statement, the Statutory Prospectus or the Prospectus. The Registration Statement, the
Statutory Prospectus and the Prospectus disclose all material off-balance sheet transactions, arrangements, obligations (including contingent
obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current or
future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures,
capital resources, or significant components of revenues or expenses. There are no pro forma or as adjusted financial statements which
are required to be included in the Registration Statement, the Statutory Prospectus and the Prospectus in accordance with Regulation S-X
or Form 10 that have not been included as so required.
2.5.2 Statistical
Data. The statistical, industry-related and market-related data included in the Registration Statement, the Statutory Prospectus and/or
the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate,
and such data agree with the sources from which they are derived.
2.6 Authorized
Capital; Options. The Company had at the date or dates indicated in each of the Registration Statement, the Statutory Prospectus,
and the Prospectus, as the case may be, duly authorized, issued and outstanding capitalization as set forth in the Registration Statement,
the Statutory Prospectus, and the Prospectus. Based on the assumptions stated in the Registration Statement, the Statutory Prospectus,
and the Prospectus, the Company will have on the Closing Date or on the Option Closing Date, as the case may be, the adjusted stock capitalization
set forth therein. Except as set forth in, or contemplated by, the Registration Statement, the Statutory Prospectus and the Prospectus,
on the Effective Date and on the Closing Date or Option Closing Date, as the case may be, there will be no options, warrants, or other
rights to purchase or otherwise acquire any authorized but unissued shares of Common Stock or any security convertible into shares of
Common Stock, or any contracts or commitments to issue or sell shares of Common Stock or any such options, warrants, rights or convertible
securities.
2.7 Valid
Issuance of Securities.
2.7.1 Outstanding
Securities. All issued and outstanding securities of the Company issued prior to the transactions contemplated by this Agreement have
been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission with respect
thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation
of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The authorized
and outstanding securities of the Company conform in all material respects to all statements relating thereto contained in the Registration
Statement, the Statutory Prospectus and the Prospectus. All offers, sales and any transfers of the outstanding securities of the Company
were at all relevant times either registered under the Act and the applicable state securities or Blue Sky laws or exempt from such registration
requirements (based in part on the representations and warranties of the purchasers of such securities).
2.7.2 Public
Securities. The Public Securities, and the shares of Common Stock, Warrants and Rights included within the Public Securities, have
been duly authorized and reserved for issuance and when issued and paid for in accordance with this Agreement, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders;
the Public Securities, and the shares of Common Stock, Warrants and Rights included in the Public Securities, are not and will not be
subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company; and
all corporate action required to be taken for the authorization, issuance and sale of the Public Securities, and the shares of Common
Stock, Warrants and Rights included in the Public Securities, has been duly and validly taken. The form of certificates for the Public
Securities conform to the corporate law of the jurisdiction of the Company’s incorporation and applicable securities laws. The Public
Securities conform in all material respects to the descriptions thereof contained in the Registration Statement, the Statutory Prospectus
and the Prospectus, as the case may be. When paid for and issued, the Warrants and Rights will constitute valid and binding obligations
of the Company to issue the number and type of securities of the Company called for thereby in accordance with the terms thereof and such
Warrants and Rights are enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability
of any indemnification or contribution provision may be limited under foreign, federal and state securities laws; and (iii) that
the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought. The shares of Common Stock issuable upon exercise of
the Warrants and conversion of the Rights have been reserved for issuance and upon the exercise of the Warrants or conversion of the Rights,
as applicable, and upon payment of the consideration therefor, and when issued in accordance with the terms thereof, such shares of Common
Stock will be duly and validly authorized, validly issued, fully paid and non-assessable, and the holders thereof are not and will not
be subject to personal liability by reason of being such holders. The Representative’s Shares, when issued in accordance with the
terms hereof, will be duly and validly authorized, validly issued, fully paid and non-assessable; the holders thereof are not and will
not be subject to personal liability by reason of being such holders.
2.7.3 Placement
Securities.
2.7.3.1 The
Placement Warrants constitute valid and binding obligations of the Company to issue the number and type of securities of the Company called
for thereby in accordance with the terms thereof, and are, or will be, enforceable against the Company in accordance with their respective
terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under federal and state
securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject
to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. The Placement Securities
have been duly authorized and reserved for issuance and when issued and paid for in accordance with the Sponsor Warrant Purchase Agreement
and Warrant Agreement, as applicable, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not
be subject to personal liability by reason of being such holders; the Placement Securities are not and will not be subject to the preemptive
rights of any holders of any security of the Company or similar contractual rights granted by the Company; and all corporate action required
to be taken for the authorization, issuance and sale of the Placement Securities has been duly and validly taken. The Placement Securities
conform in all material respects to the descriptions thereof contained in the Registration Statement, the Statutory Prospectus, and the
Prospectus, as the case may be.
2.7.4 No
Integration. Neither the Company nor any of its affiliates has, prior to the date hereof, made any offer or sale of any securities
which are required to be or may be “integrated” pursuant to the Act or the Regulations with the offer and sale of the Public
Securities pursuant to the Registration Statement or the Placement Securities in the Warrant Private Placement.
2.8 Registration
Rights of Third Parties. Except as set forth in the Registration Statement, the Statutory Prospectus and the Prospectus, no holders
of any securities of the Company or any rights exercisable for or convertible or exchangeable into securities of the Company have the
right to require the Company to register any such securities of the Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
2.9 Validity
and Binding Effect of Agreements. This Agreement, the Insider Letters (as defined in Section 2.21.1), the Trust Agreement, the
Services Agreement (as defined in Section 2.21.3), the Registration Rights Agreement (as defined in Section 2.21.4), the Warrant
Agreement (as defined in Section 2.23), the Rights Agreement (as defined in Section 2.24), the Investment Agreement (as defined
in Section 2.25) and the Sponsor Warrant Purchase Agreement (collectively, the “Transaction Documents”) have been duly
and validly authorized by the Company and, when executed and delivered by the Company and the other parties thereto, will constitute the
valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except (i) as
such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally,
(ii) as enforceability of any indemnification or contribution provision may be limited under the foreign, federal, and state securities
laws, and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the
equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
2.10 No
Conflicts, Etc. The execution, delivery, and performance by the Company of the Transaction Documents, the consummation by the Company
of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will
not, with or without the giving of notice or the lapse of time or both: (i) result in a breach or violation of, or conflict with
any of the terms and provisions of, or constitute a default under, or result in the creation, modification, termination or imposition
of any lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any agreement, obligation, condition,
covenant or instrument to which the Company is a party or bound or to which its property is subject except pursuant to the Trust Agreement;
(ii) result in any violation of the provisions of the Amended and Restated Certificate of Incorporation and Bylaws of the Company,
each as may be amended (collectively, the “Charter Documents”); or (iii) violate any existing applicable statute, law,
rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company
or any of its properties, assets or business constituted as of the date hereof.
2.11 No
Defaults; Violations. No default or violation exists in the due performance and observance of any term, covenant or condition of any
license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing
an obligation for borrowed money, or any other agreement or instrument to which the Company is a party or by which the Company may be
bound or to which any of the properties or assets of the Company is subject. The Company is not in violation of any term or provision
of its Charter Documents or in violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its properties or businesses.
2.12 Corporate
Power; Licenses; Consents.
2.12.1 Conduct
of Business. The Company has all requisite corporate power and authority, and has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory officials and bodies that it needs as of the date hereof to
conduct its business for the purpose as described in the Registration Statement, the Statutory Prospectus and the Prospectus. The disclosures
in the Registration Statement, the Statutory Prospectus and the Prospectus concerning the effects of foreign, federal, state and local
regulation on this Offering and the Company’s business purpose as currently contemplated are correct in all material respects and
do not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since its formation, the Company has conducted no business and has incurred
no liabilities other than in connection with its formation and in furtherance of this Offering.
2.12.2 Transactions
Contemplated Herein. The Company has all requisite corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals and orders required in connection herewith have been obtained.
No consent, authorization, or order of, and no filing with, any court, government agency or other body, foreign or domestic, is required
for the valid issuance, sale and delivery, of the Public Securities and the Placement Securities and the consummation of the transactions
and agreements contemplated by the Transaction Documents and as contemplated by the Registration Statement, the Statutory Prospectus and
the Prospectus, except with respect to applicable foreign, federal and state securities laws and the rules and regulations promulgated
by FINRA.
2.13 D&O
Questionnaires. To the Company’s best knowledge, all information contained in the questionnaires (“Questionnaires”)
completed by each of the Company’s officers, directors and stockholders (“Insiders”) and provided to the Representative
and its counsel and the biographies of the Insiders contained in the Registration Statement, Statutory Prospectus and the Prospectus (to
the extent a biography is contained) is true and correct and the Company has not become aware of any information which would cause the
information disclosed in the Questionnaires completed by each Insider to become inaccurate, incorrect or incomplete.
2.14 Litigation;
Governmental Proceedings. There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding
pending, or to the Company’s knowledge, assuming reasonable inquiry, threatened against or involving the Company or, to the Company’s
knowledge, assuming reasonable inquiry, any Insider or any stockholder or member of an Insider that has not been disclosed, that is required
to be disclosed, in the Registration Statement, the Statutory Prospectus, the Prospectus or the Questionnaires.
2.15 Good
Standing. The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of its
jurisdiction of incorporation. The Company is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction
in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify
would not have a material adverse effect on the condition (financial or otherwise), earnings, assets, prospects, business, operations
or properties of the Company, whether or not arising from transactions in the ordinary course of business (a “Material Adverse Effect”).
2.16 No
Contemplation of a Business Combination. The Company has not identified any Business Combination target (each a “Target Business”)
and it has not, nor has anyone on its behalf, initiated any substantive discussions, directly or indirectly, with any Business Combination
target.
2.17 Transactions
Requiring Disclosure to FINRA.
2.17.1 Finder’s
Fees. There are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting
or origination fee by the Company or any Insider with respect to the sale of the Securities hereunder or any other arrangements, agreements
or understandings of the Company or to the Company’s knowledge, assuming reasonable inquiry, any Insider that may affect the Underwriters’
compensation, as determined by FINRA.
2.17.2 Payments
Within 180 Days. The Company has not made any direct or indirect payments (in cash, securities or otherwise) to: (i) any person,
as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to
the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity that
has any direct or indirect affiliation or association with any FINRA member, within the 180-day period prior to the initial filing of
the Registration Statement, other than the prior payments to the Representative in connection with the Offering. The Company has not issued
any warrants or other securities, or granted any options, directly or indirectly, to anyone who is a potential underwriter in the Offering
or a related person (as defined by FINRA rules) of such an underwriter within the 180-day period prior to the initial filing date of the
Registration Statement. No person to whom securities of the Company have been privately issued within the 180-day period prior to the
initial filing date of the Registration Statement has any relationship or affiliation or association with any member of FINRA participating
in the Offering. Except with respect to the Representative in connection with the Offering, the Company has not entered into any agreement
or arrangement (including, without limitation, any consulting agreement or any other type of agreement) during the 180-day period prior
to the initial filing date of the Registration Statement with the Commission, which arrangement or agreement provides for the receipt
of any item of value and/or the transfer or issuance of any warrants, options, or other securities from the Company to a FINRA member,
any person associated with a member (as defined by FINRA rules), any potential underwriters in the Offering and/or any related persons.
2.17.3 FINRA
Affiliation. Other than as disclosed to the Representative, no officer or director or any direct or indirect beneficial owner (including
the Insiders) of any class of the Company’s unregistered securities (whether debt or equity, registered or unregistered, regardless
of the time acquired or the source from which derived) has any direct or indirect affiliation or association with any FINRA member (as
determined in accordance with the rules and regulations of FINRA). The Company will advise the Representative and Seward &
Kissel if it learns that any officer or director or any direct or indirect beneficial owner (including the Insiders) is or becomes an
affiliate or associated person of a FINRA member participating in the Offering.
2.17.4 Share
Ownership. No officer or director or any direct or indirect beneficial owner (including the Insiders) of any class of the Company’s
unregistered securities is an owner of shares or other securities of any member of FINRA participating in the Offering (other than securities
purchased on the open market).
2.17.5 Loans.
No officer or director or any direct or indirect beneficial owner (including the Insiders) of any class of the Company’s unregistered
securities has made a subordinated loan to any member of FINRA participating in the Offering.
2.17.6 Proceeds
of the Offering. No proceeds from the sale of the Public Securities (excluding underwriting compensation) or the Placement Securities
will be paid to any FINRA member participating in the Offering, or any persons associated or affiliated with a member of FINRA participating
in the Offering, except as specifically authorized herein.
2.17.7 Conflicts
of Interest. To the Company’s knowledge, assuming reasonable inquiry, no FINRA member intending to participate in the Offering
has a conflict of interest with the Company. For this purpose, a “conflict of interest” exists when a member of FINRA and/or
its associated persons, parent or affiliates in the aggregate beneficially own 10% or more of the Company’s outstanding subordinated
debt or common equity, or 10% or more of the Company’s preferred equity. “Members participating in the Offering” include
managing agents, syndicate group members and all dealers which are members of FINRA.
2.18 Taxes.
2.18.1 There
are no transfer taxes or other similar fees or charges under U.S. federal law or the laws of any U.S. state or any political subdivision
of the United States, required to be paid in connection with the execution and delivery of this Agreement or the issuance or sale by the
Company of the Public Securities.
2.18.2 The
Company has filed all U.S. federal, state and local tax returns required to be filed with taxing authorities prior to the date hereof
in a timely manner or has duly obtained extensions of time for the filing thereof. The Company has paid all taxes shown as due on such
returns that were filed and has paid all taxes imposed on it and any other assessment, fine or penalty levied against it, to the extent
that any of the foregoing is due and payable. The Company has made appropriate provisions in the applicable financial statements referred
to in Section 2.5.1 above in respect of all federal, state, local and foreign income and franchise taxes for all current or prior
periods as to which the tax liability of the Company has not been finally determined.
2.19 Foreign
Corrupt Practices Act; Anti-Money Laundering; Patriot Act.
2.19.1 Foreign
Corrupt Practices Act. Neither the Company nor to the Company’s knowledge, assuming reasonable inquiry, any of the Insiders
or any other person acting on behalf of the Company has, directly or indirectly, given or agreed to give any money, gift or similar benefit
(other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or
any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder
the business of the Company (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company
to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have
had a Material Adverse Effect, or (iii) if not continued in the future, might adversely affect the assets, business or operations
of the Company. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the
Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended.
2.19.2 Currency
and Foreign Transactions Reporting Act. The operations of the Company are and have been conducted at all times in compliance with
(i) the requirements of the U.S. Treasury Department Office of Foreign Asset Control and (ii) applicable financial recordkeeping
and reporting requirements of the Currency and Foreign Transaction Reporting Act of 1970, as amended, including the Money Laundering Control
Act of 1986, as amended, the rules and regulations thereunder and any related or similar money laundering statutes, rules, regulations
or guidelines, issued, administered or enforced by any Federal governmental agency (collectively, the “Money Laundering Laws”)
and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company
with respect to the Money Laundering Laws is pending or, to the Company’s knowledge, assuming reasonable inquiry, threatened.
2.19.3 Patriot
Act. Neither the Company nor to the Company’s knowledge, assuming reasonable inquiry, any Insider has violated the Bank Secrecy
Act of 1970, as amended, or the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism (USA PATRIOT) Act of 2001, and/or the rules and regulations promulgated under any such law, or any successor law.
2.20 Officers’
Certificate. Any certificate signed by any duly authorized officer of the Company in connection with the Offering and delivered to
the Representative or to Seward & Kissel shall be deemed a representation and warranty by the Company to the Underwriters as
to the matters covered thereby.
2.21 Agreements
With Insiders.
2.21.1 Insider
Letter. The Company has caused to be duly executed a legally binding and enforceable agreement (except (i) as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (ii) as enforceability
of any indemnification, contribution or non-compete provision may be limited under foreign, federal and state securities laws, and (iii) that
the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought), a form of which is annexed as an exhibit to the Registration
Statement (the “Insider Letter”), pursuant to which each of the Insiders of the Company agree to certain matters. The Insider
Letter shall not be amended, modified or otherwise changed without the prior written consent of the Representative.
2.21.2 Sponsor
Warrant Purchase Agreement. The Sponsor has executed and delivered a Sponsor Warrant Purchase Agreement, the form of which is filed
as an exhibit to the Registration Statement (the “Sponsor Warrant Purchase Agreement”), pursuant to which the Sponsor will,
among other things, on the Closing Date, consummate the purchase of and deliver the purchase price for the Placement Warrants as provided
for in such Sponsor Warrant Purchase Agreement. Pursuant to the Sponsor Warrant Purchase Agreement, (i) the Sponsor has waived any
and all rights and claims each may have to any proceeds, and any interest thereon, held in the Trust Account in respect of the Placement
Securities, and (ii) the proceeds from the sale of the Placement Securities will be deposited by the Company in the Trust Account
in accordance with the terms of the Trust Agreement on the Closing Date as provided for in the Sponsor Warrant Purchase Agreement.
2.21.3 Administrative
Services. The Company and the Sponsor have entered into an agreement (“Services Agreement”) substantially in the form
annexed as an exhibit to the Registration Statement pursuant to which the Sponsor will make available to the Company general and administrative
services including office space, utilities and secretarial and administrative support for the Company’s use for $10,000 per month
payable for up to 12 months, on the terms and subject to the conditions set forth in the Services Agreement.
2.21.4 Registration
Rights Agreement. The Company, the Initial Stockholder and the Underwriters have entered into a Registration Rights Agreement (“Registration
Rights Agreement”) substantially in the form filed as an exhibit to the Registration Statement, whereby such parties will be entitled
to certain registration rights with respect to the securities they hold or may hold, as set forth in such Registration Rights Agreement
and described more fully in the Registration Statement, the Statutory Prospectus and the Prospectus.
2.21.5 Loans.
The Sponsor has agreed to make loans to the Company in the aggregate amount of up to $400,000 (the “Insider Loans”) pursuant
to a promissory note substantially in the form filed as an exhibit to the Registration Statement. The Insider Loans do not bear any interest
and are repayable by the Company on the earlier of June 24, 2022 or the consummation of the Offering.
2.22 Investment
Management Trust Agreement. The Company has entered into the Trust Agreement with respect to certain proceeds of the Offering and
the Warrant Private Placement substantially in the form filed as an exhibit to the Registration Statement, pursuant to which the funds
held in the Trust Account may be released under limited circumstances. The Trust Agreement shall not be amended, modified, or otherwise
changed in any way that modifies the rights or obligations of the Company without the prior written consent of the Representative.
2.23 Warrant
Agreement. The Company has entered into a warrant agreement with respect to the Warrants underlying the Units and the Placement Warrants
and certain other warrants that may be issued by the Company with CST substantially in the form filed as an exhibit to the Registration
Statement (“Warrant Agreement”).
2.24 Rights
Agreement. The Company has entered into a rights agreement with respect to the Rights with CST substantially in the form filed as
an exhibit to the Registration Statement (“Rights Agreement”).
2.25 Investment
Agreement. The Company has entered into separate investment agreements, dated as of [ ], 2022, with up to ten qualified institutional
buyers or institutional accredited investors (each an “Anchor Investor” and, collectively, the “Anchor Investors”)
in substantially the form filed as Exhibit [ ] to the Registration Statement (each an “Investment Agreement” and, collectively,
the “Investment Agreements”), pursuant to which the Anchor Investors may purchase 990,000 Units at the offering price of $10.00
per Unit. On the date hereof, the Anchor Investors (subject to each such Anchor Investor’s purchase of 99.0% of the Units allocated
to them) have committed to purchase no more than 9,900,000 Units (or 11,385,000 Units in the aggregate if the Underwriter’s over-allotment
option is exercised in full).
2.26 No
Existing Non-Competition Agreements. No Insider is subject to any non-competition agreement or non-solicitation agreement with any
employer or prior employer which could materially affect his ability to be an employee, officer and/or director of the Company, except
as disclosed in the Registration Statement.
2.27 Investments.
No more than 45% of the “value” (as defined in Section 2(a)(41) of the Investment Company Act of 1940, as amended (“Investment
Company Act”)) of the Company’s total assets consist of, and no more than 45% of the Company’s net income after taxes
is derived from, securities other than “Government Securities” (as defined in Section 2(a)(16) of the Investment Company
Act) or money market funds meeting the conditions of Rule 2a-7 under the Investment Company Act.
2.28 Investment
Company Act. The Company is not required, and upon the issuance and sale of the Securities as herein contemplated and the application
of the net proceeds therefrom as described in the Statutory Prospectus and Prospectus will not be required, to register as an “investment
company” under the Investment Company Act.
2.29 Subsidiaries.
The Company does not own an interest in any corporation, partnership, limited liability company, joint venture, trust or other business
entity.
2.30 Related
Party Transactions. No relationship, direct or indirect, exists between or among the Company, on the one hand, and any Insider, on
the other hand, which is required by the Act, the Exchange Act or the Regulations to be described in the Registration Statement, the Statutory
Prospectus and the Prospectus which is not so described as required. There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business), or guarantees of indebtedness by the Company to or for the benefit of any of
the officers or directors of the Company or any of their respective family members, except as disclosed in the Registration Statement,
the Statutory Prospectus and Prospectus. The Company has not extended or maintained credit, arranged for the extension of credit, or renewed
an extension of credit, in the form of a personal loan to or for any director or officer of the Company.
2.31 No
Influence. The Company has not offered, or caused the Underwriters to offer, the Firm Units to any person or entity with the intention
of unlawfully influencing: (a) a customer or supplier of the Company or any affiliate of the Company to alter the customer’s
or supplier’s level or type of business with the Company or such affiliate or (b) a journalist or publication to write or publish
favorable information about the Company or any such affiliate.
2.32 Sarbanes-Oxley.
The Company is, or on the Closing Date will be, in material compliance with the provisions of the Sarbanes-Oxley Act of 2002, as amended,
and the rules and regulations promulgated thereunder and related or similar rules or regulations promulgated by any governmental
or self-regulatory entity or agency, that are applicable to it as of the date hereof.
2.33 Distribution
of Offering Material by the Company. The Company has not distributed and will not distribute, prior to the later of the Closing Date
and the completion of the distribution of the Units, any offering material in connection with the offering and sale of the Units other
than the Statutory Prospectus and the Prospectus, in each case as supplemented and amended.
2.34 Nasdaq
Stock Market. The Public Securities have been authorized for listing, subject to official notice of issuance and evidence of satisfactory
distribution, on The Nasdaq Stock Market (the “Nasdaq”), and the Company knows of no reason or set of facts that is likely
to adversely affect such authorization.
2.35 Board
of Directors. As of the Effective Date, the Board of Directors of the Company will be comprised of the persons set forth as “Directors”
or “Director nominees” under the heading of the Statutory Prospectus and the Prospectus captioned “Management.”
As of the Effective Date, the qualifications of the persons serving as board members and the overall composition of the board will comply
with the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and the rules of the Nasdaq that are, in each case,
applicable to the Company. As of the Effective Date, the Company will have an Audit Committee that satisfies the applicable requirements
under the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and the rules of the Nasdaq.
2.36 Emerging
Growth Company. From its formation through the date hereof, the Company has been and is an “emerging growth company,”
as defined in Section 2(a) of the Act (an “Emerging Growth Company”).
2.37 No
Disqualification Events. Neither the Company, nor any of its predecessors or any affiliated issuer, nor any director, executive officer,
or other officer of the Company participating in the Offering, nor any beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the
Act) connected with the Company in any capacity at the Applicable Time (each, a “Company Covered Person” and, together, “Company
Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to
(viii) under the Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or
(d)(3). The Company has exercised reasonable care to determine whether any Company Covered Person is subject to a Disqualification Event.
The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Underwriters
a copy of any disclosures provided thereunder.
2.38 Free-Writing
Prospectus and Testing-the-Waters. The Company has not made any offer relating to the Public Securities that would constitute an issuer
free writing prospectus, as defined in Rule 433 under the Act, or that would otherwise constitute a “free writing prospectus”
as defined in Rule 405. The Company: (a) has not engaged in any Testing-the-Waters Communication other than Testing-the-Waters
Communications with the consent of the Representative with entities that are qualified institutional buyers within the meaning of Rule 144A
under the Act or institutions that are accredited investors within the meaning of Rule 501 under the Act and (b) has not authorized
anyone to engage in Testing-the-Waters Communications other than its officers and the Representative and individuals engaged by the Representative.
The Company has not distributed any written Testing-the-Waters Communications other than those listed on Schedule B hereto. “Testing-the-Waters
Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of
the Act.
3. Covenants
of the Company. The Company covenants and agrees as follows:
3.1 Amendments
to Registration Statement. The Company will deliver to the Representative, prior to filing, any amendment or supplement to the Registration
Statement, any Preliminary Prospectus or the Prospectus proposed to be filed after the Effective Date and the Company shall not file any
such amendment or supplement to which the Representative reasonably objects in writing.
3.2 Federal
Securities Laws.
3.2.1 Compliance.
During the time when a Prospectus is required to be delivered under the Act, the Company will use its best efforts to comply with all
requirements imposed upon it by the Act, the Regulations, and the Exchange Act, and by the regulations under the Exchange Act, as from
time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Securities in accordance with the
provisions hereof and the Statutory Prospectus and the Prospectus. If at any time when a Prospectus relating to the Securities is required
to be delivered under the Act, any event shall have occurred as a result of which, in the opinion of counsel for the Company or counsel
for the Underwriters, the Prospectus, as then amended or supplemented, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at any time to amend or supplement the Prospectus to comply with the Act, the Company
will notify the Representative promptly and prepare and file with the Commission, subject to Section 3.1 hereof, an appropriate amendment
or supplement in accordance with Section 10 of the Act.
3.2.2 Filing
of Final Prospectus. The Company will file the Prospectus (in form and substance satisfactory to the Underwriters) with the Commission
pursuant to the requirements of Rule 424 of the Regulations.
3.2.3 Exchange
Act Registration. The Company will use its best efforts to maintain the registration of the Public Securities under the provisions
of the Exchange Act (except in connection with a going-private transaction) for a period of five years from the Effective Date, or until
the Company is required to be liquidated or is acquired, if earlier, or, in the case of the Warrants, until the Warrants expire and are
no longer exercisable or have been exercised or redeemed in full. The Company will not deregister the Public Securities under the Exchange
Act without the prior written consent of the Representative.
3.2.4 Exchange
Act Filings. From the Effective Date until the earlier of the Company’s initial Business Combination, or its liquidation and
dissolution, the Company shall timely file with the Commission via the Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”)
such statements and reports as are required to be filed by a company registered under Section 12(b) of the Exchange Act.
3.2.5 Sarbanes-Oxley
Compliance. As soon as it is legally required to do so, the Company shall take all actions necessary to obtain and thereafter maintain
material compliance with each applicable provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder
and related or similar rules and regulations promulgated by any other governmental or self-regulatory entity or agency with jurisdiction
over the Company.
3.3 Free-Writing
Prospectus. The Company agrees that it will not make any offer relating to the Public Securities that would constitute an issuer free
writing prospectus, as defined in Rule 433 under the Act, or that would otherwise constitute a “free writing prospectus”
as defined in Rule 405.
3.4 Delivery
to Underwriters of Prospectuses. The Company will deliver to the Underwriters, without charge and from time to time during the period
when the Prospectus is required to be delivered under the Act or the Exchange Act, such number of copies of each Preliminary Prospectus
and the Prospectus as the Underwriters may reasonably request and, as soon as the Registration Statement or any amendment or supplement
thereto becomes effective, deliver to the Underwriters, upon their request, two manually executed Registration Statements, including exhibits,
and all post-effective amendments thereto and copies of all exhibits filed therewith or incorporated therein by reference and all manually
executed consents of certified experts.
3.5 Effectiveness
and Events Requiring Notice to the Representative. The Company will use its best efforts to cause the Registration Statement to remain
effective and will notify the Representative immediately and confirm the notice in writing: (i) of the effectiveness of the Registration
Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or of the initiation, or the threatening, of any proceeding for that purpose; (iii) of the issuance by any foreign or
state securities commission of any proceedings for the suspension of the qualification of the Public Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (iv) of the mailing and delivery to
the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments
or request for any additional information from the Commission; and (vi) of the happening of any event that, in the reasonable judgment
of the Company, makes any statement of a material fact made in the Registration Statement or the Prospectus untrue or that requires the
making of any changes in the Registration Statement or the Prospectus in order to make the statements therein, and in light of the circumstances
under which they were made, not misleading. If the Commission or any foreign or state securities commission shall enter a stop order or
suspend such qualification at any time, the Company will make every reasonable effort to obtain promptly the lifting of such order.
3.6 Affiliated
Transactions.
3.6.1 Business
Combinations. The Company will not consummate a Business Combination with any entity that is affiliated with any Insider unless (i) the
Company obtains an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions
that the Business Combination is fair to the Company from a financial point of view and (ii) a majority of the Company’s disinterested
and independent directors (if there are any) approve such transaction.
3.6.2 Compensation
to Insiders. Except as disclosed in the Registration Statement, the Statutory Prospectus and the Prospectus, the Company shall not
pay any of the Insiders or any of their affiliates any fees or compensation from the Company, for services rendered to the Company prior
to, or in connection with, the consummation of a Business Combination.
3.7 Financial
Public Relations Firm. Promptly after the execution of a definitive agreement for a Business Combination, the Company shall retain
a financial public relations firm reasonably acceptable to the Representative for a term to be agreed on by the Company and the Representative.
3.8 Reports
to the Representative. For a period of five years from the Effective Date or until such earlier time upon which the Company is required
to be liquidated or is no longer required to file reports under the Exchange Act, the Company will furnish to the Representative and its
counsel copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally
to holders of any class of its securities, and promptly furnish to the Underwriters, (i) a copy of each periodic report the Company
shall be required to file with the Commission, (ii) a copy of every press release and every news item and article with respect to
the Company or its affairs that was released by the Company, (iii) a copy of each current Report on Form 8-K or Schedule 13D,
13G, 14D-1 or 13E-4 received or prepared by the Company, (iv) two (2) copies of each registration statement filed by the Company
with the Commission under the Act, and (v) such additional documents and information with respect to the Company and the affairs
of any future subsidiaries of the Company as the Representative may from time to time reasonably request; provided the Representative
shall sign, if requested by the Company, a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the Representative
and its counsel in connection with the Representative’s receipt of such information. Documents filed with the Commission pursuant
to its EDGAR system shall be deemed to have been delivered to the Representative pursuant to this Section.
3.9 Transfer
Agent. For a period of five years following the Effective Date or until such earlier time upon which the Company is required to be
liquidated, the Company shall retain a transfer agent, warrant agent and rights agent acceptable to the Representative. CST is acceptable
to the Representative.
3.10 Payment
of Expenses. The Company hereby agrees to pay on each of the Closing Date and the Option Closing Date, if any, to the extent not paid
at the Closing Date, all Company expenses incident to the performance of the obligations of the Company under this Agreement, including
but not limited to (i) the costs of preparing, printing, mailing and delivering the Registration Statement, the preliminary prospectus
and final prospectus and amendments thereto, post-effective amendments and supplements thereto, this agreement related documents (all
in such quantities as the Representative may reasonably require); (ii) preparing and printing stock certificates and warrant certificates;
(iii) the costs of any “due diligence” meetings; (iv) net roadshow; i-Deal system, filing fees (including SEC filing
fees), costs and expenses (including third party expenses and disbursements) incurred in registering the offering, FINRA filing fees;
(v) preparation of leather bound volumes and Lucite cube mementos in such quantities as the Representative may reasonably request;
transfer taxes; (vi) transfer and warrant agent and registrar fees; (vii) all reasonable out-of-pocket expenses incurred by
the Representative in connection with its engagement, including, without limitation, any expenses and fees incurred by the Representative’s
counsel, expenses incurred for background checks on the Company's senior management and board of directors to be conducted upon the execution
of the engagement letter by a background search firm acceptable to the Representative, subject to a maximum amount of $125,000 in the
event of a closing and $50,000 in the event there is no closing.
3.11 Application
of Net Proceeds. The Company will apply the net proceeds from the Offering and the Warrant Private Placement and received by it in
a manner consistent with the application described under the caption “Use of Proceeds” in the Prospectus.
3.12 Delivery
of Earnings Statements to Security Holders. The Company will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following the Effective Date, an earnings statement (which need
not be certified by independent public or independent certified public accountants unless required by the Act or the Regulations, but
which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
3.13 Notice
to FINRA.
3.13.1 Notice
to FINRA. For a period of sixty (60) days after the date of the Prospectus, in the event any person or entity (regardless of any FINRA
affiliation or association) is engaged, in writing, to assist the Company in its search for a Target Business or to provide any other
services in connection therewith, the Company will provide the following to FINRA and the Representative prior to the consummation of
the Business Combination: (i) complete details of all services and copies of agreements governing such services; and (ii) justification
as to why the person or entity providing the merger and acquisition services should not be considered an “underwriter and related
person” with respect to the Offering, as such term is defined in Rule 5110 of the FINRA Manual. The Company also agrees that,
if required by law, proper disclosure of such arrangement or potential arrangement will be made in the tender offer documents or proxy
statement which the Company will file with the Commission in connection with the Business Combination.
3.13.2 FINRA.
The Company shall advise the Representative (who shall make an appropriate filing with FINRA) if it is aware that any 10% or greater stockholder
of the Company becomes an affiliate or associated person of a FINRA member participating in the distribution of the Public Securities.
3.13.3 Broker/Dealer.
In the event the Company intends to register as a broker/dealer, merge with or acquire a registered broker/dealer, or otherwise become
a member of FINRA, it shall promptly notify FINRA.
3.14 Stabilization.
Neither the Company, nor to its knowledge, assuming reasonable inquiry, any of its employees, directors or stockholders (without the consent
of the Representative) has taken and the Company will not take, and has directed its employees, directors and stockholders not to take,
directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under
the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale
of the Units.
3.15 Intentionally
Omitted.
3.16 Payment
of Deferred Underwriting Commission on Business Combination. Upon the consummation of the Company’s initial Business Combination,
the Company agrees that it will cause the Trustee to pay the Deferred Underwriting Commission directly from the Trust Account to the Underwriters,
in accordance with Section 1.3.
3.17 Internal
Controls. The Company will maintain a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management’s general or specific authorization, (ii) transactions are recorded as necessary
in order to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets, (iii) access
to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability
for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
3.18 Accountants.
Until the earlier of five years from the Effective Date or until such earlier time upon which the Company is required to be liquidated,
the Company shall retain Marcum or another independent registered public accounting firm reasonably acceptable to the Representative.
3.19 Form 8-K.
The Company shall, on or prior to the date hereof, retain its independent registered public accounting firm to audit the balance sheet
of the Company as of the Closing Date (“Audited Financial Statements”) reflecting the receipt by the Company of the proceeds
of the Offering and the Warrant Private Placement. Within four (4) Business Days after the Closing Date, the Company shall file a
Current Report on Form 8-K with the Commission, which Report shall contain the Company’s Audited Financial Statements. Promptly
after the Option Closing Date, if the Over-allotment Option is exercised after the Closing Date, the Company shall file with the Commission
a Current Report on Form 8-K or an amendment to the Form 8-K to provide updated financial information to reflect the exercise
of such option.
3.20 Corporate
Proceedings. All corporate proceedings and other legal matters necessary to carry out the provisions of this Agreement and the transactions
contemplated hereby shall have been done to the reasonable satisfaction of the Representative (or its counsel).
3.21 Investment
Company. The Company shall cause the proceeds of the Offering to be held in the Trust Account to be invested only as provided for in the
Trust Agreement and disclosed in the Prospectus. The Company will otherwise conduct its business in a manner so that it will not become
subject to the Investment Company Act. Furthermore, once the Company consummates a Business Combination, it shall be engaged in a business
other than that of investing, reinvesting, owning, holding or trading securities.
3.22 Amendments
to Charter Documents. The Company covenants and agrees, that prior to its initial Business Combination it will not seek to amend or modify
its Charter Documents, except as set forth therein. The Company acknowledges that the purchasers of the Public Securities in the Offering
shall be deemed to be third party beneficiaries of this Agreement and specifically this Section 3.22.
3.23 Press
Releases. The Company agrees that it will not issue press releases or engage in any other publicity, without the Representative’s
prior written consent (not to be unreasonably withheld), for a period of twenty-five (25) days after the Closing Date. Notwithstanding
the foregoing, in no event shall the Company be prohibited from issuing any press releases or engaging in any other publicity required
by law, except that including the name of any Underwriter therein shall require the prior written consent of such Underwriter.
3.24 Insurance.
The Company will maintain directors’ and officers’ insurance (including, without limitation, insurance covering the Company,
its directors and officers for liabilities or losses arising in connection with this Offering, including, without limitation, liabilities
or losses arising under the Act, the Exchange Act, the Regulations and any applicable foreign securities laws).
3.25 Electronic
Prospectus. The Company shall cause to be prepared and delivered to the Underwriters, at the Company’s expense, promptly, but in
no event later than two (2) Business Days from the effective date of this Agreement, an Electronic Prospectus to be used by the Underwriters
in connection with the Offering. As used herein, the term “Electronic Prospectus” means a form of prospectus, and any amendment
or supplement thereto, that meets each of the following conditions: (i) it shall be encoded in an electronic format, satisfactory
to the Representative, that may be transmitted electronically by the Underwriters to offerees and purchasers of the Units for at least
the period during which a prospectus relating to the Units is required to be delivered under the Act; (ii) it shall disclose the
same information as the paper prospectus and prospectus filed pursuant to EDGAR, except to the extent that graphic and image material
cannot be disseminated electronically, in which case such graphic and image material shall be replaced in the electronic prospectus with
a fair and accurate narrative description or tabular representation of such material, as appropriate; and (iii) it shall be in or
convertible into a paper format or an electronic format, satisfactory to the Representative, that will allow recipients thereof to store
and have continuously ready access to the prospectus at any future time, without charge to such recipients (other than any fee charged
for subscription to the Internet as a whole and for on-line time).
3.26 Private
Placement Proceeds. On the Closing Date, the Company shall cause to be deposited $3,200,000 of proceeds from the Warrant Private Placement
into the Trust Account, or such other amount such that the amount of the funds in the Trust Account shall be $10.10 per Public Share sold
in the Offering. On the Option Closing Date, if any, the Company shall cause to be deposited an amount of additional proceeds from the
additional Placement Warrants sold on the Option Closing Date into the Trust Account such that the amount of funds in the Trust Account
shall be $10.10 per Public Share sold in the Offering.
3.27 Future
Financings. The Company agrees that neither it, nor any successor or subsidiary of the Company, will consummate any public or private
equity or debt financing prior to the consummation of a Business Combination, unless all investors in such financing expressly waive,
in writing, any rights in or claims against the Trust Account.
3.28 Amendments
to Agreements. The Company shall not amend, modify or otherwise change the Warrant Agreement, Trust Agreement, Registration Rights Agreement,
Sponsor Warrant Purchase Agreement, the Services Agreement, or any Insider Letter without the prior written consent of the Representative
which will not be unreasonably withheld. Furthermore, the Trust Agreement shall provide that the trustee is required to obtain a joint
written instruction signed by both the Company and the Representative with respect to the transfer of the funds held in the Trust Account
from the Trust Account, prior to commencing any liquidation of the assets of the Trust Account in connection with the consummation of
any Business Combination, and such provision of the Trust Agreement shall not be permitted to be amended without the prior written consent
of the Representative.
3.29 Nasdaq.
Until the consummation of a Business Combination, the Company will use its best efforts to maintain the listing of the Public Securities
on the Nasdaq or a national securities exchange acceptable to the Representative.
3.30 Reservation
of Shares. The Company will reserve and keep available that maximum number of its authorized but unissued securities which are issuable
upon exercise of the Warrants and Placement Warrants outstanding from time to time.
3.31 Notice
of Disqualification Events. The Company will notify the Underwriters in writing, prior to the Closing Date, of (i) any Disqualification
Event relating to any Company Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event
relating to any Company Covered Person.
3.32 Disqualification
of S-1. Until the earlier of seven years from the date hereof or until the Warrants have either expired and are no longer exercisable
or have all been exercised, the Company will not take any action or actions that prevent or disqualify the Company’s use of Form S-1
(or other appropriate form) for the registration of the shares of Common Stock issuable upon exercise of the Warrants under the Act.
3.33 Emerging
Growth Company Status. The Company will promptly notify the Representative if the Company ceases to be an Emerging Growth Company at any
time prior to the earlier of five years after the consummation of the Company’s initial Business Combination, or the liquidation
of the Trust Account if a Business Combination is not consummated as required by its Charter Documents (the “Termination Date”).
3.34 Review
of Financial Statements. Until the earlier of five years from the Effective Date or until the liquidation of the Trust Account if a Business
Combination is not consummated by the Termination Date, the Company, at its expense, shall cause its regularly engaged independent certified
public accountants to review (but not audit) the Company’s financial statements for each of the first three fiscal quarters prior
to the announcement of quarterly financial information and the filing of the Company’s Form 10-Q quarterly report.
4. Conditions
of Underwriters’ Obligations. The obligations of the Underwriters to purchase and pay for the Units, as provided herein, shall
be subject to the continuing accuracy of the representations and warranties of the Company as of the date hereof and as of each of the
Closing Date and the Option Closing Date, if any, to the accuracy of the statements of officers of the Company made pursuant to the provisions
hereof and to the performance by the Company of its obligations hereunder and to the following conditions:
4.1 Regulatory
Matters.
4.1.1 Effectiveness
of Registration Statement. The Registration Statement shall have become effective not later than 5:00 p.m., New York time, on the
date of this Agreement or such later date and time as shall be consented to in writing by the Representative, and, at each of the Closing
Date and the Option Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued and
no proceedings for the purpose shall have been instituted or shall be pending or contemplated by the Commission and any request on the
part of the Commission for additional information shall have been complied with to the reasonable satisfaction of Seward & Kissel.
4.1.2 FINRA
Clearance. By the Effective Date, the Underwriters shall have received clearance from FINRA as to the amount of compensation allowable
or payable to the Underwriters as described in the Registration Statement.
4.1.3 No
Commission Stop Order. At the Closing Date and on each Option Closing Date, the Commission has not issued any order or threatened
to issue any order preventing or suspending the use of any Preliminary Prospectus, the Prospectus or any part thereof, and has not instituted
or, to the Company’s knowledge, assuming reasonable inquiry, threatened to institute any proceedings with respect to such an order.
4.1.4 Nasdaq.
The Securities shall have been approved for listing on Nasdaq, subject to official notice of issuance and evidence of satisfactory distribution,
satisfactory evidence of which shall have been provided to the Representative.
4.2 Company
Counsel Matters.
4.2.1 Closing
Date and Option Closing Date Opinions of Counsel. On the Closing Date and the Option Closing Date, if any, the Representative shall
have received the favorable opinions and negative assurance statements of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., dated the
Closing Date or the Option Closing Date, as the case may be, addressed to the Representative as representative for the several Underwriters
and in form and substance satisfactory to the Representative and Seward & Kissel.
4.2.2 Reliance.
In rendering such opinions, such counsels may rely as to matters of fact, to the extent they deem proper, on certificates or other written
statements of officers of the Company and officers of departments of various jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company, provided that copies of any such statements or certificates shall be delivered to
the Representative’s counsel if requested.
4.3 Comfort
Letter. At the time this Agreement is executed, and at the Closing Date and Option Closing Date, if any, the Representative shall
have received a letter, addressed to the Representative as representative for the several Underwriters and in form and substance satisfactory
in all respects (including the non-material nature of the changes or decreases, if any, referred to in Section 4.3.3 below) to the
Representative from Marcum dated, respectively, as of the date of this Agreement and as of the Closing Date and Option Closing Date, if
any:
4.3.1 Confirming
that they are independent accountants with respect to the Company within the meaning of the Act and the applicable Regulations and that
they have not, during the periods covered by the financial statements included in the Registration Statement, Preliminary Prospectus,
Statutory Prospectus and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of
the Exchange Act;
4.3.2 Stating
that in their opinion the financial statements of the Company included in the Registration Statement, the Statutory Prospectus and the
Prospectus comply as to form in all material respects with the applicable accounting requirements of the Act and the published Regulations
thereunder;
4.3.3 Stating
that, on the basis of their review, which included a reading of the latest available unaudited interim financial statements of the Company
(with an indication of the date of the latest available unaudited interim financial statements), a reading of the latest available minutes
of the stockholders and Board of Directors and the various committees of the Board of Directors, consultations with officers and other
employees of the Company responsible for financial and accounting matters and other specified procedures and inquiries, nothing has come
to their attention that would lead them to believe that (a) the unaudited financial statements of the Company included in the Registration
Statement, the Statutory Prospectus and the Prospectus do not comply as to form in all material respects with the applicable accounting
requirements of the Act and the Regulations or are not fairly presented in conformity with GAAP applied on a basis substantially consistent
with that of the audited financial statements of the Company included in the Registration Statement, the Statutory Prospectus and the
Prospectus, or (b) at a date immediately prior to the Effective Date, Closing Date or Option Closing Date, as the case may be, there
was any change in the share capital or long-term debt of the Company, or any decrease in the stockholders’ equity of the Company
as compared with amounts shown in the [ ], 2022 balance sheets included
in the Registration Statement, the Statutory Prospectus and the Prospectus, other than as set forth in or contemplated by the Registration
Statement, the Statutory Prospectus and the Prospectus or, if there was any decrease, setting forth the amount of such decrease, and (c) during
the period from [ ], 2022, to a specified date immediately prior
to the Effective Date, Closing Date or Option Closing Date, as the case may be, there were any changes in revenues, net earnings (losses)
or net earnings (losses) per share of Common Stock, in each case as compared with the Statement of Operations for the period from [ ]
(inception) through [ ] and included in the Registration Statement, the Statutory Prospectus and the Prospectus, or, if there was any
such change, setting forth the amount of such change;
4.3.4 Setting
forth, at a date not later than five days prior to the Effective Date, the amount of liabilities of the Company (including a break-down
of commercial papers and notes payable to banks);
4.3.5 Stating
that they have compared specific dollar amounts, numbers of shares, percentages of revenues and earnings, statements and other financial
information pertaining to the Company set forth in the Registration Statement, the Statutory Prospectus and the Prospectus in each case
to the extent that such amounts, numbers, percentages, statements and information may be derived from the general accounting records,
including work sheets, of the Company and excluding any questions requiring an interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries and other appropriate procedures (which procedures do not constitute an examination
in accordance with generally accepted auditing standards) set forth in the letter and found them to be in agreement;
4.3.6 Stating
that they have not, since the Company’s incorporation, brought to the attention of the Company’s management any reportable
condition related to internal structure, design or operation as defined in the Statement on Auditing Standards No. 60 “Communication
of Internal Control Structure Related Matters Noted in an Audit,” in the Company’s internal controls; and
4.3.7 Statements
as to such other matters incident to the transaction contemplated hereby as the Representative or its counsel may reasonably request,
including: (i) that Marcum is registered with the Public Company Accounting Oversight Board; (ii) that Marcum has sufficient
assets and insurance to pay for any liability incurred by it relating to providing the letter; and (iii) that Marcum is not insolvent.
4.4 Officers’
Certificates.
4.4.1 Officers’
Certificate. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate
of the Company signed by the Chairman of the Board or the Chief Executive Officer and the Secretary or Assistant Secretary of the Company
(in their capacities as such), dated the Closing Date or the Option Closing Date, as the case may be, respectively, to the effect that
the Company has performed all covenants and complied with all conditions required by this Agreement to be performed or complied with by
the Company prior to and as of the Closing Date, or the Option Closing Date, as the case may be, and that the conditions set forth in
Section 4 hereof have been satisfied as of such date and that, as of Closing Date and the Option Closing Date, as the case may be,
the representations and warranties of the Company set forth in Section 2 hereof are true and correct. In addition, the Representative
will have received such other and further certificates of officers of the Company (in their capacities as such) as the Representative
may reasonably request.
4.4.2 Secretary’s
Certificate. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate
of the Company signed by the Secretary or Assistant Secretary of the Company, dated the Closing Date or the Option Date, as the case may
be, respectively, certifying (i) that the Charter Documents are true and complete, have not been modified and are in full force and
effect, (ii) that the resolutions of the Company’s Board of Directors relating to the public offering contemplated by this
Agreement are in full force and effect and have not been modified, (iii) as to the accuracy and completeness of all correspondence
between the Company or its counsel and the Commission, (iv) as to the accuracy and completeness of all correspondence between the
Company or its counsel and Nasdaq and (v) as to the incumbency of the officers of the Company. The documents referred to in such
certificate shall be attached to such certificate.
4.5 No
Material Changes. Prior to and on each of the Closing Date and the Option Closing Date, if any, (i) there shall have been no
material adverse change or development involving a prospective material adverse change in the condition or prospects or the business activities,
financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement and
the Prospectus, (ii) no action suit or proceeding, at law or in equity, shall have been pending or threatened against the Company
or any Insider before or by any court or federal, foreign or state commission, board or other administrative agency wherein an unfavorable
decision, ruling or finding may materially adversely affect the business, operations, or financial condition or income of the Company,
except as set forth in the Registration Statement and the Prospectus, (iii) no stop order shall have been issued under the Act and
no proceedings therefor shall have been initiated or, to the Company’s knowledge, assuming reasonable inquiry, threatened by the
Commission, and (iv) the Registration Statement, the Statutory Prospectus and the Prospectus and any amendments or supplements thereto
shall contain all material statements which are required to be stated therein in accordance with the Act and the Regulations and shall
conform in all material respects to the requirements of the Act and the Regulations, and neither the Registration Statement, the Statutory
Prospectus nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.6 Delivery
of Agreements. On the Effective Date, the Company shall have delivered to the Representative executed copies of the Transaction Documents.
4.7 Placement
Warrants. On the Closing Date and the Option Closing Date, as applicable, the Placement Warrants have been purchased as provided for
in the Sponsor Warrant Purchase Agreement and the requisite portion of the purchase price for such securities specified herein and therein
shall be deposited into the Trust Account.
4.8 Representative’s
Shares. On the Closing Date and as applicable, the Option Closing Date, the Company shall deliver to the Representative, or its designees,
book-entry confirmation representing the Representative’s Shares.
5. Indemnification
and Contribution.
5.1 Indemnification.
5.1.1 Indemnification
of the Underwriters. The Company agrees to indemnify and hold harmless each Underwriter, its affiliates and their respective partners,
members, directors, officers, employees and agents, and each person, if any, who controls each Underwriter or any affiliate within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act as follows:
(a) against
any and all loss, liability, claim, damage and expense whatsoever, as incurred, joint or several, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), or the omission
or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading,
or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus, Statutory
Prospectus, any Testing-the-Waters Communication or the Prospectus (or any amendment or supplement to the foregoing), or the omission
or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(b) against
any and all loss, liability, claim, damage and expense whatsoever, as incurred, joint or several, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or proceeding by any governmental authority, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that
(subject to Section 5.1(d)) any such settlement is effected with the written consent of the Company, which consent shall not unreasonably
be delayed, conditioned or withheld; and
(c) against
any and all expense whatsoever, as incurred (including the fees and disbursements of counsel), reasonably incurred in investigating, preparing
or defending against any litigation, or any investigation or proceeding by any governmental authority, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission (whether or not a
party), to the extent that any such expense is not paid under (a) or (b) above;
provided, however, that this indemnity agreement
shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged
untrue statement or omission made solely in reliance upon and in conformity with the Underwriters’ Information.
5.1.2 Indemnification
of the Company, its Directors and Officers. Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the
Company, and its directors, each officer of the Company who signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all loss,
liability, claim, damage and expense described in the indemnity contained in Section 5.1.1, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement, any preliminary prospectus,
the Statutory Prospectus, any Testing-the-Waters Communication or the Prospectus (or any amendment or supplement to the foregoing), solely
in reliance upon and in conformity with the Underwriters’ Information.
5.1.3 Notifications
and Other Indemnification Procedures. Any party that proposes to assert the right to be indemnified under this Section 5.1 will,
promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 5.1, notify each such indemnifying party of the commencement of such action, enclosing
a copy of all papers served, but the omission so to notify such indemnifying party will not relieve the indemnifying party from (i) any
liability that it might have to any indemnified party otherwise than under this Section 5.1 and (ii) any liability that it may
have to any indemnified party under the foregoing provision of this Section 5.1 unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified
party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the
extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the
action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of, the action,
with counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of
its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any other legal expenses except
as provided below and except for the reasonable costs of investigation subsequently incurred by the indemnified party in connection with
the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless (A) the employment of counsel by the indemnified
party has been authorized in writing by the indemnifying party, (B) the indemnified party has reasonably concluded (based on advice
of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those
available to the indemnifying party, (C) a conflict or potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (D) the indemnifying party has not in fact employed counsel to assume the defense
of such action or counsel reasonably satisfactory to the indemnified party, in each case, within a reasonable time after receiving notice
of the commencement of the action; in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more
than one separate firm admitted to practice in such jurisdiction (plus local counsel) at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by the indemnifying party promptly as they are incurred. An
indemnifying party will not, in any event, be liable for any settlement of any action or claim effected without its written consent. No
indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 5 (whether
or not any indemnified party is a party thereto), unless such settlement, compromise or consent (x) includes an express and unconditional
release of each indemnified party, in form and substance reasonably satisfactory to such indemnified party, from all liability arising
out of such litigation, investigation, proceeding or claim and (y) does not include a statement as to or an admission of fault, culpability
or a failure to act by or on behalf of any indemnified party.
5.1.4 Settlement
Without Consent if Failure to Reimburse. If an indemnified party shall have requested an indemnifying party to reimburse the indemnified
party for reasonable fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature
contemplated by Section 5.1.1(b) effected without its written consent if (i) such settlement is entered into more than
45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall
not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
5.2 Contribution.
In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs
of Section 5.1 is applicable in accordance with its terms but for any reason is held to be unavailable or insufficient from the Company
or the Underwriters, the Company and the Underwriters will contribute to the total losses, claims, liabilities, expenses and damages (including
any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted) to which any indemnified party may be subject in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand shall be deemed to be in the same proportion as the total net proceeds
from the sale of the Units (before deducting expenses) received by the Company bear to the total compensation received by the Underwriters
(before deducting expenses) from the sale of Units on behalf of the Company. If, but only if, the allocation provided by the foregoing
sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect
not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on the one hand, and
the Underwriters, on the other hand, with respect to the statements or omission that resulted in such loss, claim, liability, expense
or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative
fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the parties
and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and
the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 5.2 were to be determined
by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect
thereof, referred to above in this Section 5.2 shall be deemed to include, for the purpose of this Section 5.2, any legal or
other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim to
the extent consistent with Section 5.1.3. Notwithstanding the foregoing provisions of Section 5.1 and this Section 5.2,
the Underwriters shall not be required to contribute any amount in excess of the commissions actually received by it under this Agreement
and no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will
be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 5.2,
any person who controls a party to this Agreement within the meaning of the Securities Act, any affiliates of the respective Underwriters
and any officers, directors, partners, employees or agents of the Underwriters or their respective affiliates, will have the same rights
to contribution as that party, and each director of the Company and each officer of the Company who signed the Registration Statement
will have the same rights to contribution as the Company, subject in each case to the provisions hereof. Any party entitled to contribution,
promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be
made under this Section 5.2, will notify any such party or parties from whom contribution may be sought, but the omission to so notify
will not relieve that party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 5.2
except to the extent that the failure to so notify such other party materially prejudiced the substantive rights or defenses of the party
from whom contribution is sought. Except for a settlement entered into pursuant to the last sentence of Section 5.1.3, no party will
be liable for contribution with respect to any action or claim settled without its written consent if such consent is required pursuant
to Section 5.1.3.
6. Default
by an Underwriter.
6.1 Default
Not Exceeding 10% of Firm Units. If any Underwriter or Underwriters shall default in its or their obligations to purchase the Firm
Units and if the number of the Firm Units with respect to which such default relates does not exceed in the aggregate 10% of the number
of Firm Units that all Underwriters have agreed to purchase hereunder, then such Firm Units to which the default relates shall be purchased
by the non-defaulting Underwriters in proportion to their respective commitments hereunder.
6.2 Default
Exceeding 10% of Firm Units. In the event that the default addressed in Section 6.1 above relates to more than 10% of the Firm
Units, the Representative may, in its discretion, arrange for it or for another party or parties to purchase such Firm Units to which
such default relates on the terms contained herein. If within one (1) Business Day after such default relating to more than 10% of
the Firm Units the Representative do not arrange for the purchase of such Firm Units, then the Company shall be entitled to a further
period of one (1) Business Day within which to procure another party or parties satisfactory to the Representative to purchase said
Firm Units on such terms. In the event that neither the Representative nor the Company arrange for the purchase of the Firm Units to which
a default relates as provided in this Section 6, this Agreement may be terminated by the Representative or the Company without liability
on the part of the Company (except as provided in Sections 3.10, 5, and 9.3 hereof) or the several Underwriters (except as provided in
Section 5 hereof); provided that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default hereunder.
6.3 Postponement
of Closing Date. In the event that the Firm Units to which the default relates are to be purchased by the non-defaulting Underwriters,
or are to be purchased by another party or parties as aforesaid, the Representative or the Company shall have the right to postpone the
Closing Date for a reasonable period, but not in any event exceeding five (5) Business Days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement and/or the Prospectus, as the case may be, or in any other documents and arrangements,
and the Company agrees to file promptly any amendment to, or to supplement, the Registration Statement and/or the Prospectus, as the case
may be, that in the reasonable opinion of counsel for the Underwriters may thereby be made necessary. The term “Underwriter”
as used in this Agreement shall include any party substituted under this Section 6 with like effect as if it had originally been
a party to this Agreement with respect to such securities.
7. Additional
Covenants.
7.1 Additional
Shares or Options. The Company hereby agrees that until the consummation of a Business Combination, it shall not issue any shares
of Common Stock or any options or other securities convertible into Common Stock, or any preferred shares or other securities of the Company
which participate in any manner in the Trust Account or which vote as a class with the Common Stock on a Business Combination.
7.2 Trust
Account Waiver Acknowledgments. The Company hereby agrees that it will use its reasonable best efforts prior to commencing its due
diligence investigation of any prospective Target Business or obtaining the services of any vendor to have such Target Business and/or
vendor acknowledge in writing whether through a letter of intent, memorandum of understanding or other similar document (and subsequently
acknowledges the same in any definitive document replacing any of the foregoing), that (a) it has read the Prospectus and understands
that the Company has established the Trust Account, initially in an amount of $101,000,000 (without giving effect to any exercise of the
Over-allotment Option) for the benefit of the Public Stockholders and that, except for a portion of the interest earned on the amounts
held in the Trust Account, the Company may disburse monies from the Trust Account only (i) to the Public Stockholders in the event
they elect to redeem shares of Common Stock contained in the Public Securities in connection with the consummation of a Business Combination,
(ii) to the Public Stockholders if the Company fails to consummate a Business Combination within the time period set forth in the
Charter Documents, or (iii) to the Company after or concurrently with the consummation of a Business Combination and (b) for
and in consideration of the Company (i) agreeing to evaluate such Target Business for purposes of consummating a Business Combination
with it or (ii) agreeing to engage the services of the vendor, as the case may be, such Target Business or vendor agrees that it
does not have any right, title, interest or claim of any kind in or to any monies in the Trust Account (“Claim”) and waives
any Claim it may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with the Company and
will not seek recourse against the Trust Account for any reason whatsoever. The foregoing letters shall substantially be in the form attached
hereto as Exhibits A and B respectively. The Company may forego obtaining such waivers only if the Company shall have received the approval
of its Chief Executive Officer and the approving vote of at least a majority of its Board of Directors.
7.3 Insider
Letters. The Company shall not take any action or omit to take any action which would cause a breach of any of the Insider Letters
and will not allow any amendments to, or waivers of, such Insider Letters without the prior written consent of the Representative, which
consent shall not be unreasonably withheld.
7.4 Rule 419.
The Company agrees that it will use its best efforts to prevent the Company from becoming subject to Rule 419 under the Act prior
to the consummation of any Business Combination, including but not limited to using its best efforts to prevent any of the Company’s
outstanding securities from being deemed to be a “penny stock” as defined in Rule 3a-51-1 under the Exchange Act during
such period.
7.5 Tender
Offer Documents, Proxy Materials and Other Information. The Company shall provide to the Representative or their counsel (if so instructed
by the Representative) with 10 copies of all tender offer documents or proxy information and all related material filed with the Commission
in connection with a Business Combination concurrently with such filing with the Commission. Documents filed with the Commission pursuant
to its EDGAR system shall be deemed to have been provided to the Representative pursuant to this Section. In addition, the Company shall
furnish any other state in which its initial public offering was registered, such information as may be requested by such state.
7.6 Emerging
Growth Company. The Company shall promptly notify the Representative if the Company ceases to be an Emerging Growth Company at any
time prior to the completion of the distribution of the Securities within the meaning of the Act.
7.7 Target
Fair Market Value. The Company agrees that the Target Business that it acquires must have a fair market value equal to at least 80%
of the balance in the Trust Account at the time of signing the definitive agreement for the Business Combination with such Target Business
(excluding taxes payable and the Deferred Underwriting Commissions). The fair market value of such business must be determined by the
Board of Directors of the Company based upon standards generally accepted by the financial community, such as actual and potential sales,
earnings, cash flow and book value. If the Board of Directors of the Company is not able to independently determine that the target business
meets such fair market value requirement, the Company will obtain an opinion from an independent investment banking firm or another independent
entity that commonly renders valuation opinions with respect to the satisfaction of such criteria. The Company is not required to obtain
an opinion as to the fair market value if the Company’s Board of Directors independently determines that the Target Business does
have sufficient fair market value.
8. Representations
and Agreements to Survive Delivery. Except as the context otherwise requires, all representations, warranties and agreements contained
in this Agreement shall be deemed to be representations, warranties and agreements as of the Closing Date or the Option Closing Date,
if any, and such representations, warranties and agreements of the Underwriters and the Company, including the indemnity agreements contained
in Section 5 hereof, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of
the Underwriters, the Company or any Controlling Person, and shall survive termination of this Agreement or the issuance and delivery
of the Public Securities to the Underwriters until the earlier of the expiration of any applicable statute of limitations and the seventh
(7th) anniversary of the later of the Closing Date or the Option Closing Date, if any, at which time the representations, warranties and
agreements shall terminate and be of no further force and effect.
9. Effective
Date of This Agreement and Termination Thereof.
9.1 Effective
Date. This Agreement shall become effective on the Effective Date at the time the Registration Statement is declared effective by
the Commission.
9.2 Termination.
The Representative shall have the right to terminate this Agreement at any time prior to the Closing Date, (i) if any domestic or
international event or act or occurrence has materially disrupted, or in the Representative’s opinion will in the immediate future
materially disrupt, general securities markets in the United States, or (ii) if trading on the New York Stock Exchange, the NYSE
American, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market or quoted on the OTCBB shall have been
suspended, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been
fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government
authority having jurisdiction, or (iii) if the United States shall have become involved in a new war or an increase in existing major
hostilities, or (iv) if a banking moratorium has been declared by a New York State or Federal authority, or (v) if a moratorium
on foreign exchange trading has been declared which materially adversely impacts the United States securities market, or (vi) if
the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act which, whether or not such loss shall have been insured, will, in the Representative’s sole opinion, make it inadvisable
to proceed with the delivery of the Units, or (vii) if the Company is in material breach of any of its representations, warranties
or covenants hereunder, or (viii) if the Representative shall have become aware after the date hereof of such a material adverse
change in the conditions of the Company, or such adverse material change in general market conditions, including without limitation as
a result of terrorist activities after the date hereof, as in the Representative’s sole judgment would make it impracticable to
proceed with the offering, sale and/or delivery of the Units or to enforce contracts made by the Underwriters for the sale of the Public
Securities.
9.3 Expenses.
In the event that this Agreement shall not be carried out for any reason whatsoever, other than with respect to a termination pursuant
to Section 6 hereof, within the time specified herein or any extensions thereof pursuant to the terms herein, (i) the obligations
of the Company to pay the out of pocket expenses related to the transactions contemplated herein shall be governed by Section 3.10
hereof and (ii) the Company shall reimburse the Representative for any costs and expenses incurred in connection with enforcing any
provisions of this Agreement.
9.4 Indemnification.
Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether
or not this Agreement is otherwise carried out, the provisions of Section 5 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part hereof.
10. Miscellaneous.
10.1 Notices.
All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed, delivered by
hand or reputable overnight courier or delivered by facsimile transmission (with printed confirmation of receipt) and confirmed and shall
be deemed given when so mailed, delivered or faxed or if mailed, two days after such mailing.
If to the Representative:
EF
Hutton,
division of Benchmark Investments LLC
590 Madison Avenue, 39th Floor
New York, NY 10022
| Attn: | Joseph T. Rallo, Chief Executive
Officer |
| Email: | jrallo@efhuttongroup.com |
Copy (which copy shall not constitute notice) to:
Seward &
Kissel LLP
One Battery Park Plaza
New York, New York 10004
| Attn: | Keith Billotti, Esq. |
| Email: | billotti@sewkis.com |
If to the Company:
Monterey
Capital Acquisition Corporation
32 Garrison Street, #50-407
Boston, Massachusetts
| Attn: | Bala Padmakumar, Chief Executive
Officer |
| Email: | bala@padmakumar.com |
Copy (which copy shall not
constitute notice) to:
Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attn: Thomas R. Burton
Email: TRBurton@mintz.com
10.2 Headings.
The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
10.3 Amendment.
This Agreement may only be amended by a written instrument executed by each of the parties hereto.
10.4 Entire
Agreement. This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this
Agreement) constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersede
all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.
10.5 Binding
Effect. This Agreement shall inure solely to the benefit of and shall be binding upon the Representative, the Underwriters, the Selected
Dealers, the Company and the Controlling Persons, directors, agents, partners, members, employees and officers referred to in Section 5
hereof, and their respective successors, legal representatives and assigns, and no other person shall have or be construed to have any
legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. The
term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from the Underwriters.
10.6 Waiver
of Immunity. To the extent that the Company may be entitled in any jurisdiction in which judicial proceedings may at any time be commenced
hereunder, to claim for itself or its revenues or assets any immunity, including sovereign immunity, from suit, jurisdiction, attachment
in aid of execution of a judgment or prior to a judgment, execution of a judgment or any other legal process with respect to its obligations
hereunder and to the extent that in any such jurisdiction there may be attributed to the Company such an immunity (whether or not claimed),
the Company hereby irrevocably agrees not to claim and irrevocably waives such immunity to the maximum extent permitted by law.
10.7 Submission
to Jurisdiction. Each of the Company and the Representative irrevocably submit to the nonexclusive jurisdiction of any New York State
or United States Federal court sitting in The City of New York, Borough of Manhattan, over any suit, action or proceeding arising out
of or relating to this Agreement, the Registration Statement, the Statutory Prospectus and the Prospectus or the offering of the Securities.
Each of the Company and the Representative irrevocably waives, to the fullest extent permitted by law, any objection that they may now
or hereafter have to the laying of venue of any such suit, action or proceeding brought in such a court and any claim that any such suit,
action or proceeding brought in such a court has been brought in an inconvenient forum. Any such process or summons to be served upon
the Company or the Representative may be served by transmitting a copy thereof by registered or certified mail, return receipt requested,
postage prepaid, addressed to it at the address set forth in Section 10.1 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the Company or the Representative in any action, proceeding or claim. Each of the Company and the Representative
waives, to the fullest extent permitted by law, any other requirements of or objections to personal jurisdiction with respect thereto.
Notwithstanding the foregoing, any action based on this Agreement may be instituted by the Underwriters in any competent court. The Company
agrees that the Underwriters shall be entitled to recover all of their reasonable attorneys’ fees and expenses relating to any action
or proceeding and/or incurred in connection with the preparation therefor if any of them are the prevailing party in such action or proceeding.
10.8 Governing
Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without
giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction.
10.9 Execution
in Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall
become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties
hereto. Delivery of a signed counterpart of this Agreement by facsimile or email/pdf transmission shall constitute valid and sufficient
delivery thereof.
10.10 Waiver.
The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validity of this Agreement or any provision hereof or the right of
any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or
non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the
party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment
shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
10.11 No
Fiduciary Relationship. The Company acknowledges and agrees that (i) the purchase and sale of the Units pursuant to this Agreement
is an arm’s-length commercial transaction pursuant to a contractual relationship between the Company and the Underwriters, (ii) in
connection therewith and with the process leading to such transaction, each Underwriter is acting solely as a principal and not the agent
or fiduciary of the Company, (iii) the Underwriters have not assumed an advisory or fiduciary responsibility in favor of the Company
with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether the Underwriters have advised
or are currently advising the Company on other matters) or any other obligation to the Company except the obligations expressly set forth
in this Agreement, (iv) in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Company,
its management, stockholders, creditors or any other person in connection with any activity that the Underwriters may undertake or have
undertaken in furtherance of this offering of the Company’s securities, either before or after the date hereof and (v) the
Company has consulted its own legal and financial advisors to the extent it deemed appropriate. The Underwriters hereby expressly disclaim
any fiduciary or similar obligations to the Company, either in connection with the transactions contemplated by this Agreement or any
matters leading up to such transactions, and the Company hereby confirms its understanding and agreement to that effect. The Company agrees
that it will not claim that the Underwriters have rendered advisory services of any nature or respect, or owe a fiduciary or similar duty
to the Company, in connection with such transaction or the process leading thereto. The Company and the Underwriters agree that they are
each responsible for making their own independent judgment with respect to any such transactions, and that any opinions or views expressed
by the Underwriters to the Company regarding such transactions, including but not limited to any opinions or views with respect to the
price or market for the Company’s securities, do not constitute advice or recommendations to the Company. The Company hereby waives
and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any
breach or alleged breach of any fiduciary or similar duty to the Company in connection with the transactions contemplated by this Agreement
or any matters leading up to such transactions.
[Remainder of page intentionally left
blank]
If the foregoing correctly sets forth the understanding
between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement between us.
| |
Very truly yours, |
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| |
MONTEREY CAPITAL ACQUISITION CORPORATION |
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By: |
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Name: |
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|
Title: |
Accepted on the date first above written.
EF HUTTON, division of Benchmark Investments, Inc.,
as Representative of the several Underwriters |
|
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| By: |
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Name: |
|
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Title: |
|
[Signature page to Underwriting Agreement]
SCHEDULE A
MONTEREY CAPITAL ACQUISITION CORPORATION
10,000,000 Units
| Underwriter | |
Number of Firm Units to
be Purchased | |
| EF Hutton, division of Benchmark Investments LLC | |
| 10,000,000 | |
| TOTAL | |
| 10,000,000 | |
SCHEDULE B
None.
EXHIBIT A
FORM OF TARGET BUSINESS LETTER
MONTEREY CAPITAL ACQUISITION CORPORATION
Ladies and Gentlemen:
Reference is made to the Final
Prospectus of Monterey Capital Acquisition Corporation (the “Company”), dated as of [ ], 2022 (the “Prospectus”). Capitalized
terms used and not otherwise defined herein shall have the meanings assigned to them in Prospectus.
We have read the Prospectus
and understand that the Company has established the Trust Account, initially in an amount of at least $101,000,000 for the benefit of
the Public Stockholders and the Underwriters of the Company’s initial public offering (the “Underwriters”) and that,
except for a portion of the interest earned on the amounts held in the Trust Account, the Company may disburse monies from the Trust Account
only: (i) to the Public Stockholders in the event they elect to redeem their public shares in connection with the consummation of
a Business Combination, (ii) to the Public Stockholders if the Company fails to consummate a Business Combination within the required
time period set forth in its Certificate of Incorporation as the same may be amended from time to time, or (iii) to the Company after
or concurrently with the consummation of a Business Combination.
For and in consideration of
the Company agreeing to evaluate the undersigned for purposes of consummating a Business Combination with it, the undersigned hereby agrees
that it does not have any right, title, interest or claim of any kind in or to any monies in the Trust Account (each, a “Claim”)
and hereby waives any Claim it may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with
the Company and will not seek recourse against the Trust Account for any reason whatsoever.
| |
|
| Print Name of Target Business |
|
| |
|
| Authorized Signature of Target Business |
|
EXHIBIT B
FORM OF VENDOR LETTER
MONTEREY CAPITAL ACQUISITION CORPORATION
Ladies and Gentlemen:
Reference is made to the Final
Prospectus of Monterey Capital Acquisition Corporation (the “Company”), dated as of [ ], 2022 (the “Prospectus”). Capitalized
terms used and not otherwise defined herein shall have the meanings assigned to them in Prospectus.
We have read the Prospectus
and understand that the Company has established the Trust Account, initially in an amount of at least $101,000,000 for the benefit of
the Public Stockholders and the Underwriters of the Company’s initial public offering (the “Underwriters”) and that,
except for a portion of the interest earned on the amounts held in the Trust Account, the Company may disburse monies from the Trust Account
only: (i) to the Public Stockholders in the event they elect to redeem their public shares in connection with the consummation of
a Business Combination, (ii) to the Public Stockholders if the Company fails to consummate a Business Combination within the required
time period set forth in its Certificate of Incorporation as the same may be amended from time to time, or (iii) to the Company after
or concurrently with the consummation of a Business Combination.
For and in consideration of
the Company agreeing to engage the services of the undersigned, the undersigned hereby agrees that it does not have any right, title,
interest or claim of any kind in or to any monies in the Trust Account (each, a “Claim”) and hereby waives any Claim it may
have in the future as a result of, or arising out of, any services provided to the Company and will not seek recourse against the Trust
Account for any reason whatsoever.
| |
|
| Authorized Signature of Vendor |
|
Exhibit 3.1
CERTIFICATE OF
INCORPORATION
OF
MONTEREY CAPITAL
ACQUISITION CORPORATION
September 23,
2021
The
undersigned, for the purposes of forming a corporation under the laws of the State of Delaware, does make, file, and record this Certificate
of Incorporation (the “Certificate”), and does hereby certify as follows:
ARTICLE I
NAME
The
name of the corporation is Monterey Capital Acquisition Corporation (the “Corporation”).
ARTICLE II
PURPOSE
The
purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation
Law of the State of Delaware, as amended from time to time (the “DGCL”).
ARTICLE III
REGISTERED AGENT
The
address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington,
New Castle County, Delaware 19801, and the name of the Corporation’s registered agent at such address is The Corporation Trust
Company.
ARTICLE IV
CAPITALIZATION
Section 4.1 Authorized
Capital Stock. The total number of shares of all classes of capital stock, each with a par value of $0.0001 per share, which the
Corporation is authorized to issue is 111,000,000 shares, consisting of (a) 110,000,000 shares of common stock (the “Common
Stock”), including (i) 100,000,000 shares of Class A Common Stock (the “Class A Common Stock”),
and (ii) 10,000,000 shares of Class B Common Stock (the “Class B Common Stock”), and (b) 1,000,000
shares of preferred stock (the “Preferred Stock”).
Section 4.2 Preferred
Stock. The board of directors of the Corporation (the “Board”) is hereby expressly authorized to provide,
out of the unissued shares of the Preferred Stock, one or more series of Preferred Stock, and to establish from time to time the number
of shares to be included in each such series and to fix the voting rights, if any, designations, powers, preferences and relative, participating,
optional, special and other rights, if any, of each such series and any qualifications, limitations and restrictions thereof, as shall
be stated in the resolution or resolutions adopted by the Board providing for the issuance of such series and included in a certificate
of designation (a “Preferred Stock Designation”) filed pursuant to the DGCL, and the Board is hereby expressly
vested with the authority to the full extent provided by law, now or hereafter, to adopt any such resolution or resolutions.
Section 4.3 Common
Stock.
(a) Voting.
(i) Except
as otherwise required by law or this Certificate (including any Preferred Stock Designation), the holders of the Common Stock shall exclusively
possess all voting power with respect to the Corporation.
(ii) Except
as otherwise required by law or this Certificate (including any Preferred Stock Designation), the holders of shares of Common Stock shall
be entitled to one vote for each such share on each matter properly submitted to the stockholders on which the holders of the Common
Stock are entitled to vote.
(iii) Except
as otherwise required by law or this Certificate (including any Preferred Stock Designation), at any annual or special meeting of the
stockholders of the Corporation, holders of the Class A Common Stock and holders of the Class B Common Stock, voting together
as a single class, shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to
a vote of the stockholders. Notwithstanding the foregoing, except as otherwise required by law or this Certificate (including any Preferred
Stock Designation), holders of shares of any series of Common Stock shall not be entitled to vote on any amendment to this Certificate
(including any amendment to any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of Preferred
Stock or other series of Common Stock if the holders of such affected series of Preferred Stock or Common Stock, as applicable, are entitled,
either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate (including
any Preferred Stock Designation) or the DGCL.
(b) Class B
Common Stock.
(i) Shares
of Class B Common Stock shall be convertible into shares of Class A Common Stock on a one-for-one basis (the “Initial
Conversion Ratio”) automatically upon the consummation of the Business Combination (as defined below).
(ii) Notwithstanding
the Initial Conversion Ratio, in the case that additional shares of Class A Common Stock, or equity-linked securities, are issued
or deemed issued in excess of the amounts sold in the Corporation’s initial public offering of securities and related to the closing
of the initial Business Combination, all issued and outstanding shares of Class B Common Stock shall automatically convert into
shares of Class A Common Stock at the time of the closing of the Corporation’s initial merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”)
at a ratio for which:
| · | the
numerator shall be equal to the sum of (A) 25% of all shares of Class A Common
Stock issued or issuable (upon the conversion or exercise of any equity-linked securities
or otherwise) by the Corporation, related to or in connection with the consummation of the
initial Business Combination (excluding any securities issued or issuable to any seller in
the initial Business Combination) plus (B) the number of shares of Class B Common
Stock issued and outstanding prior to the closing of the initial Business Combination; and |
| · | the
denominator shall be the number of shares of Class B Common Stock issued and outstanding
prior to the closing of the initial Business Combination. |
Notwithstanding
anything to the contrary contained herein, (i) the foregoing adjustment to the Initial Conversion Ratio may be waived as to any
particular issuance or deemed issuance of additional shares of Class A Common Stock or equity-linked securities by the written consent
or agreement of holders of a majority of the shares of Class B Common Stock then outstanding consenting or agreeing separately as
a single class in the manner provided in Section 4.3(b)(iii), and (ii) in no event shall the Class B Common Stock
convert into Class A Common Stock at a ratio that is less than one-for-one.
The
foregoing conversion ratio shall also be adjusted to account for any subdivision (by stock split, subdivision, exchange, stock dividend,
reclassification, recapitalization or otherwise) or combination (by reverse stock split, exchange, reclassification, recapitalization
or otherwise) or similar reclassification or recapitalization of the outstanding shares of Class A Common Stock into a greater or
lesser number of shares occurring after the original filing of this Certificate without a proportionate and corresponding subdivision,
combination or similar reclassification or recapitalization of the outstanding shares of Class B Common Stock.
Each
share of Class B Common Stock shall convert into its pro rata number of shares of Class A Common Stock pursuant to this Section 4.3(b).
The pro rata share for each holder of Class B Common Stock will be determined as follows: Each share of Class B Common Stock
shall convert into such number of shares of Class A Common Stock as is equal to the product of one (1) multiplied by a fraction,
the numerator of which shall be the total number of shares of Class A Common Stock into which all of the issued and outstanding
shares of Class B Common Stock shall be converted pursuant to this Section 4.3(b) and the denominator of which
shall be the total number of issued and outstanding shares of Class B Common Stock at the time of conversion.
(iii) Voting.
Except as otherwise required by law or this Certificate (including any Preferred Stock Designation), for so long as any shares of Class B
Common Stock shall remain outstanding, the Corporation shall not, without the prior vote or written consent of the holders of a majority
of the shares of Class B Common Stock then outstanding, voting separately as a single class, amend, alter or repeal any provision
of this Certificate, whether by merger, consolidation or otherwise, if such amendment, alteration or repeal would alter or change the
powers, preferences or relative, participating, optional or other or special rights of the Class B Common Stock. Any action required
or permitted to be taken at any meeting of the holders of Class B Common Stock may be taken without a meeting, without prior notice
and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of the outstanding
Class B Common Stock having not less than the minimum number of votes that would be necessary to authorize or take such action at
a meeting at which all shares of Class B Common Stock were present and voted and shall be delivered to the Corporation by delivery
to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having
custody of the book in which minutes of proceedings of stockholders are recorded. Delivery made to the Corporation’s registered
office shall be by hand or by certified or registered mail, return receipt requested. Prompt written notice of the taking of corporate
action without a meeting by less than unanimous written consent of the holders of Class B Common Stock shall, to the extent required
by law, be given to those holders of Class B Common Stock who have not consented in writing and who, if the action had been taken
at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that
written consents signed by a sufficient number of holders of Class B Common Stock to take the action were delivered to the Corporation.
(c) Dividends.
Subject to applicable law, the rights, if any, of the holders of any outstanding series of the Preferred Stock, the holders of shares
of Common Stock shall be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the
Corporation) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Corporation legally available
therefor and shall share equally on a per share basis in such dividends and distributions.
(d) Liquidation,
Dissolution or Winding Up of the Corporation. Subject to applicable law, the rights, if any, of the holders of any outstanding series
of the Preferred Stock, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after
payment or provision for payment of the debts and other liabilities of the Corporation, the holders of shares of Common Stock shall be
entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion
to the number of shares of Class A Common Stock (on an as converted basis with respect to the Class B Common Stock) held by
them.
Section 4.4 Rights
and Options. The Corporation has the authority to create and issue rights, warrants and options entitling the holders thereof to
acquire from the Corporation any shares of its capital stock of any class or classes, with such rights, warrants and options to be evidenced
by or in instrument(s) approved by the Board. The Board is empowered to set the exercise price, duration, times for exercise and
other terms and conditions of such rights, warrants or options; provided, however, that the consideration to be received for any shares
of capital stock issuable upon exercise thereof may not be less than the par value thereof.
ARTICLE V
INCORPORATOR
The
name and mailing address of the sole incorporator of the Corporation are as follows:
| Name |
|
Address |
| Charles
Koech |
|
Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston, MA 02111 |
ARTICLE VI
DIRECTORS
Section 6.1 Board
Powers. The business and affairs of the Corporation shall be managed by, or under the direction of, the Board. In addition to the
powers and authority expressly conferred upon the Board by statute, this Certificate or the Bylaws (the “Bylaws”)
of the Corporation, the Board is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Certificate and any Bylaws adopted by the stockholders;
provided, however, that no Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the Board that would have been
valid if such Bylaws had not been adopted.
Section 6.2 Election.
Unless and except to the extent that the Bylaws shall so require, the election of directors need not be by written ballot.
ARTICLE VII
BYLAWS
In
furtherance and not in limitation of the powers conferred upon it by law, the Board shall have the power to adopt, amend, alter, change,
add or repeal the Bylaws. The Bylaws also may be adopted, amended, altered or repealed by the stockholders.
ARTICLE VIII
LIMITED LIABILITY; INDEMNIFICATION
Section 8.1 Limitation
of Director Liability. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary
damages for any breach of fiduciary duty by such director as a director, except for liability (i) for any breach of the director’s
duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit. If the DGCL is amended to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the DGCL, as so amended. Any repeal or modification of this Section 8.1 by the stockholders of the Corporation
shall not adversely affect any right or protection of a director of the Corporation with respect to events occurring prior to the time
of such repeal or modification.
Section 8.2 Indemnification.
The Corporation, to the full extent permitted by Section 145 of the DGCL, as amended from time to time, shall indemnify all persons
whom it may indemnify pursuant thereto. Expenses (including attorneys’ fees) incurred by an officer or director in defending any
civil, criminal, administrative, or investigative action, suit or proceeding for which such officer or director may be entitled to indemnification
hereunder shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation as authorized hereby.
ARTICLE IX
INSOLVENCY; SALE, LEASE OR EXCHANGE OF ASSETS
Whenever
a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation
and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in
a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed
for this Corporation under Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and
the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors
or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on
this Corporation.
ARTICLE X
AMENDMENT OF CERTIFICATE OF INCORPORATION
The
Corporation reserves the right to amend, alter, change, add or repeal any provision contained in this Certificate (including any Preferred
Stock Designation), in the manner now or hereafter prescribed by this Certificate and the DGCL; and except as set forth in ARTICLE VIII,
all rights, preferences and privileges herein conferred upon stockholders, directors or any other persons by and pursuant to this Certificate
in its present form or as hereafter amended are granted subject to the right reserved in this Article.
[Signature Page Follows]
IN
WITNESS WHEREOF, the undersigned incorporator has executed this Certificate as of the date first set forth above.
| By: | /s/
Charles Koech |
| | Name: | Charles Koech |
| | Title: | Sole
Incorporator |
Exhibit 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MONTEREY CAPITAL ACQUISITION CORPORATION
[________], 2022
Monterey Capital Acquisition Corporation, a corporation
organized and existing under the laws of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY AS
FOLLOWS:
1. The
name of the Corporation is “Monterey Capital Acquisition Corporation” The original certificate of incorporation
of the Corporation was filed with the Secretary of State of the State of Delaware on September 23, 2021 (the “Certificate”).
2. This
Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate”), which both restates
and amends the provisions of the Certificate, was duly adopted in accordance with Sections 228, 242 and 245 of the General Corporation
Law of the State of Delaware, as amended from time to time (the “DGCL”).
3. This
Amended and Restated Certificate shall become effective on the date of filing with Secretary of State of Delaware.
4. The
text of the Certificate is hereby restated and amended in its entirety to read as follows:
ARTICLE I
NAME
The name of the corporation is Monterey Capital
Acquisition Corporation.
ARTICLE II
PURPOSE
The purpose of the Corporation is to engage in
any lawful act or activity for which corporations may be organized under the DGCL. In addition to the powers and privileges conferred
upon the Corporation by law and those incidental thereto, the Corporation shall possess and may exercise all the powers and privileges
that are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Corporation, including, but
not limited to, effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination,
involving the Corporation and one or more businesses (a “Business Combination”).
ARTICLE III
REGISTERED AGENT
The address of the Corporation’s registered
office in the State of Delaware is 251 Little Falls Drive, in the City of Wilmington, County of New Castle, State of Delaware, 19808,
and the name of the Corporation’s registered agent at such address is Corporation Service Company.
ARTICLE IV
CAPITALIZATION
Section 4.1 Authorized Capital Stock.
The total number of shares of all classes of capital stock, each with a par value of $0.0001 per share, which the Corporation is authorized
to issue is 111,000,000 shares, consisting of (a) 110,000,000 shares of common stock (the “Common Stock”),
including (i) 100,000,000 shares of Class A Common Stock (the “Class A Common Stock”), and (ii) 10,000,000
shares of Class B Common Stock (the “Class B Common Stock”), and (b) 1,000,000 shares of preferred
stock (the “Preferred Stock”).
Section 4.2 Preferred Stock.
Subject to Article IX of this Amended and Restated Certificate, the Board of Directors of the Corporation (the
“Board”) is hereby expressly authorized to provide out of the unissued shares of the Preferred Stock for one
or more series of Preferred Stock and to establish from time to time the number of shares to be included in each such series and to fix
the voting rights, if any, designations, powers, preferences and relative, participating, optional, special and other rights, if any,
of each such series and any qualifications, limitations and restrictions thereof, as shall be stated in the resolution or resolutions
adopted by the Board providing for the issuance of such series and included in a certificate of designation (a “Preferred
Stock Designation”) filed pursuant to the DGCL, and the Board is hereby expressly vested with the authority to the full
extent provided by law, now or hereafter, to adopt any such resolution or resolutions.
Section 4.3 Common Stock.
(a) Voting.
(i) Except
as otherwise required by law or this Amended and Restated Certificate (including any Preferred Stock Designation), the holders of the
Common Stock shall exclusively possess all voting power with respect to the Corporation.
(ii) Except
as otherwise required by law or this Amended and Restated Certificate (including any Preferred Stock Designation), the holders of shares
of Common Stock shall be entitled to one vote for each such share on each matter properly submitted to the stockholders of the Corporation
on which the holders of the Common Stock are entitled to vote.
(iii) Except
as otherwise required by law or this Amended and Restated Certificate (including any Preferred Stock Designation), at any annual or special
meeting of the stockholders of the Corporation, holders of the Class A Common Stock and holders of the Class B Common Stock,
voting together as a single class, shall have the exclusive right to vote for the election of directors and on all other matters properly
submitted to a vote of the stockholders. Notwithstanding the foregoing, except as otherwise required by law or this Amended and Restated
Certificate (including any Preferred Stock Designation), holders of shares of any series of Common Stock shall not be entitled to vote
on any amendment to this Amended and Restated Certificate (including any amendment to any Preferred Stock Designation) that relates solely
to the terms of one or more outstanding series of Preferred Stock or other series of Common Stock if the holders of such affected series
of Preferred Stock or Common Stock, as applicable, are entitled exclusively, either separately or together with the holders of one or
more other such series, to vote thereon pursuant to this Amended and Restated Certificate (including any Preferred Stock Designation)
or the DGCL.
(b) Class B
Common Stock.
(i) Shares
of Class B Common Stock shall be convertible into shares of Class A Common Stock on a one-for-one basis (the “Initial
Conversion Ratio”) automatically on the closing of the Business Combination.
(ii) Notwithstanding
the Initial Conversion Ratio, in the case that additional shares of Class A Common Stock, or Equity-linked Securities (as defined
below), are issued or deemed issued in excess of the amounts sold in the Corporation’s initial public offering of securities (the
“Offering”) and related to the closing of the initial Business Combination, all issued and outstanding shares
of Class B Common Stock shall automatically convert into shares of Class A Common Stock at the time of the closing of the initial
Business Combination at a ratio for which:
the numerator shall be equal to the sum of (A) 25%
of all shares of Class A Common Stock issued or issuable (upon the conversion or exercise of any Equity-linked Securities or otherwise)
by the Corporation, related to or in connection with the consummation of the initial Business Combination (excluding any securities issued
or issuable to any seller in the initial Business Combination, any private placement warrants (or underlying securities) issued to Monterrey
Acquisition Sponsor, LLC, a Delaware limited liability company (the “Sponsor”), or its affiliates upon conversion
of loans to the Corporation plus (B) the number of shares of Class B Common Stock issued and outstanding prior to the closing
of the initial Business Combination; and the denominator shall be the number of shares of Class B Common Stock issued and outstanding
prior to the closing of the initial Business Combination.
As used herein, the term “Equity-linked
Securities” means any debt or equity securities that are convertible, exercisable or exchangeable for shares of Class A common
stock issued in a financing transaction in connection with the Corporation’s initial business combination, including but not limited
to a private placement of equity or debt.
Notwithstanding anything to the contrary contained
herein, (i) the foregoing adjustment to the Initial Conversion Ratio may be waived as to any particular issuance or deemed issuance
of additional shares of Class A Common Stock or Equity-linked Securities by the written consent or agreement of holders of a majority
of the shares of Class B Common Stock then outstanding consenting or agreeing separately as a single class in the manner provided
in Section 4.3(b)(iii), and (ii) in no event shall the Class B Common Stock convert into Class A Common
Stock at a ratio that is less than one-for-one.
The foregoing conversion ratio shall also be adjusted
to account for any subdivision (by stock split, subdivision, exchange, stock dividend, reclassification, recapitalization or otherwise)
or combination (by reverse stock split, exchange, reclassification, recapitalization or otherwise) or similar reclassification or recapitalization
of the outstanding shares of Class A Common Stock into a greater or lesser number of shares occurring after the original filing
of this Amended and Restated Certificate without a proportionate and corresponding subdivision, combination or similar reclassification
or recapitalization of the outstanding shares of Class B Common Stock.
Each share of Class B Common Stock shall
convert into its pro rata number of shares of Class A Common Stock pursuant to this Section 4.3(b).
The pro rata share for each holder of Class B Common Stock will be determined as follows: Each share of Class B
Common Stock shall convert into such number of shares of Class A Common Stock as is equal to the product of one (1) multiplied
by a fraction, the numerator of which shall be the total number of shares of Class A Common Stock into which all of the issued and
outstanding shares of Class B Common Stock shall be converted pursuant to this Section 4.3(b) and the denominator
of which shall be the total number of issued and outstanding shares of Class B Common Stock at the time of conversion.
(iii) Voting. Except
as otherwise required by law or this Amended and Restated Certificate (including any Preferred Stock Designation), for so long as any
shares of Class B Common Stock shall remain outstanding, the Corporation shall not, without the prior vote or written consent of
the holders of a majority of the shares of Class B Common Stock then outstanding, voting separately as a single class, amend, alter
or repeal any provision of this Amended and Restated Certificate, whether by merger, consolidation or otherwise, if such amendment, alteration
or repeal would alter or change the powers, preferences or relative, participating, optional or other or special rights of the Class B
Common Stock. Any action required or permitted to be taken at any meeting of the holders of Class B Common Stock may be taken without
a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of the outstanding Class B Common Stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares of Class B Common Stock were present and voted and shall be delivered
to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which minutes of proceedings of stockholders are recorded. Delivery made to the Corporation’s
registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt written notice of the taking
of corporate action without a meeting by less than unanimous written consent of the holders of Class B Common Stock shall, to the
extent required by law, be given to those holders of Class B Common Stock who have not consented in writing and who, if the action
had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been
the date that written consents signed by a sufficient number of holders of Class B Common Stock to take the action were delivered
to the Corporation.
(c)
Dividends. Subject to applicable law, the rights, if any, of the holders of any outstanding series of the Preferred Stock
and the provisions of Article IX hereof, the holders of shares of Common Stock shall be entitled to receive
such dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared
thereon by the Board from time to time out of any assets or funds of the Corporation legally available therefor and shall share
equally on a per share basis in such dividends and distributions.
(d) Liquidation,
Dissolution or Winding Up of the Corporation. Subject to applicable law, the rights, if any, of the holders of any outstanding
series of the Preferred Stock and the provisions of Article IX hereof, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, after payment or provision for payment of the debts and other liabilities
of the Corporation, the holders of shares of Common Stock shall be entitled to receive all the remaining assets of the Corporation available
for distribution to its stockholders, ratably in proportion to the number of shares of Class A Common Stock (on an as converted
basis with respect to the Class B Common Stock) held by them.
Section 4.4 Rights and Options.
The Corporation has the authority to create and issue rights, warrants and options entitling the holders thereof to acquire from the
Corporation any shares of its capital stock of any class or classes, with such rights, warrants and options to be evidenced by or in
instrument(s) approved by the Board. The Board is empowered to set the exercise price, duration, times for exercise and other terms
and conditions of such rights, warrants or options; provided, however, that the consideration to be received for any shares of capital
stock issuable upon exercise thereof may not be less than the par value thereof.
ARTICLE V
BOARD OF DIRECTORS
Section 5.1 Board Powers. The
business and affairs of the Corporation shall be managed by, or under the direction of, the Board. In addition to the powers and authority
expressly conferred upon the Board by statute, this Amended and Restated Certificate or the By-Laws of the Corporation (“By-Laws”),
the Board is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation,
subject, nevertheless, to the provisions of the DGCL, this Amended and Restated Certificate, and any By-Laws adopted by the stockholders
of the Corporation; provided, however, that no By-Laws hereafter adopted by the stockholders of the Corporation shall invalidate any
prior act of the Board that would have been valid if such By-Laws had not been adopted.
Section 5.2 Number,
Election and Term.
(a) The
number of directors of the Corporation, other than those who may be elected by the holders of one or more series of the Preferred Stock
voting separately by class or series, shall be fixed from time to time exclusively by the Board pursuant to a resolution adopted by a
majority of the Board.
(b) Subject
to Section 5.5 hereof, the Board shall be divided into two classes, as nearly equal in number as possible and designated
Class I and Class II. The Board is authorized to assign members of the Board already in office to Class I and Class II.
The term of the initial Class I Directors shall expire at the first annual meeting of the stockholders of the Corporation following
the effectiveness of this Amended and Restated Certificate and the term of the initial Class II Directors shall expire at the second
annual meeting of the stockholders of the Corporation following the effectiveness of this Amended and Restated Certificate. At each succeeding
annual meeting of the stockholders of the Corporation, beginning with the first annual meeting of the stockholders of the Corporation
following the effectiveness of this Amended and Restated Certificate, each of the successors elected to replace the class of directors
whose term expires at that annual meeting shall be elected for a two-year term or until the election and qualification of their respective
successors in office, subject to their earlier death, resignation or removal. Subject to Section 5.5 hereof, if
the number of directors that constitute the Board is changed, any increase or decrease shall be apportioned by the Board among the classes
so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of
directors constituting the Board shorten the term of any incumbent director. Subject to the rights of the holders of one or more series
of Preferred Stock, voting separately by class or series, to elect directors pursuant to the terms of one or more series of Preferred
Stock, the election of directors shall be determined by a plurality of the votes cast by the stockholders present in person or represented
by proxy at the meeting and entitled to vote thereon. The Board is hereby expressly authorized, by resolution or resolutions thereof,
to assign members of the Board already in office to the aforesaid classes at the time this Amended and Restated Certificate (and therefore
such classification) becomes effective in accordance with the DGCL.
(c) Subject
to Section 5.5 hereof, a director shall hold office until the annual meeting for the year in which his or her term
expires and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation,
retirement, disqualification or removal.
(d)
Unless and except to the extent that the By-Laws shall so require, the election of directors need not be by written ballot. The
holders of shares of Common Stock shall not have cumulative voting rights with regard to election of directors.
Section 5.3 Newly Created Directorships
and Vacancies. Subject to Section 5.5 hereof, newly created directorships resulting from an increase in the
number of directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or other
cause may be filled solely and exclusively by a majority vote of the remaining directors then in office, even if less than a quorum,
or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office for the remainder of the full
term of the class of directors to which the new directorship was added or in which the vacancy occurred and until his or her successor
has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or
removal.
Section 5.4 Removal. Subject
to Section 5.5 hereof, any or all of the directors may be removed from office at any time, but only for cause and
only by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a single class.
Section 5.5 Preferred Stock - Directors.
Notwithstanding any other provision of this Article V, and except as otherwise required by law, whenever the holders
of one or more series of the Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors,
the term of office, the filling of vacancies, the removal from office and other features of such directorships shall be governed by the
terms of such series of the Preferred Stock as set forth in this Amended and Restated Certificate (including any Preferred Stock Designation)
and such directors shall not be included in any of the classes created pursuant to this Article V unless expressly
provided by such terms.
ARTICLE VI
BYLAWS
In furtherance and not in limitation of the powers
conferred upon it by law, the Board shall have the power and is expressly authorized to adopt, amend, alter or repeal the By-Laws. The
affirmative vote of a majority of the Board shall be required to adopt, amend, alter or repeal the By-Laws. The By-Laws also may be adopted,
amended, altered or repealed by the stockholders; provided, however, that in addition to any vote of the holders of any class or series
of capital stock of the Corporation required by law or by this Amended and Restated Certificate (including any Preferred Stock Designation),
the affirmative vote of the holders of at least a majority of the voting power of all then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders
to adopt, amend, alter or repeal the By-Laws; and provided further, however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the Board that would have been valid if such By-Laws had not been adopted.
ARTICLE VII
SPECIAL MEETINGS OF STOCKHOLDERS; ACTION BY
WRITTEN CONSENT
Section 7.1 Special Meetings.
Subject to the rights, if any, of the holders of any outstanding series of the Preferred Stock, and to the requirements of applicable
law, special meetings of stockholders of the Corporation may be called only by the Chairman of the Board, the Chief Executive Officer
of the Corporation, or the Board pursuant to a resolution adopted by a majority of the Board, and the ability of the stockholders of
the Corporation to call a special meeting is hereby specifically denied. Except as provided in the foregoing sentence, special meetings
of stockholders of the Corporation may not be called by another person or persons.
Section 7.2 Advance Notice. Advance
notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the
stockholders of the Corporation shall be given in the manner provided in the By-Laws.
Section 7.3 Action by Written Consent.
Except as may be otherwise provided for or fixed pursuant to this Amended and Restated Certificate (including any Preferred Stock Designation)
relating to the rights of the holders of any outstanding series of Preferred Stock, subsequent to the consummation of the Offering, any
action required or permitted to be taken by the stockholders of the Corporation must be effected by a duly called annual or special meeting
of such stockholders and may not be effected by written consent of the stockholders other than with respect to our Class B Common
Stock with respect to which action may be taken by written consent.
ARTICLE VIII
LIMITED LIABILITY; INDEMNIFICATION
Section 8.1 Limitation of Director
Liability. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted
under the DGCL as the same exists or may hereafter be amended unless they violated their duty of loyalty to the Corporation or its stockholders,
acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases
or unlawful redemptions, or derived improper personal benefit from their actions as directors. Any amendment, modification or repeal
of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of
any act or omission occurring prior to the time of such amendment, modification or repeal.
Section 8.2 Indemnification
and Advancement of Expenses.
(a) To
the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, the Corporation shall indemnify and hold
harmless each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”)
by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation,
is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (an “indemnitee”),
whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other
capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, without
limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred
by such indemnitee in connection with such proceeding. The Corporation shall to the fullest extent not prohibited by applicable law pay
the expenses (including attorneys’ fees) incurred by an indemnitee in defending or otherwise participating in any proceeding in
advance of its final disposition; provided, however, that, to the extent required by applicable law, such payment of expenses in advance
of the final disposition of the proceeding shall be made only upon receipt of an undertaking, by or on behalf of the indemnitee, to repay
all amounts so advanced if it shall ultimately be determined that the indemnitee is not entitled to be indemnified under this Section 8.2 or
otherwise. The rights to indemnification and advancement of expenses conferred by this Section 8.2 shall be contract
rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure
to the benefit of his or her heirs, executors and administrators. Notwithstanding the foregoing provisions of this Section 8.2(a),
except for proceedings to enforce rights to indemnification and advancement of expenses, the Corporation shall indemnify and advance
expenses to an indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or
part thereof) was authorized by the Board.
(b) The
rights to indemnification and advancement of expenses conferred on any indemnitee by this Section 8.2 shall not
be exclusive of any other rights that any indemnitee may have or hereafter acquire under law, this Amended and Restated Certificate,
the By-Laws, an agreement, vote of stockholders or disinterested directors, or otherwise.
(c) Any
repeal or amendment of this Section 8.2 by the stockholders of the Corporation or by changes in law, or the adoption
of any other provision of this Amended and Restated Certificate inconsistent with this Section 8.2, shall, unless otherwise
required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader
indemnification rights on a retroactive basis than permitted prior thereto), and shall not in any way diminish or adversely affect any
right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any proceeding
(regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring
prior to such repeal or amendment or adoption of such inconsistent provision.
(d) This Section 8.2 shall
not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses
to persons other than indemnitees.
ARTICLE IX
BUSINESS COMBINATION REQUIREMENTS; EXISTENCE
Section 9.1 General.
(a) The
provisions of this Article IX shall apply during the period commencing upon the effectiveness of this Amended and
Restated Certificate and terminating upon the consummation of the Corporation’s initial Business Combination and no amendment to
this Article IX shall be effective prior to the consummation of the initial Business Combination unless approved
by the affirmative vote of the holders of at least sixty-five percent (65%) of all then outstanding shares of the Common Stock.
(b) Immediately
after the Offering, a certain amount of the net offering proceeds received by the Corporation in the Offering (including the proceeds
of any exercise of the underwriters’ over-allotment option) and certain other amounts specified in the Corporation’s registration
statement on Form S-1, as initially filed with the U.S. Securities and Exchange Commission (the “SEC”)
on [________], as amended (the “Registration Statement”), shall be deposited in a trust account (the “Trust
Account”), established for the benefit of the Public Stockholders (as defined below) pursuant to a trust agreement described
in the Registration Statement. Except for the withdrawal of interest to pay taxes (less up to $100,000 interest to pay dissolution expenses),
none of the funds held in the Trust Account (including the interest earned on the funds held in the Trust Account) will be released from
the Trust Account until the earliest to occur of (i) the completion of the initial Business Combination, (ii) the redemption
of 100% of the Offering Shares (as defined below) if the Corporation is unable to complete its initial Business Combination within 12
months (or 18 months, as applicable) from the closing of the Offering (or, if the Office of the Delaware Division of Corporations shall
not be open for business (including filing of corporate documents) on such date the next date upon which the Office of the Delaware Division
of Corporations shall be open) (the “Deadline Date”) and (iii) the redemption of shares in connection
with a vote seeking (a) to modify the substance or timing of the Corporation’s obligation to provide for the redemption of
the Offering Shares in connection with an initial Business Combination or amendments to this Amended and Restated Certificate prior thereto
or to redeem 100% of such shares if the Corporation has not consummated an initial Business Combination by the Deadline Date or (b) with
respect to any other material provisions relating to stockholders’ rights or pre-initial Business Combination activity (as described
in Section 9.7). Holders of shares of Common Stock included as part of the units sold in the Offering (the “Offering
Shares”) (whether such Offering Shares were purchased in the Offering or in the secondary market following the Offering
and whether or not such holders are the Sponsor or officers or directors of the Corporation, or affiliates of any of the foregoing) are
referred to herein as “Public Stockholders.”
Section 9.2 Redemption
Rights.
(a) Prior
to the consummation of the initial Business Combination, the Corporation shall provide all holders of Offering Shares with the opportunity
to have their Offering Shares redeemed upon the consummation of the initial Business Combination pursuant to, and subject to the limitations
of, Sections 9.2(b) and 9.2(c) (such rights of such holders to have their Offering Shares redeemed
pursuant to such Sections, the “Redemption Rights”) hereof for cash equal to the applicable redemption price
per share determined in accordance with Section 9.2(b) hereof (the “Redemption Price”);
provided, however, that the Corporation will only redeem Offering Shares so long as (after such redemption), the Corporation’s
net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) (or any successor rule)), or of any entity that succeeds the Corporation as a public company,
will be at least $5,000,001 or any greater net tangible asset or cash requirement which may be contained in the agreement relating to
the initial Business Combination either immediately prior to or upon consummation of the initial Business Combination and after payment
of underwriters’ fees and commissions (such limitation hereinafter called the “Redemption Limitation”).
Notwithstanding anything to the contrary contained in this Amended and Restated Certificate, there shall be no Redemption Rights or liquidating
distributions with respect to any warrant issued pursuant to the Offering.
(b) If
the Corporation offers to redeem the Offering Shares other than in conjunction with a stockholder vote on an initial Business Combination
with a proxy solicitation pursuant to Regulation 14A of the Exchange Act (or any successor rules or regulations) and filing proxy
materials with the SEC, the Corporation shall offer to redeem the Offering Shares upon the consummation of the initial Business Combination,
subject to lawfully available funds therefor, in accordance with the provisions of Section 9.2(a) hereof pursuant
to a tender offer in accordance with Rule 13e-4 and Regulation 14E of the Exchange Act (or any successor rule or regulation)
(such rules and regulations hereinafter called the “Tender Offer Rules”) which it shall commence prior
to the consummation of the initial Business Combination and shall file tender offer documents with the SEC prior to the consummation
of the initial Business Combination that contain substantially the same financial and other information about the initial Business Combination
and the Redemption Rights as is required under Regulation 14A of the Exchange Act (or any successor rule or regulation) (such rules and
regulations hereinafter called the “Proxy Solicitation Rules”), even if such information is not required under
the Tender Offer Rules; provided, however, that if a stockholder vote is required by law to approve the proposed initial Business Combination,
or the Corporation decides to submit the proposed initial Business Combination to the stockholders for their approval for business or
other legal reasons, the Corporation shall offer to redeem the Offering Shares, subject to lawfully available funds therefor, in accordance
with the provisions of Section 9.2(a) hereof in conjunction with a proxy solicitation pursuant to the Proxy Solicitation
Rules (and not the Tender Offer Rules) at a price per share equal to the Redemption Price calculated in accordance with the following
provisions of this Section 9.2(b). In the event that the Corporation offers to redeem the Offering Shares pursuant to
a tender offer in accordance with the Tender Offer Rules, the Redemption Price per share of the Common Stock payable to holders of the
Offering Shares tendering their Offering Shares pursuant to such tender offer shall be equal to the quotient obtained by dividing: (i) the
aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination,
including interest not previously released to the Corporation to pay its taxes, by (ii) the total number of then outstanding Offering
Shares. If the Corporation offers to redeem the Offering Shares in conjunction with a stockholder vote on the proposed initial Business
Combination pursuant to a proxy solicitation, the Redemption Price per share of the Common Stock payable to holders of the Offering Shares
exercising their Redemption Rights shall be equal to the quotient obtained by dividing (a) the aggregate amount on deposit in the
Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest not previously
released to the Corporation to pay its taxes, by (b) the total number of then outstanding Offering Shares.
(c) If
the Corporation offers to redeem the Offering Shares in conjunction with a stockholder vote on an initial Business Combination pursuant
to a proxy solicitation, a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder
is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Exchange Act), shall
be restricted from seeking Redemption Rights with respect to more than an aggregate of 15% of the Offering Shares without the prior consent
of the Corporation.
(d) In
the event that the Corporation has not consummated an initial Business Combination by the Deadline Date, the Corporation shall (i) cease
all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days
thereafter subject to lawfully available funds therefor, redeem 100% of the Offering Shares in consideration of a per-share price, payable
in cash, equal to the quotient obtained by dividing (A) the aggregate amount then on deposit in the Trust Account, including interest
not previously released to the Corporation to pay its taxes (less up to $100,000 of such net interest to pay dissolution expenses), by
(B) the total number of then outstanding Offering Shares, which redemption will completely extinguish rights of the Public Stockholders
(including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Board in accordance with
applicable law, dissolve and liquidate, subject in the case of clauses (ii) and (iii) to the Corporation’s obligations
under the DGCL to provide for claims of creditors and other requirements of applicable law.
(e) If
the Corporation offers to redeem the Offering Shares in conjunction with a stockholder vote on an initial Business Combination, the Corporation
shall consummate the proposed initial Business Combination only if (i) such initial Business Combination is approved by the affirmative
vote of the holders of a majority of the shares of the Common Stock that are voted at a stockholder meeting held to consider such initial
Business Combination and (ii) the Redemption Limitation is not exceeded.
(f) If
the Corporation conducts a tender offer pursuant to Section 9.2(b), the Corporation shall consummate the proposed initial Business
Combination only if the Redemption Limitation is not exceeded.
Section 9.3 Distributions
from the Trust Account.
(a) A
Public Stockholder shall be entitled to receive funds from the Trust Account only as provided in Sections 9.2(a), 9.2(b), 9.2(d) or 9.7 hereof.
In no other circumstances shall a Public Stockholder have any right or interest of any kind in or to distributions from the Trust Account,
and no stockholder other than a Public Stockholder shall have any interest in or to the Trust Account.
(b) Each
Public Stockholder that does not exercise its Redemption Rights shall retain its interest in the Corporation and shall be deemed to have
given its consent to the release of the remaining funds in the Trust Account to the Corporation, and following payment to any Public
Stockholders exercising their Redemption Rights, the remaining funds in the Trust Account shall be released to the Corporation.
(c) The
exercise by a Public Stockholder of the Redemption Rights shall be conditioned on such Public Stockholder following the specific procedures
for redemptions set forth by the Corporation in any applicable tender offer or proxy materials sent to the Public Stockholders relating
to the proposed initial Business Combination. Payment of the amounts necessary to satisfy the Redemption Rights properly exercised shall
be made as promptly as practical after the consummation of the initial Business Combination.
Section 9.4 Share Issuances.
Prior to the consummation of the Corporation’s initial Business Combination, the Corporation shall not issue any additional shares
of capital stock of the Corporation that would entitle the holders thereof to receive funds from the Trust Account or vote on any initial
Business Combination, on any pre-Business Combination activity or on any amendment to this Article IX.
Section 9.5 Transactions with Affiliates.
In the event the Corporation enters into an initial Business Combination with a target business that is affiliated with the Sponsor,
or the directors or officers of the Corporation, the Corporation, or a committee of the independent directors of the Corporation, shall
obtain an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions
that such Business Combination is fair to the Corporation from a financial point of view.
Section 9.6 No Transactions with
Other Blank Check Companies. The Corporation shall not enter into an initial Business Combination with another blank check company
or a similar company with nominal operations.
Section 9.7 Additional Redemption
Rights. If, in accordance with Section 9.1(a), any amendment is made to Section 9.2(d) to modify (i) the
substance or timing of the ability of Public Stockholders to seek redemption in connection with an initial Business Combination or amendments
to this Amended and Restated Certificate prior thereto or the Corporation’s obligation to redeem 100% of the Offering Shares if
the Corporation has not consummated an initial Business Combination by the Deadline Date or (ii) any other provisions relating to
stockholders’ rights or pre-initial Business Combination activity, the Public Stockholders shall be provided with the opportunity
to redeem their Offering Shares upon the approval of any such amendment, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account, including interest not previously released to the Corporation to pay its taxes, divided
by the number of then outstanding Offering Shares; provided, however, that any such amendment will be voided, and this Article IX will
remain unchanged, if any stockholders who wish to redeem are unable to redeem due to the Redemption Limitation.
Section 9.8 Minimum Value of Target.
So long as the Corporation is listed on a national securities exchange, the Corporation’s initial Business Combination must occur
with one or more target businesses that together have a fair market value of at least 80% of the assets held in the Trust Account (excluding
the deferred underwriting discount held in, and taxes payable on the income earned on, the Trust Account) at the time of the agreement
for the initial Business Combination.
ARTICLE X
CORPORATE OPPORTUNITY
To the extent allowed by law, the doctrine of
corporate opportunity, or any other analogous doctrine, shall not apply with respect to the Corporation or any of its officers or directors,
or any of their respective affiliates, in circumstances where the application of any such doctrine would conflict with any fiduciary
duties or contractual obligations they may have as of the date of this Amended and Restated Certificate or in the future, and the Corporation
renounces any expectancy that any of the directors or officers of the Corporation will offer any such corporate opportunity of which
he or she may become aware to the Corporation, except, the doctrine of corporate opportunity shall apply with respect to any of the directors
or officers of the Corporation with respect to a corporate opportunity that was offered to such person solely in his or her capacity
as a director or officer of the Corporation and (i) such opportunity is one the Corporation is legally and contractually permitted
to undertake and would otherwise be reasonable for the Corporation to pursue and (ii) the director or officer is permitted to refer
that opportunity to the Corporation without violating any legal obligation.
ARTICLE XI
AMENDMENT OF AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION
The Corporation reserves the right at any
time and from time to time to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate
(including any Preferred Stock Designation), and other provisions authorized by the laws of the State of Delaware at the time in
force that may be added or inserted, in the manner now or hereafter prescribed by this Amended and Restated Certificate and the
DGCL; and, except as set forth in Article VIII, all rights, preferences and privileges of whatever nature herein conferred
upon stockholders, directors or any other persons by and pursuant to this Amended and Restated Certificate in its present form or as
hereafter amended are granted subject to the right reserved in this Article XI; provided, however, that Article
IX of this Amended and Restated Certificate may be amended only as provided therein.
ARTICLE XII
EXCLUSIVE FORUM FOR CERTAIN LAWSUITS; CONSENT
TO JURISDICTION
Section 12.1 Forum. Subject
to the last sentence in this Section 12.1, and unless the Corporation consents in writing to the selection of an alternative forum,
to the fullest extent permitted by the applicable law, the Court of Chancery of the State of Delaware shall be the sole and exclusive
forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the
Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of
the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation,
its directors, officers or employees arising pursuant to any provision of the DGCL or this Amended and Restated Certificate or the By-Laws,
or (iv) any action asserting a claim against the Corporation, its directors, officers or employees governed by the internal affairs
doctrine and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process
on such stockholder’s counsel except any action (A) as to which the Court of Chancery in the State of Delaware determines
that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent
to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the
exclusive jurisdiction of a court or forum other than the Court of Chancery, or (C) for which the Court of Chancery does not have
subject matter jurisdiction. Notwithstanding the foregoing, (i) the provisions of this Section 12.1 will not apply to suits
brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction
and (ii) unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the
United States of America shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting
a cause of action arising under the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder.
Section 12.2 Consent to Jurisdiction.
If any action the subject matter of which is within the scope of Section 12.1 immediately above is filed in a court other than a
court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder
shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware
in connection with any action brought in any such court to enforce Section 12.1 immediately above (an “FSC Enforcement
Action”) and (ii) having service of process made upon such stockholder in any such FSC Enforcement Action by service
upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.
Section 12.3 Severability.
If any provision or provisions of this Article XII shall be held to be invalid, illegal or unenforceable as applied to any
person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and
enforceability of such provisions in any other circumstance and of the remaining provisions of this Article XII
(including, without limitation, each portion of any sentence of this Article XII containing any such provision held to be
invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such
provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.
Section 12.4 Deemed Notice. Any person
or entity purchasing or otherwise acquiring or holding any interest in any security of the Corporation shall be deemed to have notice
of and consented to this Article XII.
IN WITNESS WHEREOF, Monterey Capital Acquisition
Corporation has caused this Amended and Restated Certificate to be duly executed and acknowledged in its name and on its behalf by an
authorized officer as of the date first set forth above.
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Monterey Capital Acquisition Corporation |
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By: |
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Name: Bala Padmakumar |
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Title: Chief Executive Officer |
[Signature Page to Amended and Restated
Certificate of Incorporation]
Exhibit 3.3
BY LAWS
OF
Monterey
Capital Acquisition Corporation
(THE
“CORPORATION”)
ARTICLE I
OFFICES
Section 1.1.
Registered Office. The registered office of the Corporation within the State of Delaware shall be located at either (a) the
principal place of business of the Corporation in the State of Delaware or (b) the office of the corporation or individual acting
as the Corporation’s registered agent in Delaware.
Section 1.2.
Additional Offices. The Corporation may, in addition to its registered office in the State of Delaware, have such other offices
and places of business, both within and outside the State of Delaware, as the Board of Directors of the Corporation (the “Board”)
may from time to time determine or as the business and affairs of the Corporation may require.
ARTICLE II
STOCKHOLDERS MEETINGS
Section 2.1.
Annual Meetings. The annual meeting of stockholders shall be held at such place, either within or without the State of Delaware,
and time and on such date as shall be determined by the Board and stated in the notice of the meeting, provided that the Board may in
its sole discretion determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication
pursuant to Section 9.5(a). At each annual meeting, the stockholders entitled to vote on such matters shall elect those
directors of the Corporation to fill any term of a directorship that expires on the date of such annual meeting and may transact any other
business as may properly be brought before the meeting.
Section 2.2.
Special Meetings. Subject to the rights of the holders of any outstanding series of the preferred stock of the Corporation
(“Preferred Stock”), and to the requirements of applicable law, special meetings of stockholders, for any purpose
or purposes, may be called only by the Chairman of the Board, or a Chief Executive Officer, or the Board pursuant to a resolution adopted
by a majority of the Board, and may not be called by any other person. Special meetings of stockholders shall be held at such place, either
within or without the State of Delaware, and at such time and on such date as shall be determined by the Board and stated in the Corporation’s
notice of the meeting, provided that the Board may in its sole discretion determine that the meeting shall not be held at any place, but
may instead be held solely by means of remote communication pursuant to Section 9.5(a).
Section 2.3.
Notices. Written notice of each stockholders meeting stating the place, if any, date, and time of the meeting, and the means
of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting
and the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for
determining stockholders entitled to notice of the meeting, shall be given in the manner permitted by Section 9.3 to
each stockholder entitled to vote thereat as of the record date for determining the stockholders entitled to notice of the meeting, by
the Corporation not less than 10 nor more than 60 days before the date of the meeting unless otherwise required by the General Corporation
Law of the State of Delaware (the “DGCL”). If said notice is for a stockholders meeting other than an annual
meeting, it shall in addition state the purpose or purposes for which the meeting is called, and the business transacted at such meeting
shall be limited to the matters so stated in the Corporation’s notice of meeting (or any supplement thereto). Any meeting of stockholders
as to which notice has been given may be postponed, and any meeting of stockholders as to which notice has been given may be cancelled,
by the Board upon public announcement (as defined in Section 2.7(c)) given before the date previously scheduled for such meeting.
Section 2.4.
Quorum. Except as otherwise provided by applicable law, the Corporation’s Certificate of Incorporation, as the same may
be amended or restated from time to time (the “Certificate of Incorporation”) or these By Laws, the presence,
in person or by proxy, at a stockholders meeting of the holders of shares of outstanding capital stock of the Corporation representing
a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote at such meeting shall constitute
a quorum for the transaction of business at such meeting, except that when specified business is to be voted on by a class or series of
stock voting as a class, the holders of shares representing a majority of the voting power of the outstanding shares of such class or
series shall constitute a quorum of such class or series for the transaction of such business. If a quorum shall not be present or represented
by proxy at any meeting of the stockholders of the Corporation, the chairman of the meeting may adjourn the meeting from time to time
in the manner provided in Section 2.6 until a quorum shall attend. The stockholders present at a duly convened meeting
may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the voting power of the shares entitled
to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled
to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any
such other corporation to vote shares held by it in a fiduciary capacity.
Section 2.5.
Voting of Shares.
(a) Voting
Lists. The Secretary of the Corporation (the “Secretary”) shall prepare, or shall cause the officer or agent
who has charge of the stock ledger of the Corporation to prepare and make, at least 10 days before every meeting of stockholders, a complete
list of the stockholders of record entitled to vote at such meeting; provided, however, that if the record date for determining the stockholders
entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth
day before the meeting date, arranged in alphabetical order and showing the address and the number and class of shares registered in the
name of each stockholder. Nothing contained in this Section 2.5(a) shall require the Corporation to include electronic
mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours for a period of at least 10 days prior to the meeting: (i) on
a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice
of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that
the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that
such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be
produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
If a meeting of stockholders is to be held solely by means of remote communication as permitted by Section 9.5(a), the list shall
be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and
the information required to access such list shall be provided with the notice of meeting. The stock ledger shall be the only evidence
as to who are the stockholders entitled to examine the list required by this Section 2.5(a) or to vote in person or by
proxy at any meeting of stockholders.
(b) Manner
of Voting. At any stockholders meeting, every stockholder entitled to vote may vote in person or by proxy. If authorized by the Board,
the voting by stockholders or proxy holders at any meeting conducted by remote communication may be effected by a ballot submitted by
electronic transmission (as defined in Section 9.3), provided that any such electronic transmission must either set forth
or be submitted with information from which the Corporation can determine that the electronic transmission was authorized by the stockholder
or proxy holder. The Board, in its discretion, or the chairman of the meeting of stockholders, in such person’s discretion, may
require that any votes cast at such meeting shall be cast by written ballot.
(c) Proxies.
Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without
a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period. Proxies need not be filed with the Secretary until the
meeting is called to order, but shall be filed with the Secretary before being voted. Without limiting the manner in which a stockholder
may authorize another person or persons to act for such stockholder as proxy, either of the following shall constitute a valid means by
which a stockholder may grant such authority. No stockholder shall have cumulative voting rights.
(i) A
stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy. Execution may be accomplished
by the stockholder or such stockholder’s authorized officer, director, employee or agent signing such writing or causing such person’s
signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature.
(ii) A
stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission
of an electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service
organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that
any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic
transmission was authorized by the stockholder. Any copy, facsimile telecommunication or other reliable reproduction of the writing or
transmission authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original
writing or transmission for any and all purposes for which the original writing or transmission could be used; provided that such copy,
facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.
(d) Required
Vote. Subject to the rights of the holders of one or more series of Preferred Stock, voting separately by class or series, to elect
directors pursuant to the terms of one or more series of Preferred Stock, at all meetings of stockholders at which a quorum is present,
the election of directors shall be determined by a plurality of the votes cast by the stockholders present in person or represented by
proxy at the meeting and entitled to vote thereon. All other matters presented to the stockholders at a meeting at which a quorum is present
shall be determined by the vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the meeting
and entitled to vote thereon, unless the matter is one upon which, by applicable law, the Certificate of Incorporation, these By Laws
or applicable stock exchange rules, a different vote is required, in which case such provision shall govern and control the decision of
such matter.
(e) Inspectors
of Election. The Board may, and shall if required by law, in advance of any meeting of stockholders, appoint one or more persons as
inspectors of election, who may be employees of the Corporation or otherwise serve the Corporation in other capacities, to act at such
meeting of stockholders or any adjournment thereof and to make a written report thereof. The Board may appoint one or more persons as
alternate inspectors to replace any inspector who fails to act. If no inspectors of election or alternates are appointed by the Board,
the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her
duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of
his or her ability. The inspectors shall ascertain and report the number of outstanding shares and the voting power of each; determine
the number of shares present in person or represented by proxy at the meeting and the validity of proxies and ballots; count all votes
and ballots and report the results; determine and retain for a reasonable period a record of the disposition of any challenges made to
any determination by the inspectors; and certify their determination of the number of shares represented at the meeting and their count
of all votes and ballots. No person who is a candidate for an office at an election may serve as an inspector at such election. Each report
of an inspector shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at
such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors.
Section 2.6.
Adjournments. Any meeting of stockholders, annual or special, may be adjourned by the chairman of the meeting, from time to
time, whether or not there is a quorum, to reconvene at the same or some other place. Notice need not be given of any such adjourned meeting
if the date, time, and place, if any, thereof, and the means of remote communication, if any, by which stockholders and proxy holders
may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken.
At the adjourned meeting the stockholders, or the holders of any class or series of stock entitled to vote separately as a class, as the
case may be, may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 30 days,
notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment
a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix a new record date for notice
of such adjourned meeting in accordance with Section 9.2, and shall give notice of the adjourned meeting to each stockholder
of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.
Section 2.7.
Advance Notice for Business.
(a) Annual
Meetings of Stockholders. No business may be transacted at an annual meeting of stockholders, other than business that is either (i) specified
in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise
properly brought before the annual meeting by or at the direction of the Board or (iii) otherwise properly brought before the annual
meeting by any stockholder of the Corporation (x) who is a stockholder of record entitled to vote at such annual meeting on the date
of the giving of the notice provided for in this Section 2.7(a) and on the record date for the determination of
stockholders entitled to vote at such annual meeting and (y) who complies with the notice procedures set forth in this Section 2.7(a).
Notwithstanding anything in this Section 2.7(a) to the contrary, only persons nominated for election as a director
to fill any term of a directorship that expires on the date of the annual meeting pursuant to Section 3.2 will be
considered for election at such meeting.
(i) In
addition to any other applicable requirements, for business (other than nominations) to be properly brought before an annual meeting by
a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary and such business must otherwise
be a proper matter for stockholder action. Subject to Section 2.7(a)(iii), a stockholder’s notice to the Secretary
with respect to such business, to be timely, must be received by the Secretary at the principal executive offices of the Corporation not
later than the close of business on the 90th day nor earlier than the opening of business on the 120th day before the anniversary date
of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is more than
30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not
earlier than the close of business on the 120th day before the meeting and not later than the later of (x) the close of business
on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of
the date of the annual meeting is first made by the Corporation. The public announcement of an adjournment or postponement of an annual
meeting shall not commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described in
this Section 2.7(a).
(ii) To
be in proper written form, a stockholder’s notice to the Secretary with respect to any business (other than nominations) must set
forth as to each such matter such stockholder proposes to bring before the annual meeting (A) a brief description of the business
desired to be brought before the annual meeting, the text of the proposal or business (including the text of any resolutions proposed
for consideration and in the event such business includes a proposal to amend these By Laws, the language of the proposed amendment) and
the reasons for conducting such business at the annual meeting, (B) the name and record address of such stockholder and the name
and address of the beneficial owner, if any, on whose behalf the proposal is made, (C) the class or series and number of shares of
capital stock of the Corporation that are owned beneficially and of record by such stockholder and by the beneficial owner, if any, on
whose behalf the proposal is made, (D) a description of all arrangements or understandings between such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made and any other person or persons (including their names) in connection with the proposal
of such business by such stockholder, (E) any material interest of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made in such business and (F) a representation that such stockholder (or a qualified representative of such stockholder)
intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.
(iii) The
foregoing notice requirements of this Section 2.7(a) shall be deemed satisfied by a stockholder as to any proposal
(other than nominations) if the stockholder has notified the Corporation of such stockholder’s intention to present such proposal
at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and such stockholder has complied with the requirements of such Rule for inclusion
of such proposal in a proxy statement prepared by the Corporation to solicit proxies for such annual meeting. No business shall be conducted
at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in
this Section 2.7(a), provided, however, that once business has been properly brought before the annual meeting in accordance
with such procedures, nothing in this Section 2.7(a) shall be deemed to preclude discussion by any stockholder of
any such business. If the Board or the chairman of the annual meeting determines that any stockholder proposal was not made in accordance
with the provisions of this Section 2.7(a) or that the information provided in a stockholder’s notice does
not satisfy the information requirements of this Section 2.7(a), such proposal shall not be presented for action at the annual
meeting. Notwithstanding the foregoing provisions of this Section 2.7(a), if the stockholder (or a qualified representative
of the stockholder) does not appear at the annual meeting of stockholders of the Corporation to present the proposed business, such proposed
business shall not be transacted, notwithstanding that proxies in respect of such matter may have been received by the Corporation.
(iv) In
addition to the provisions of this Section 2.7(a), a stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 2.7(a) shall
be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
(b) Special
Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board may be made at a special
meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting only pursuant to Section 3.2.
(c) Public
Announcement. For purposes of these By Laws, “public announcement” shall mean disclosure in a press release
reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation
with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act (or any successor thereto).
Section 2.8.
Conduct of Meetings. The chairman of each annual and special meeting of stockholders shall be the Chairman of the Board or,
in the absence (or inability or refusal to act) of the Chairman of the Board, any Chief Executive Officer (if he or she shall be a director)
or, in the absence (or inability or refusal to act of a Chief Executive Officer or if a Chief Executive Officer is not a director, the
President (if he or she shall be a director) or, in the absence (or inability or refusal to act) of the President or if the President
is not a director, such other person as shall be appointed by the Board. The date and time of the opening and the closing of the polls
for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chairman of the meeting. The
Board may adopt such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to
the extent inconsistent with these By Laws or such rules and regulations as adopted by the Board, the chairman of any meeting of
stockholders shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations
or procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following:
(a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order
at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders
of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall
determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on
the time allotted to questions or comments by participants. Unless and to the extent determined by the Board or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. The secretary
of each annual and special meeting of stockholders shall be the Secretary or, in the absence (or inability or refusal to act) of the Secretary,
an Assistant Secretary so appointed to act by the chairman of the meeting. In the absence (or inability or refusal to act) of the Secretary
and all Assistant Secretaries, the chairman of the meeting may appoint any person to act as secretary of the meeting.
Section 2.9.
Consents in Lieu of Meeting. Unless otherwise provided by the Certificate of Incorporation, until the Corporation consummates
an initial public offering (“Offering”), any action required to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock entitled to vote thereon having not less than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were present and voted, and shall be delivered to the Corporation
by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered
office shall be by hand or by certified or registered mail, return receipt requested.
Every written consent shall
bear the date of signature of each stockholder who signs the consent, and no written consent shall be effective to take the corporate
action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this section
and the DGCL to the Corporation, written consents signed by a sufficient number of holders entitled to vote to take action are delivered
to the Corporation by delivery to its registered office in Delaware, its principal place of business or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered
office shall be by hand or by certified or registered mail, return receipt requested.
ARTICLE III
DIRECTORS
Section 3.1.
Powers; Number. The business and affairs of the Corporation shall be managed by or under the direction of the Board, which
may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By Laws required to be exercised or done by the stockholders. Directors need not be stockholders or residents
of the State of Delaware. Subject to the Certificate of Incorporation, the number of directors shall be fixed exclusively by resolution
of the Board.
Section 3.2.
Advance Notice for Nomination of Directors.
(a) Only
persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation,
except as may be otherwise provided by the terms of one or more series of Preferred Stock with respect to the rights of holders of one
or more series of Preferred Stock to elect directors. Nominations of persons for election to the Board at any annual meeting of stockholders,
or at any special meeting of stockholders called for the purpose of electing directors as set forth in the Corporation’s notice
of such special meeting, may be made (i) by or at the direction of the Board or (ii) by any stockholder of the Corporation (x) who
is a stockholder of record entitled to vote in the election of directors on the date of the giving of the notice provided for in this Section 3.2 and
on the record date for the determination of stockholders entitled to vote at such meeting and (y) who complies with the notice procedures
set forth in this Section 3.2.
(b) In
addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice
thereof in proper written form to the Secretary. To be timely, a stockholder’s notice to the Secretary must be received by the Secretary
at the principal executive offices of the Corporation (i) in the case of an annual meeting, not later than the close of business
on the 90th day nor earlier than the close of business on the 120th day before the anniversary date of the immediately preceding annual
meeting of stockholders; provided, however, that in the event that the annual meeting is more than 30 days before or more than 60
days after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the close of business on
the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or
(y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting was first
made by the Corporation; and (ii) in the case of a special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the 10th day following the day on which public announcement of the date of the special meeting
is first made by the Corporation. In no event shall the public announcement of an adjournment or postponement of an annual meeting or
special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described in
this Section 3.2.
(c) Notwithstanding
anything in paragraph (b) to the contrary, in the event that the number of directors to be elected to the Board at an annual meeting
is greater than the number of directors whose terms expire on the date of the annual meeting and there is no public announcement by the
Corporation naming all of the nominees for the additional directors to be elected or specifying the size of the increased Board before
the close of business on the 90th day prior to the anniversary date of the immediately preceding annual meeting of stockholders, a stockholder’s
notice required by this Section 3.2 shall also be considered timely, but only with respect to nominees for the additional
directorships created by such increase that are to be filled by election at such annual meeting, if it shall be received by the Secretary
at the principal executive offices of the Corporation not later than the close of business on the 10th day following the date on which
such public announcement was first made by the Corporation.
(d) To
be in proper written form, a stockholder’s notice to the Secretary must set forth (i) as to each person whom the stockholder
proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the
principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the Corporation
that are owned beneficially or of record by the person and (D) any other information relating to the person that would be required
to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (ii) as
to the stockholder giving the notice (A) the name and record address of such stockholder as they appear on the Corporation’s
books and the name and address of the beneficial owner, if any, on whose behalf the nomination is made, (B) the class or series and
number of shares of capital stock of the Corporation that are owned beneficially and of record by such stockholder and the beneficial
owner, if any, on whose behalf the nomination is made, (C) a description of all arrangements or understandings relating to the nomination
to be made by such stockholder among such stockholder, the beneficial owner, if any, on whose behalf the nomination is made, each proposed
nominee and any other person or persons (including their names), (D) a representation that such stockholder (or a qualified representative
of such stockholder) intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (E) any
other information relating to such stockholder and the beneficial owner, if any, on whose behalf the nomination is made that would be
required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election
of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must
be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.
(e) If
the Board or the chairman of the meeting of stockholders determines that any nomination was not made in accordance with the provisions
of this Section 3.2, or that the information provided in a stockholder’s notice does not satisfy the information
requirements of this Section 3.2, then such nomination shall not be considered at the meeting in question. Notwithstanding
the foregoing provisions of this Section 3.2, if the stockholder (or a qualified representative of the stockholder) does
not appear at the meeting of stockholders of the Corporation to present the nomination, such nomination shall be disregarded, notwithstanding
that proxies in respect of such nomination may have been received by the Corporation.
(f) In
addition to the provisions of this Section 3.2, a stockholder shall also comply with all of the applicable requirements
of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 3.2 shall
be deemed to affect any rights of the holders of Preferred Stock to elect directors pursuant to the Certificate of Incorporation.
Section 3.3.
Compensation. Unless otherwise restricted by the Certificate of Incorporation or these By Laws, the Board shall have the authority
to fix the compensation of directors, including for service on a committee of the Board, and may be paid either a fixed sum for attendance
at each meeting of the Board or other compensation as director. The directors may be reimbursed their expenses, if any, of attendance
at each meeting of the Board. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of committees of the Board may be allowed like compensation and reimbursement of expenses for service on
the committee.
ARTICLE IV
BOARD MEETINGS
Section 4.1.
Annual Meetings. The Board shall meet as soon as practicable after the adjournment of each annual stockholders meeting at the
place of the annual stockholders meeting unless the Board shall fix another time and place and give notice thereof in the manner required
herein for special meetings of the Board. No notice to the directors shall be necessary to legally convene this meeting, except as provided
in this Section 4.1.
Section 4.2.
Regular Meetings. Regularly scheduled, periodic meetings of the Board may be held without notice at such times, dates and places
(within or without the State of Delaware) as shall from time to time be determined by the Board.
Section 4.3.
Special Meetings. Special meetings of the Board (a) may be called by the Chairman of the Board or President and (b) shall
be called by the Chairman of the Board, President or Secretary on the written request of at least a majority of directors then in office,
or the sole director, as the case may be, and shall be held at such time, date and place (within or without the State of Delaware) as
may be determined by the person calling the meeting or, if called upon the request of directors or the sole director, as specified in
such written request. Notice of each special meeting of the Board shall be given, as provided in Section 9.3, to each
director (i) at least 24 hours before the meeting if such notice is oral notice given personally or by telephone or written notice
given by hand delivery or by means of a form of electronic transmission and delivery; (ii) at least two days before the meeting if
such notice is sent by a nationally recognized overnight delivery service; and (iii) at least five days before the meeting if such
notice is sent through the United States mail. If the Secretary shall fail or refuse to give such notice, then the notice may be given
by the officer who called the meeting or the directors who requested the meeting. Any and all business that may be transacted at a regular
meeting of the Board may be transacted at a special meeting. Except as may be otherwise expressly provided by applicable law, the Certificate
of Incorporation, or these By Laws, neither the business to be transacted at, nor the purpose of, any special meeting need be specified
in the notice or waiver of notice of such meeting. A special meeting may be held at any time without notice if all the directors are present
or if those not present waive notice of the meeting in accordance with Section 9.4.
Section 4.4.
Quorum; Required Vote. A majority of the Board shall constitute a quorum for the transaction of business at any meeting of
the Board, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board,
except as may be otherwise specifically provided by applicable law, the Certificate of Incorporation or these By Laws. If a quorum shall
not be present at any meeting, a majority of the directors present may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present.
Section 4.5.
Consent In Lieu of Meeting. Unless otherwise restricted by the Certificate of Incorporation or these By Laws, any action required
or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic
transmission or transmissions (or paper reproductions thereof) are filed with the minutes of proceedings of the Board or committee. Such
filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained
in electronic form.
Section 4.6.
Organization. The chairman of each meeting of the Board shall be the Chairman of the Board or, in the absence (or inability
or refusal to act) of the Chairman of the Board, any Chief Executive Officer (if he or she shall be a director) or, in the absence (or
inability or refusal to act) of a Chief Executive Officer or if a Chief Executive Officer is not a director, the President (if he or she
shall be a director) or in the absence (or inability or refusal to act) of the President or if the President is not a director, a chairman
elected from the directors present. The Secretary shall act as secretary of all meetings of the Board. In the absence (or inability or
refusal to act) of the Secretary, an Assistant Secretary shall perform the duties of the Secretary at such meeting. In the absence (or
inability or refusal to act) of the Secretary and all Assistant Secretaries, the chairman of the meeting may appoint any person to act
as secretary of the meeting.
ARTICLE V
COMMITTEES OF DIRECTORS
Section 5.1.
Establishment. The Board may by resolution of the Board designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. Each committee shall keep regular minutes of its meetings and report the same to the Board
when required by the resolution designating such committee. The Board shall have the power at any time to fill vacancies in, to change
the membership of, or to dissolve any such committee.
Section 5.2.
Available Powers. Any committee established pursuant to Section 5.1 hereof, to the extent permitted by
applicable law and by resolution of the Board, shall have and may exercise all of the powers and authority of the Board in the management
of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require
it.
Section 5.3.
Alternate Members. The Board may designate one or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of the committee, the member
or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously
appoint another member of the Board to act at the meeting in place of any such absent or disqualified member.
Section 5.4.
Procedures. Unless the Board otherwise provides, the time, date, place, if any, and notice of meetings of a committee shall
be determined by such committee. At meetings of a committee, a majority of the number of members of the committee (but not including any
alternate member, unless such alternate member has replaced any absent or disqualified member at the time of, or in connection with, such
meeting) shall constitute a quorum for the transaction of business. The act of a majority of the members present at any meeting at which
a quorum is present shall be the act of the committee, except as otherwise specifically provided by applicable law, the Certificate of
Incorporation, these By Laws or the Board. If a quorum is not present at a meeting of a committee, the members present may adjourn the
meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. Unless the Board otherwise
provides and except as provided in these By Laws, each committee designated by the Board may make, alter, amend and repeal rules for
the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board
is authorized to conduct its business pursuant to Article III and Article IV of these By Laws.
ARTICLE VI
OFFICERS
Section 6.1.
Officers. The officers of the Corporation elected by the Board shall be one or more Chief Executive Officers, a Chief Financial
Officer, a Secretary and such other officers (including without limitation, a Chairman of the Board, Presidents, Vice Presidents, Assistant
Secretaries and a Treasurer) as the Board from time to time may determine. Officers elected by the Board shall each have such powers and
duties as generally pertain to their respective offices, subject to the specific provisions of this Article VI. Such
officers shall also have such powers and duties as from time to time may be conferred by the Board. Any Chief Executive Officer or President
may also appoint such other officers (including without limitation one or more Vice Presidents and Controllers) as may be necessary or
desirable for the conduct of the business of the Corporation. Such other officers shall have such powers and duties and shall hold their
offices for such terms as may be provided in these By Laws or as may be prescribed by the Board or, if such officer has been appointed
by any Chief Executive Officer or President, as may be prescribed by the appointing officer.
(a) Chairman
of the Board. The Chairman of the Board shall preside when present at all meetings of the stockholders and the Board. The Chairman
of the Board shall have general supervision and control of the acquisition activities of the Corporation subject to the ultimate authority
of the Board, and shall be responsible for the execution of the policies of the Board with respect to such matters. In the absence (or
inability or refusal to act) of the Chairman of the Board, any Chief Executive Officer (if he or she shall be a director) shall preside
when present at all meetings of the stockholders and the Board. The powers and duties of the Chairman of the Board shall not include supervision
or control of the preparation of the financial statements of the Corporation (other than through participation as a member of the Board).
The position of Chairman of the Board and Chief Executive Officer may be held by the same person and may be held by more than one person.
(b) Chief
Executive Officer. One or more Chief Executive Officers shall be the chief executive officer(s) of the Corporation, shall have
general supervision of the affairs of the Corporation and general control of all of its business subject to the ultimate authority of
the Board, and shall be responsible for the execution of the policies of the Board with respect to such matters, except to the extent
any such powers and duties have been prescribed to the Chairman of the Board pursuant to Section 6.1(a) above. In
the absence (or inability or refusal to act) of the Chairman of the Board, any Chief Executive Officer (if he or she shall be a director)
shall preside when present at all meetings of the stockholders and the Board. The position of Chief Executive Officer and President may
be held by the same person and may be held by more than one person.
(c) President.
The President shall make recommendations to any Chief Executive Officer on all operational matters that would normally be reserved for
the final executive responsibility of any Chief Executive Officer. In the absence (or inability or refusal to act) of the Chairman of
the Board and a Chief Executive Officer, the President (if he or she shall be a director) shall preside when present at all meetings of
the stockholders and the Board. The President shall also perform such duties and have such powers as shall be designated by the Board.
The position of President and Chief Executive Officer may be held by the same person.
(d) Vice
Presidents. In the absence (or inability or refusal to act) of the President, the Vice President (or in the event there be more than
one Vice President, the Vice Presidents in the order designated by the Board) shall perform the duties and have the powers of the President.
Any one or more of the Vice Presidents may be given an additional designation of rank or function.
(e) Secretary.
(i) The
Secretary shall attend all meetings of the stockholders, the Board and (as required) committees of the Board and shall record the proceedings
of such meetings in books to be kept for that purpose. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the Board and shall perform such other duties as may be prescribed by the Board, the Chairman of the Board, any
Chief Executive Officer or President. The Secretary shall have custody of the corporate seal of the Corporation and the Secretary, or
any Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested
by his or her signature or by the signature of such Assistant Secretary. The Board may give general authority to any other officer to
affix the seal of the Corporation and to attest the affixing thereof by his or her signature.
(ii) The
Secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporation’s
transfer agent or registrar, if one has been appointed, a stock ledger, or duplicate stock ledger, showing the names of the stockholders
and their addresses, the number and classes of shares held by each and, with respect to certificated shares, the number and date of certificates
issued for the same and the number and date of certificates cancelled.
(f) Assistant
Secretaries. The Assistant Secretary or, if there be more than one, the Assistant Secretaries in the order determined by the Board
shall, in the absence (or inability or refusal to act) of the Secretary, perform the duties and have the powers of the Secretary.
(g) Chief
Financial Officer. The Chief Financial Officer shall perform all duties commonly incident to that office (including, without limitation,
the care and custody of the funds and securities of the Corporation, which from time to time may come into the Chief Financial Officer’s
hands and the deposit of the funds of the Corporation in such banks or trust companies as the Board, any Chief Executive Officer or the
President may authorize).
(h) Treasurer.
The Treasurer shall, in the absence (or inability or refusal to act) of the Chief Financial Officer, perform the duties and exercise the
powers of the Chief Financial Officer.
Section 6.2.
Term of Office; Removal; Vacancies. The elected officers of the Corporation shall be appointed by the Board and shall hold
office until their successors are duly elected and qualified by the Board or until their earlier death, resignation, retirement, disqualification,
or removal from office. Any officer may be removed, with or without cause, at any time by the Board. Any officer appointed by any Chief
Executive Officer or President may also be removed, with or without cause, by any Chief Executive Officer or President, as the case may
be, unless the Board otherwise provides. Any vacancy occurring in any elected office of the Corporation may be filled by the Board. Any
vacancy occurring in any office appointed by any Chief Executive Officer or President may be filled by any Chief Executive Officer, or
President, as the case may be, unless the Board then determines that such office shall thereupon be elected by the Board, in which case
the Board shall elect such officer.
Section 6.3.
Other Officers. The Board may delegate the power to appoint such other officers and agents, and may also remove such officers
and agents or delegate the power to remove same, as it shall from time to time deem necessary or desirable.
Section 6.4.
Multiple Officeholders; Stockholder and Director Officers. Any number of offices may be held by the same person unless the
Certificate of Incorporation or these By Laws otherwise provide. Officers need not be stockholders or residents of the State of Delaware.
ARTICLE VII
SHARES
Section 7.1.
Certificated and Uncertificated Shares. The shares of the Corporation may be certificated or uncertificated, subject to the
sole discretion of the Board and the requirements of the DGCL.
Section 7.2.
Multiple Classes of Stock. If the Corporation shall be authorized to issue more than one class of stock or more than one series
of any class, the Corporation shall (a) cause the powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or
rights to be set forth in full or summarized on the face or back of any certificate that the Corporation issues to represent shares of
such class or series of stock or (b) in the case of uncertificated shares, within a reasonable time after the issuance or transfer
of such shares, send to the registered owner thereof a written notice containing the information required to be set forth on certificates
as specified in clause (a) above; provided, however, that, except as otherwise provided by applicable law, in lieu of the foregoing
requirements, there may be set forth on the face or back of such certificate or, in the case of uncertificated shares, on such written
notice a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences
and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations
or restrictions of such preferences or rights.
Section 7.3.
Signatures. Each certificate representing capital stock of the Corporation shall be signed by or in the name of the Corporation
by (a) the Chairman of the Board, any Chief Executive Officer, the President or a Vice President and (b) the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Corporation. Any or all the signatures on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation
with the same effect as if such person were such officer, transfer agent or registrar on the date of issue.
Section 7.4.
Consideration and Payment for Shares.
(a) Subject
to applicable law and the Certificate of Incorporation, shares of stock may be issued for such consideration, having in the case of shares
with par value a value not less than the par value thereof, and to such persons, as determined from time to time by the Board. The consideration
may consist of any tangible or intangible property or any benefit to the Corporation including cash, promissory notes, services performed,
contracts for services to be performed or other securities, or any combination thereof.
(b) Subject
to applicable law and the Certificate of Incorporation, shares may not be issued until the full amount of the consideration has been paid,
unless upon the face or back of each certificate issued to represent any partly paid shares of capital stock or upon the books and records
of the Corporation in the case of partly paid uncertificated shares, there shall have been set forth the total amount of the consideration
to be paid therefor and the amount paid thereon up to and including the time said certificate representing certificated shares or said
uncertificated shares are issued.
Section 7.5.
Lost, Destroyed or Wrongfully Taken Certificates.
(a) If
an owner of a certificate representing shares claims that such certificate has been lost, destroyed or wrongfully taken, the Corporation
shall issue a new certificate representing such shares or such shares in uncertificated form if the owner: (i) requests such a new
certificate before the Corporation has notice that the certificate representing such shares has been acquired by a protected purchaser;
(ii) if requested by the Corporation, delivers to the Corporation a bond sufficient to indemnify the Corporation against any claim
that may be made against the Corporation on account of the alleged loss, wrongful taking or destruction of such certificate or the issuance
of such new certificate or uncertificated shares; and (iii) satisfies other reasonable requirements imposed by the Corporation.
(b) If
a certificate representing shares has been lost, apparently destroyed or wrongfully taken, and the owner fails to notify the Corporation
of that fact within a reasonable time after the owner has notice of such loss, apparent destruction or wrongful taking and the Corporation
registers a transfer of such shares before receiving notification, the owner shall be precluded from asserting against the Corporation
any claim for registering such transfer or a claim to a new certificate representing such shares or such shares in uncertificated form.
Section 7.6.
Transfer of Stock.
(a) If
a certificate representing shares of the Corporation is presented to the Corporation with an endorsement requesting the registration of
transfer of such shares or an instruction is presented to the Corporation requesting the registration of transfer of uncertificated shares,
the Corporation shall register the transfer as requested if:
(i) in
the case of certificated shares, the certificate representing such shares has been surrendered;
(ii) (A) with
respect to certificated shares, the endorsement is made by the person specified by the certificate as entitled to such shares; (B) with
respect to uncertificated shares, an instruction is made by the registered owner of such uncertificated shares; or (C) with respect
to certificated shares or uncertificated shares, the endorsement or instruction is made by any other appropriate person or by an agent
who has actual authority to act on behalf of the appropriate person;
(iii) the
Corporation has received a guarantee of signature of the person signing such endorsement or instruction or such other reasonable assurance
that the endorsement or instruction is genuine and authorized as the Corporation may request;
(iv) the
transfer does not violate any restriction on transfer imposed by the Corporation that is enforceable in accordance with Section 7.8(a);
and
(v) such
other conditions for such transfer as shall be provided for under applicable law have been satisfied.
(b) Whenever
any transfer of shares shall be made for collateral security and not absolutely, the Corporation shall so record such fact in the entry
of transfer if, when the certificate for such shares is presented to the Corporation for transfer or, if such shares are uncertificated,
when the instruction for registration of transfer thereof is presented to the Corporation, both the transferor and transferee request
the Corporation to do so.
Section 7.7.
Registered Stockholders. Before due presentment for registration of transfer of a certificate representing shares of the Corporation
or of an instruction requesting registration of transfer of uncertificated shares, the Corporation may treat the registered owner as the
person exclusively entitled to inspect for any proper purpose the stock ledger and the other books and records of the Corporation, vote
such shares, receive dividends or notifications with respect to such shares and otherwise exercise all the rights and powers of the owner
of such shares, except that a person who is the beneficial owner of such shares (if held in a voting trust or by a nominee on behalf of
such person) may, upon providing documentary evidence of beneficial ownership of such shares and satisfying such other conditions as are
provided under applicable law, may also so inspect the books and records of the Corporation.
Section 7.8.
Effect of the Corporation’s Restriction on Transfer.
(a) A
written restriction on the transfer or registration of transfer of shares of the Corporation or on the amount of shares of the Corporation
that may be owned by any person or group of persons, if permitted by the DGCL and noted conspicuously on the certificate representing
such shares or, in the case of uncertificated shares, contained in a notice, offering circular or prospectus sent by the Corporation to
the registered owner of such shares within a reasonable time prior to or after the issuance or transfer of such shares, may be enforced
against the holder of such shares or any successor or transferee of the holder including an executor, administrator, trustee, guardian
or other fiduciary entrusted with like responsibility for the person or estate of the holder.
(b) A
restriction imposed by the Corporation on the transfer or the registration of shares of the Corporation or on the amount of shares of
the Corporation that may be owned by any person or group of persons, even if otherwise lawful, is ineffective against a person without
actual knowledge of such restriction unless: (i) the shares are certificated and such restriction is noted conspicuously on the certificate;
or (ii) the shares are uncertificated and such restriction was contained in a notice, offering circular or prospectus sent by the
Corporation to the registered owner of such shares within a reasonable time prior to or after the issuance or transfer of such shares.
Section 7.9.
Regulations. The Board shall have power and authority to make such additional rules and regulations, subject to any applicable
requirement of law, as the Board may deem necessary and appropriate with respect to the issue, transfer or registration of transfer of
shares of stock or certificates representing shares. The Board may appoint one or more transfer agents or registrars and may require for
the validity thereof that certificates representing shares bear the signature of any transfer agent or registrar so appointed.
ARTICLE VIII
INDEMNIFICATION
Section 8.1.
Right to Indemnification. To the fullest extent permitted by applicable law, as the same exists or may hereafter be amended,
the Corporation shall indemnify and hold harmless each person who was or is made a party or is threatened to be made a party to or is
otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a “proceeding”), by reason of the fact that he or she is or was a director or officer of the Corporation
or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with
respect to an employee benefit plan (hereinafter an “Indemnitee”), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer,
employee or agent, against all liability and loss suffered and expenses (including, without limitation, attorneys’ fees, judgments,
fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred by such Indemnitee in connection with such
proceeding; provided, however, that, except as provided in Section 8.3 with respect to proceedings to enforce rights
to indemnification, the Corporation shall indemnify an Indemnitee in connection with a proceeding (or part thereof) initiated by such
Indemnitee only if such proceeding (or part thereof) was authorized by the Board.
Section 8.2.
Right to Advancement of Expenses. In addition to the right to indemnification conferred in Section 8.1, an
Indemnitee shall also have the right to be paid by the Corporation to the fullest extent not prohibited by applicable law the expenses
(including, without limitation, attorneys’ fees) incurred in defending or otherwise participating in any such proceeding in advance
of its final disposition (hereinafter an “advancement of expenses”); provided, however, that, if the DGCL requires,
an advancement of expenses incurred by an Indemnitee in his or her capacity as a director or officer of the Corporation (and not in any
other capacity in which service was or is rendered by such Indemnitee, including, without limitation, service to an employee benefit plan)
shall be made only upon the Corporation’s receipt of an undertaking (hereinafter an “undertaking”), by
or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined that such Indemnitee is not entitled
to be indemnified under this Article VIII or otherwise.
Section 8.3.
Right of Indemnitee to Bring Suit. If a claim under Section 8.1 or Section 8.2 is
not paid in full by the Corporation within 60 days after a written claim therefor has been received by the Corporation, except in
the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the Indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the
Indemnitee shall also be entitled to be paid the expense of prosecuting or defending such suit. In (a) any suit brought by the Indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by an Indemnitee to enforce a right to an advancement of expenses)
it shall be a defense that, and (b) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final judicial decision from which there is
no further right to appeal (hereinafter a “final adjudication”) that, the Indemnitee has not met any applicable
standard for indemnification set forth in the DGCL. Neither the failure of the Corporation (including its directors who are not parties
to such action, a committee of such directors, independent legal counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable
standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including a determination by its directors
who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the Indemnitee
has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of
conduct or, in the case of such a suit brought by the Indemnitee, shall be a defense to such suit. In any suit brought by the Indemnitee
to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement
of expenses, under this Article VIII or otherwise shall be on the Corporation.
Section 8.4.
Non-Exclusivity of Rights. The rights provided to any Indemnitee pursuant to this Article VIII shall
not be exclusive of any other right, which such Indemnitee may have or hereafter acquire under applicable law, the Certificate of Incorporation,
these By Laws, an agreement, a vote of stockholders or disinterested directors, or otherwise.
Section 8.5.
Insurance. The Corporation may maintain insurance, at its expense, to protect itself and/or any director, officer, employee
or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability
or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the
DGCL.
Section 8.6.
Indemnification of Other Persons. This Article VIII shall not limit the right of the Corporation to the
extent and in the manner authorized or permitted by law to indemnify and to advance expenses to persons other than Indemnitees. Without
limiting the foregoing, the Corporation may, to the extent authorized from time to time by the Board, grant rights to indemnification
and to the advancement of expenses to any employee or agent of the Corporation and to any other person who is or was serving at the request
of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan, to the fullest extent of the provisions of this Article VIII with
respect to the indemnification and advancement of expenses of Indemnitees under this Article VIII.
Section 8.7.
Amendments. Any repeal or amendment of this Article VIII by the Board or the stockholders of the Corporation
or by changes in applicable law, or the adoption of any other provision of these By Laws inconsistent with this Article VIII,
will, to the extent permitted by applicable law, be prospective only (except to the extent such amendment or change in applicable law
permits the Corporation to provide broader indemnification rights to Indemnitees on a retroactive basis than permitted prior thereto),
and will not in any way diminish or adversely affect any right or protection existing hereunder in respect of any act or omission occurring
prior to such repeal or amendment or adoption of such inconsistent provision; provided however, that amendments or repeals of this Article VIII
shall require the affirmative vote of the stockholders holding at least 66.7% of the voting power of all outstanding shares of capital
stock of the Corporation.
Section 8.8.
Certain Definitions. For purposes of this Article VIII, (a) references to “other enterprise”
shall include any employee benefit plan; (b) references to “fines” shall include any excise taxes assessed
on a person with respect to an employee benefit plan; (c) references to “serving at the request of the Corporation”
shall include any service that imposes duties on, or involves services by, a person with respect to any employee benefit plan, its participants,
or beneficiaries; and (d) a person who acted in good faith and in a manner such person reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the
best interest of the Corporation” for purposes of Section 145 of the DGCL.
Section 8.9.
Contract Rights. The rights provided to Indemnitees pursuant to this Article VIII shall be contract rights
and such rights shall continue as to an Indemnitee who has ceased to be a director, officer, agent or employee and shall inure to the
benefit of the Indemnitee’s heirs, executors and administrators.
Section 8.10.
Severability. If any provision or provisions of this Article VIII shall be held to be invalid, illegal
or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article VIII shall
not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article VIII (including,
without limitation, each such portion of this Article VIII containing any such provision held to be invalid, illegal
or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
ARTICLE IX
MISCELLANEOUS
Section 9.1.
Place of Meetings. If the place of any meeting of stockholders, the Board or committee of the Board for which notice is required
under these By Laws is not designated in the notice of such meeting, such meeting shall be held at the principal business office of the
Corporation; provided, however, if the Board has, in its sole discretion, determined that a meeting shall not be held at any place, but
instead shall be held by means of remote communication pursuant to Section 9.5 hereof, then such meeting shall not
be held at any place.
Section 9.2.
Fixing Record Dates.
(a) In
order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof,
the Board may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board,
and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If the Board so fixes a date,
such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines,
at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination.
If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of and to vote at a meeting of
stockholders shall be at the close of business on the business day next preceding the day on which notice is given, or, if notice is waived,
at the close of business on the business day next preceding the day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the
Board may fix a new record date for the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled
to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance
with the foregoing provisions of this Section 9.2(a) at the adjourned meeting.
(b) In
order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is
fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto.
Section 9.3.
Means of Giving Notice.
(a) Notice
to Directors. Whenever under applicable law, the Certificate of Incorporation or these By Laws notice is required to be given to any
director, such notice shall be given either (i) in writing and sent by mail, or by a nationally recognized delivery service, (ii) by
means of facsimile telecommunication or other form of electronic transmission, or (iii) by oral notice given personally or by telephone.
A notice to a director will be deemed given as follows: (i) if given by hand delivery, orally, or by telephone, when actually received
by the director, (ii) if sent through the United States mail, when deposited in the United States mail, with postage and fees thereon
prepaid, addressed to the director at the director’s address appearing on the records of the Corporation, (iii) if sent for
next day delivery by a nationally recognized overnight delivery service, when deposited with such service, with fees thereon prepaid,
addressed to the director at the director’s address appearing on the records of the Corporation, (iv) if sent by facsimile
telecommunication, when sent to the facsimile transmission number for such director appearing on the records of the Corporation, (v) if
sent by electronic mail, when sent to the electronic mail address for such director appearing on the records of the Corporation, or (vi) if
sent by any other form of electronic transmission, when sent to the address, location or number (as applicable) for such director appearing
on the records of the Corporation.
(b) Notice
to Stockholders. Whenever under applicable law, the Certificate of Incorporation or these By Laws notice is required to be given to
any stockholder, such notice may be given (i) in writing and sent either by hand delivery, through the United States mail, or by
a nationally recognized overnight delivery service for next day delivery, or (ii) by means of a form of electronic transmission consented
to by the stockholder, to the extent permitted by, and subject to the conditions set forth in Section 232 of the DGCL. A notice to
a stockholder shall be deemed given as follows: (i) if given by hand delivery, when actually received by the stockholder, (ii) if
sent through the United States mail, when deposited in the United States mail, with postage and fees thereon prepaid, addressed to the
stockholder at the stockholder’s address appearing on the stock ledger of the Corporation, (iii) if sent for next day delivery
by a nationally recognized overnight delivery service, when deposited with such service, with fees thereon prepaid, addressed to the stockholder
at the stockholder’s address appearing on the stock ledger of the Corporation, and (iv) if given by a form of electronic transmission
consented to by the stockholder to whom the notice is given and otherwise meeting the requirements set forth above, (A) if by facsimile
transmission, when directed to a number at which the stockholder has consented to receive notice, (B) if by electronic mail, when
directed to an electronic mail address at which the stockholder has consented to receive notice, (C) if by a posting on an electronic
network together with separate notice to the stockholder of such specified posting, upon the later of (1) such posting and (2) the
giving of such separate notice, and (D) if by any other form of electronic transmission, when directed to the stockholder. A stockholder
may revoke such stockholder’s consent to receiving notice by means of electronic communication by giving written notice of such
revocation to the Corporation. Any such consent shall be deemed revoked if (1) the Corporation is unable to deliver by electronic
transmission two consecutive notices given by the Corporation in accordance with such consent and (2) such inability becomes known
to the Secretary or an Assistant Secretary or to the Corporation’s transfer agent, or other person responsible for the giving of
notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
(c) Electronic
Transmission. “Electronic transmission” means any form of communication, not directly involving the physical
transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly
reproduced in paper form by such a recipient through an automated process, including but not limited to transmission by telex, facsimile
telecommunication, electronic mail, telegram and cablegram.
(d) Notice
to Stockholders Sharing Same Address. Without limiting the manner by which notice otherwise may be given effectively by the Corporation
to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation
or these By Laws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders
at that address to whom such notice is given. A stockholder may revoke such stockholder’s consent by delivering written notice of
such revocation to the Corporation. Any stockholder who fails to object in writing to the Corporation within 60 days of having been
given written notice by the Corporation of its intention to send such a single written notice shall be deemed to have consented to receiving
such single written notice.
(e) Exceptions
to Notice Requirements. Whenever notice is required to be given, under the DGCL, the Certificate of Incorporation or these By Laws,
to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no
duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting
that shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate
with the Secretary of State of Delaware, the certificate shall state, if such is the fact and if notice is required, that notice was given
to all persons entitled to receive notice except such persons with whom communication is unlawful.
Whenever notice is required to be given by the
Corporation, under any provision of the DGCL, the Certificate of Incorporation or these By Laws, to any stockholder to whom (1) notice
of two consecutive annual meetings of stockholders and all notices of stockholder meetings or of the taking of action by written consent
of stockholders without a meeting to such stockholder during the period between such two consecutive annual meetings, or (2) all,
and at least two payments (if sent by first-class mail) of dividends or interest on securities during a 12-month period, have been mailed
addressed to such stockholder at such stockholder’s address as shown on the records of the Corporation and have been returned undeliverable,
the giving of such notice to such stockholder shall not be required. Any action or meeting that shall be taken or held without notice
to such stockholder shall have the same force and effect as if such notice had been duly given. If any such stockholder shall deliver
to the Corporation a written notice setting forth such stockholder’s then current address, the requirement that notice be given
to such stockholder shall be reinstated. In the event that the action taken by the Corporation is such as to require the filing of a certificate
with the Secretary of State of Delaware, the certificate need not state that notice was not given to persons to whom notice was not required
to be given pursuant to Section 230(b) of the DGCL. The exception in subsection (1) of the first sentence of this paragraph
to the requirement that notice be given shall not be applicable to any notice returned as undeliverable if the notice was given by electronic
transmission.
Section 9.4.
Waiver of Notice. Whenever any notice is required to be given under applicable law, the Certificate of Incorporation, or these
By Laws, a written waiver of such notice, signed by the person or persons entitled to said notice, or a waiver by electronic transmission
by the person entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to such required notice.
All such waivers shall be kept with the books of the Corporation. Attendance at a meeting shall constitute a waiver of notice of such
meeting, except where a person attends for the express purpose of objecting to the transaction of any business on the ground that the
meeting was not lawfully called or convened.
Section 9.5. Meeting
Attendance via Remote Communication Equipment.
(a) Stockholder
Meetings. If authorized by the Board in its sole discretion, and subject to such guidelines and procedures as the Board may adopt,
stockholders entitled to vote at such meeting and proxy holders not physically present at a meeting of stockholders may, by means of remote
communication:
(i) participate
in a meeting of stockholders; and
(ii) be
deemed present in person and vote at a meeting of stockholders, whether such meeting is to be held at a designated place or solely by
means of remote communication, provided that (A) the Corporation shall implement reasonable measures to verify that each person deemed
present and permitted to vote at the meeting by means of remote communication is a stockholder or proxy holder, (B) the Corporation
shall implement reasonable measures to provide such stockholders and proxy holders a reasonable opportunity to participate in the meeting
and, if entitled to vote, to vote on matters submitted to the applicable stockholders, including an opportunity to read or hear the proceedings
of the meeting substantially concurrently with such proceedings, and (C) if any stockholder or proxy holder votes or takes other
action at the meeting by means of remote communication, a record of such votes or other action shall be maintained by the Corporation.
(b) Board
Meetings. Unless otherwise restricted by applicable law, the Certificate of Incorporation or these By Laws, members of the Board or
any committee thereof may participate in a meeting of the Board or any committee thereof by means of conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear each other. Such participation in a meeting shall constitute
presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction
of any business on the ground that the meeting was not lawfully called or convened.
Section 9.6.
Dividends. The Board may from time to time declare, and the Corporation may pay, dividends (payable in cash, property or shares
of the Corporation’s capital stock) on the Corporation’s outstanding shares of capital stock, subject to applicable law and
the Certificate of Incorporation.
Section 9.7.
Reserves. The Board may set apart out of the funds of the Corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve.
Section 9.8.
Contracts and Negotiable Instruments. Except as otherwise provided by applicable law, the Certificate of Incorporation or these
By Laws, any contract, bond, deed, lease, mortgage or other instrument may be executed and delivered in the name and on behalf of the
Corporation by such officer or officers or other employee or employees of the Corporation as the Board may from time to time authorize.
Such authority may be general or confined to specific instances as the Board may determine. The Chairman of the Board, any Chief Executive
Officer, the President, the Chief Financial Officer, the Treasurer or any Vice President may execute and deliver any contract, bond, deed,
lease, mortgage or other instrument in the name and on behalf of the Corporation. Subject to any restrictions imposed by the Board, the
Chairman of the Board , any Chief Executive Officer, President, the Chief Financial Officer, the Treasurer or any Vice President may delegate
powers to execute and deliver any contract, bond, deed, lease, mortgage or other instrument in the name and on behalf of the Corporation
to other officers or employees of the Corporation under such person’s supervision and authority, it being understood, however, that
any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power.
Section 9.9.
Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board.
Section 9.10.
Seal. The Board may adopt a corporate seal, which shall be in such form as the Board determines. The seal may be used by causing
it or a facsimile thereof to be impressed, affixed or otherwise reproduced.
Section 9.11.
Books and Records. The books and records of the Corporation may be kept within or outside the State of Delaware at such place
or places as may from time to time be designated by the Board.
Section 9.12.
Resignation. Any director, committee member or officer may resign by giving notice thereof in writing or by electronic transmission
to the Chairman of the Board, any Chief Executive Officer, the President or the Secretary. The resignation shall take effect at the time
it is delivered unless the resignation specifies a later effective date or an effective date determined upon the happening of an event
or events. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 9.13.
Surety Bonds. Such officers, employees and agents of the Corporation (if any) as the Chairman of the Board, any Chief Executive
Officer, President or the Board may direct, from time to time, shall be bonded for the faithful performance of their duties and for the
restoration to the Corporation, in case of their death, resignation, retirement, disqualification or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in their possession or under their control belonging to the Corporation, in
such amounts and by such surety companies as the Chairman of the Board, any Chief Executive Officer, President or the Board may determine.
The premiums on such bonds shall be paid by the Corporation and the bonds so furnished shall be in the custody of the Secretary.
Section 9.14.
Securities of Other Corporations. Powers of attorney, proxies, waivers of notice of meeting, consents in writing and other
instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman
of the Board, any Chief Executive Officer, President, any Vice President or any officers authorized by the Board. Any such officer, may,
in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy
at any meeting of security holders of any corporation in which the Corporation may own securities, or to consent in writing, in the name
of the Corporation as such holder, to any action by such corporation, and at any such meeting or with respect to any such consent shall
possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed. The Board may from time to time confer like powers upon any other person or persons.
Section 9.15.
Amendments. The Board shall have the power to adopt, amend, alter or repeal the By Laws. The affirmative vote of a majority
of the Board shall be required to adopt, amend, alter or repeal the By Laws. The By Laws also may be adopted, amended, altered or repealed
by the stockholders; provided, however, that in addition to any vote of the holders of any class or series of capital stock of the Corporation
required by applicable law or the Certificate of Incorporation, the affirmative vote of the holders of at least a majority of the voting
power (except as otherwise provided in Section 8.7)of all outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend, alter
or repeal the By Laws.
Exhibit 4.1
NUMBER
U-
UNITS
SEE
REVERSE FOR CERTAIN DEFINITIONS
CUSIP
61244M 208
MONTEREY
CAPITAL ACQUISITION CORPORATION
UNITS
CONSISTING OF ONE SHARE OF CLASS A COMMON STOCK, ONE WARRANT AND ONE RIGHT TO RECEIVE ONE-TENTH OF ONE SHARE OF CLASS A COMMON
STOCK,
EACH
WARRANT ENTITLING THE HOLDER TO PURCHASE ONE SHARE OF CLASS A COMMON STOCK
THIS
CERTIFIES THAT
is the owner of Units.
Each
Unit (“Unit”) consists of one (1) share of Class A common stock, par value $0.0001 per share (“Common
Stock”), of Monterey Capital Acquisition Corporation, a Delaware corporation (the “Company”),
one redeemable warrant (the “Warrant”) and one right to receive one-tenth of one share of Common Stock (the
“Right”). Each Warrant entitles the holder to purchase one (1) share (subject to adjustment) of Common
Stock for $11.50 per share (subject to adjustment). Each Warrant will become exercisable on the later of (i) the Company’s
completion of a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination
with one or more businesses (each a “Business Combination”), or (ii) twelve (12) months from the closing
of the Company’s initial public offering, and will expire unless exercised before 5:00 p.m., New York City Time, on the date that
is five (5) years after the date on which the Company completes its initial Business Combination, or earlier upon redemption or
liquidation (the “Expiration Date”). Every ten Rights entitles the holder thereof to receive one share of Common
Stock upon the consummation of the Business Combination. The Common Stock, Warrants and Rights comprising the Units represented by this
certificate are not transferable separately prior to , 2022, unless EF Hutton, division of Benchmark Investments, LLC, elects to allow
separate trading earlier, subject to the Company’s filing of a Current Report on Form 8-K with the Securities and Exchange
Commission containing an audited balance sheet reflecting the Company’s receipt of the gross proceeds of the Company’s initial
public offering and issuing a press release announcing when separate trading will begin. The terms of the Warrants are governed by a
warrant agreement, dated as of , 2022, between the Company and Continental Stock Transfer & Trust Company, as the warrant agent
(the “Warrant Agreement”), and the terms of the Rights are governed by a rights agreement, dated as of , 2022,
between the Company and Continental Stock Transfer & Trust Company, as the rights agent (the “Rights Agreement”),
and are subject to the terms and provisions contained therein, all of which terms and provisions the holder of this certificate consents
to by acceptance hereof. Copies of each of the Warrant Agreement and Rights Agreement are on file at the office of the Warrant Agent
at 1 State Street, 30th Floor, New York, New York 10004, and are available to any Warrant holder or Rights holder on written
request and without cost.
This
certificate is not valid unless countersigned by the Transfer Agent and Registrar of the Company.
This
certificate shall be governed by and construed in accordance with the internal laws of the State of New York.
Witness
the facsimile signature of a duly authorized signatory of the Company.
| Authorized
Signatory | | Transfer
Agent |
Monterey
Capital Acquisition Corporation
The
Company will furnish without charge to each unitholder who so requests, a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series thereof of the Company and the qualifications, limitations,
or restrictions of such preferences and/or rights.
The
following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written
out in full according to applicable laws or regulations:
| TEN COM — as tenants
in common |
UNIF
GIFT —
MIN
ACT |
|
Custodian |
|
| TEN
ENT — as tenants by the entireties |
|
(Cust) |
|
(Minor) |
| |
|
|
|
|
| JT
TEN — as joint tenants with right of survivorship and not as tenants in common |
under
Uniform Gifts to Minors Act |
| |
|
(State) |
| |
|
|
|
|
|
|
Additional
abbreviations may also be used though not in the above list.
For
value received,
hereby sell, assign and transfer unto
(PLEASE
INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE)
(PLEASE
PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Units
represented by the within Certificate, and do hereby irrevocably constitute and appoint
Attorney
to transfer the said Units on the books of the within named Company with full power of substitution in the premises.
Notice:
The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular, without
alteration or enlargement or any change whatever.
Signature(s) Guaranteed:
THE
SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT
UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 (OR ANY SUCCESSOR RULE).
In
each case, as more fully described in the Company’s final prospectus dated , 2022, the holder(s) of this certificate shall
be entitled to receive a pro-rata portion of certain funds held in the trust account established in connection with its initial public
offering only in the event that (i) the Company redeems the shares of Class A common stock sold in the Company’s initial
public offering and liquidates because it does not consummate an initial business combination within the time period set forth in the
Company’s amended and restated certificate of incorporation, as the same may be amended from time to time (such date being referred
to herein as the “Last Date”), (ii) the Company redeems the shares of Class A common stock sold in its initial
public offering in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation
to modify the substance or timing of the Company’s obligation to redeem 100% of the Class A common stock if it does not consummate
an initial business combination by the Last Date, or (iii) if the holder(s) seek(s) to redeem for cash his, her or its
respective shares of Class A common stock in connection with a tender offer (or proxy solicitation, solely in the event the Company
seeks stockholder approval of the proposed initial business combination) setting forth the details of a proposed initial business combination.
In no other circumstances shall the holder(s) have any right or interest of any kind in or to the trust account.
Exhibit 4.2
NUMBER
C-
SHARES
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 61244M 109
MONTEREY CAPITAL ACQUISITION
CORPORATION
INCORPORATED UNDER
THE LAWS OF THE STATE OF DELAWARE
CLASS A COMMON
STOCK
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE
SHARES OF THE PAR VALUE OF $0.0001 EACH OF THE CLASS A COMMON STOCK OF
MONTEREY CAPITAL ACQUISITION CORPORATION
(THE “COMPANY”)
transferable on the books
of the Company in person or by duly authorized attorney upon surrender of this certificate properly endorsed.
The Company will be forced
to redeem all of its shares of Class A common stock if it is unable to complete a business combination within the time period set
forth in the Company’s amended and restated certificate of incorporation, as the same may be amended from time to time, all as more
fully described in the Company’s final prospectus dated , 2022.
This certificate is not
valid unless countersigned by the Transfer Agent and registered by the Registrar.
Witness the seal of the
Company and the facsimile signatures of its duly authorized officers.
| Chief Executive Officer |
[Corporate Seal]
Delaware |
Chief Financial Officer |
| |
|
|
MONTEREY CAPITAL ACQUISITION CORPORATION
The Company will furnish
without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof of the Company and the qualifications, limitations, or restrictions of such preferences
and/or rights. This certificate and the shares represented thereby are issued and shall be held subject to all the provisions of the Company’s
amended and restated certificate of incorporation and all amendments thereto and resolutions of the Board of Directors providing for the
issue of securities (copies of which may be obtained from the secretary of the Company), to all of which the holder of this certificate
by acceptance hereof assents. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed
as though they were written out in full according to applicable laws or regulations:
| TEN COM — |
as tenants in common |
UNIF GIFT — MIN ACT |
|
Custodian |
|
| TEN
ENT — |
as tenants by the entireties |
|
(Cust) |
|
(Minor) |
| |
|
|
|
|
|
| JT TEN — |
as joint tenants with right of survivorship and not as tenants in common |
under Uniform Gifts to Minors Act
(State) |
Additional abbreviations
may also be used though not in the above list.
For value received,
hereby sells, assigns and transfers unto
(PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING NUMBER(S) OF ASSIGNEE(S))
(PLEASE PRINT OR TYPEWRITE
NAME(S) AND ADDRESS(ES), INCLUDING ZIP CODE, OF ASSIGNEE(S))
shares of the capital
stock represented by the within Certificate, and hereby irrevocably constitutes and appoints
Attorney to transfer
the said stock on the books of the within named Company with full power of substitution in the premises.
Dated:
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.
Signature(s) Guaranteed:
By
THE SIGNATURE(S) MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 (OR ANY SUCCESSOR RULE).
In each case, as more
fully described in the Company’s final prospectus dated , 2022, the holder(s) of this certificate shall be entitled to receive
a pro-rata portion of certain funds held in the trust account established in connection with its initial public offering only in the event
that (i) the Company redeems the shares of Class A common stock sold in the Company’s initial public offering and liquidates
because it does not consummate an initial business combination within the time period set forth in the Corporation’s amended and
restated certificate of incorporation, as the same may be amended from time to time (such date being referred to herein as the “Last
Date”), (ii) the Company redeems the shares of Class A common stock sold in its initial public offering in connection
with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to modify the substance or timing
of the Company’s obligation to redeem 100% of the Class A common stock if it does not consummate an initial business combination
by the Last Date, or (iii) if the holder(s) seek(s) to redeem for cash his, her or its respective shares of Class A
common stock in connection with a tender offer (or proxy solicitation, solely in the event the Company seeks stockholder approval of the
proposed initial business combination) setting forth the details of a proposed initial business combination. In no other circumstances
shall the holder(s) have any right or interest of any kind in or to the trust account.
Exhibit 4.3
[Form of Warrant Certificate]
[FACE]
Number
Warrants
THIS WARRANT SHALL BE VOID IF NOT EXERCISED
PRIOR TO
THE EXPIRATION OF THE EXERCISE PERIOD PROVIDED
FOR
IN THE WARRANT AGREEMENT DESCRIBED BELOW
MONTEREY CAPITAL ACQUISITION CORPORATION
Incorporated
Under the Laws of the State of Delaware
CUSIP
61244M 117
Warrant Certificate
This
Warrant Certificate certifies that [_________], or registered assigns, is the registered holder of warrant(s) evidenced
hereby (the “Warrants” and each, a “Warrant”) to purchase shares of Class A common stock, $0.0001
par value per share (“Common Stock”), of Monterey Capital Acquisition Corporation, a Delaware corporation (the
“Company”). Each Warrant entitles the holder, upon exercise during the period set forth in the Warrant Agreement
referred to below, to receive from the Company that number of fully paid and non-assessable shares of Common Stock as set forth below,
at the exercise price (the “Exercise Price”) as determined pursuant to the Warrant Agreement, payable in lawful
money (or through “cashless exercise” as provided for in the Warrant Agreement) of the United States of America
upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent referred to
below, subject to the conditions set forth herein and in the Warrant Agreement. Defined terms used in this Warrant Certificate but not
defined herein shall have the meanings given to them in the Warrant Agreement.
Each Warrant is initially
exercisable for one fully paid and non-assessable share of Common Stock. No fractional shares will be issued upon exercise of any Warrant.
If, upon the exercise of Warrants, a holder would be entitled to receive a fractional interest in a share of Common Stock, the Company
will, upon exercise, round down to the nearest whole number the number of shares of Common Stock to be issued to the Warrant holder. The
number of shares of Common Stock issuable upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events
set forth in the Warrant Agreement.
The initial Exercise Price
per share of Common Stock for any Warrant is equal to $11.50 per share. The Exercise Price is subject to adjustment upon the occurrence
of certain events set forth in the Warrant Agreement.
Subject to the conditions
set forth in the Warrant Agreement, the Warrants may be exercised only during the Exercise Period and to the extent not exercised by the
end of such Exercise Period, such Warrants shall become void.
Reference is hereby made
to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
This Warrant Certificate
shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate
shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to conflicts of laws
principles thereof.
| |
Monterey Capital Acquisition Corporation |
| |
|
| |
By: |
|
| |
Name: |
Bala Padmakumar |
| |
Title: |
Chief Executive Officer |
| |
|
| |
|
| |
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Warrant Agent |
| |
|
| |
By: |
|
| |
Name: |
|
| |
Title: |
|
[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by
this Warrant Certificate are part of a duly authorized issue of Warrants entitling the holder on exercise to receive shares of Common
Stock and are issued or to be issued pursuant to a Warrant Agreement dated as of ______________, 2022 (the “Warrant Agreement”),
duly executed and delivered by the Company to Continental Stock Transfer & Trust Company, a New York corporation, as warrant
agent (the “Warrant Agent”), which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities
thereunder of the Warrant Agent, the Company and the holders (the words “holders” or “holder”
meaning the Registered Holders or Registered Holder, respectively) of the Warrants. A copy of the Warrant Agreement may be obtained by
the holder hereof upon written request to the Company. Defined terms used in this Warrant Certificate but not defined herein shall have
the meanings given to them in the Warrant Agreement.
Warrants may be exercised
at any time during the Exercise Period set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate
may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed
and executed, together with payment of the Exercise Price as specified in the Warrant Agreement (or through “cashless exercise”
as provided for in the Warrant Agreement) at the principal corporate trust office of the Warrant Agent. In the event that upon any exercise
of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there
shall be issued to the holder hereof or his, her or its assignee, a new Warrant Certificate evidencing the number of Warrants not exercised.
Notwithstanding anything
else in this Warrant Certificate or the Warrant Agreement, no Warrant may be exercised unless at the time of exercise (i) a registration
statement covering the shares of Common Stock to be issued upon exercise is effective under the Securities Act and (ii) a prospectus
thereunder relating to the shares of Common Stock is current, except through “cashless exercise” as provided for in the Warrant
Agreement.
The Warrant Agreement provides
that upon the occurrence of certain events the number of shares of Common Stock issuable upon exercise of the Warrants set forth on the
face hereof may, subject to certain conditions, be adjusted. If, upon exercise of a Warrant, the holder thereof would be entitled to receive
a fractional interest in a share of Common Stock, the Company shall, upon exercise, round down to the nearest whole number of shares of
Common Stock to be issued to the holder of the Warrant.
Warrant Certificates, when
surrendered at the principal corporate trust office of the Warrant Agent by the Registered Holder thereof in person or by legal representative
or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement,
but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate
a like number of Warrants.
Upon due presentation for
registration of transfer of this Warrant Certificate at the office of the Warrant Agent, a new Warrant Certificate or Warrant Certificates
of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
The Company and the Warrant
Agent may deem and treat the Registered Holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the
contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company.
Election to Purchase
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably
elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and herewith tenders payment
for such shares of Common Stock to the order of Monterey Capital Acquisition Corporation (the “Company”) in the amount
of $[_________] in accordance with the terms hereof. The undersigned requests that a certificate for such shares of Common Stock be registered
in the name of [_________], whose address and that such shares of Common Stock be delivered to [_________] whose address [_________].
If said number of shares of Common Stock is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests
that a new Warrant Certificate representing the remaining balance of such shares of Common Stock be registered in the name of [_________],
whose address is [_________] and that such Warrant Certificate be delivered to [_________], whose address is [_________].
In the event that the Warrant
has been called for redemption by the Company pursuant to Section 6 of the Warrant Agreement and the Company has required
cashless exercise pursuant to Section 6.3 of the Warrant Agreement, the number of shares of Common Stock that this Warrant
is exercisable for shall be determined in accordance with subsection 3.3.1(b) and Section 6.3 of the Warrant Agreement.
In the event that the Warrant
is a Private Placement Warrant, Working Capital Warrant or Post-IPO Warrant that is to be exercised on a “cashless” basis
pursuant to subsection 3.3.1(c) of the Warrant Agreement, the number of shares of Common Stock that this Warrant is exercisable
for shall be determined in accordance with subsection 3.3.1(c) of the Warrant Agreement.
In the event that the Warrant
is to be exercised on a “cashless” basis pursuant to Section 7.4 of the Warrant Agreement, the number of shares
of Common Stock that this Warrant is exercisable for shall be determined in accordance with Section 7.4 of the Warrant Agreement.
In the event that the Warrant
may be exercised, to the extent allowed by the Warrant Agreement, through cashless exercise (i) the number of shares of Common Stock
that this Warrant is exercisable for would be determined in accordance with the relevant section of the Warrant Agreement which allows
for such cashless exercise and (ii) the holder hereof shall complete the following: The undersigned hereby irrevocably elects to
exercise the right, represented by this Warrant Certificate, through the cashless exercise provisions of the Warrant Agreement, to receive
shares of Common Stock. If said number of shares of Common Stock is less than all of the shares of Common Stock purchasable hereunder
(after giving effect to the cashless exercise), the undersigned requests that a new Warrant Certificate representing the remaining balance
of such shares of Common Stock be registered in the name of [_________], whose address is [_________] and that such Warrant Certificate
be delivered to [_________], whose address is [_________].
[Signature Page Follows]
| Date: ________________, 20__ |
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Signature Guaranteed:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 (OR ANY SUCCESSOR RULE)).
Exhibit 4.4
MONTEREY CAPITAL ACQUISITION CORPORATION.
INCORPORATED UNDER THE LAWS OF THE STATE OF
DELAWARE
RIGHT
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 61244M 125
THIS
CERTIFIES THAT, for value received [
] is the registered holder of a right or rights (the “Right”) to automatically receive
one-tenth of one share of Class A common stock, $0.0001 par value (“Class A Common Stock”), of
Monterey Capital Acquisition Corporation (the “Company”) for each Right evidenced by this Rights
Certificate on the Company’s completion of an initial business combination (as defined in the prospectus relating to the
Company’s initial public offering (“Prospectus”)) upon surrender of this Right Certificate pursuant
to the Rights Agreement between the Company and Continental Stock Transfer & Trust Company, as Rights Agent. In no event
will the Company be required to net cash settle any Right.
Upon liquidation of the Company
in the event an initial business combination is not consummated during the required period as identified in the Company’s Amended
and Restated Certificate of Incorporation, the Right shall expire and be worthless. As more fully described in the Prospectus, the holder
of a Right shall have no right or interest of any kind in the Company’s trust account (as defined in the Prospectus) established
in connection with the Company’s initial public offering.
Upon due presentment for registration
of transfer of the Right Certificate at the office or agency of the Rights Agent, a new Right Certificate or Right Certificates of like
tenor and evidencing in the aggregate a like number of Rights shall be issued to the transferee in exchange for this Right Certificate,
without charge except for any applicable tax or other governmental charge. The Company shall not issue fractional shares of Class A
Common Stock upon exchange of Rights. The Company reserves the right to deal with any fractional entitlement at the relevant time in any
manner (as provided in the Rights Agreement).
The Company and the Right
Agent may deem and treat the registered holder as the absolute owner of this Right Certificate (notwithstanding any notation of ownership
or other writing hereon made by anyone), for the purpose of any conversion hereof, of any distribution to the registered holder, and for
all other purposes, and neither the Company nor the Right Agent shall be affected by any notice to the contrary.
This Right does not entitle
the registered holder to any of the rights of a stockholder of the Company.
Dated:
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| CHAIRMAN |
| CHIEF FINANCIAL OFFICER |
The following abbreviations, when used in the inscription
on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
| TEN
COM |
- as tenants in common | UNIF GIFT MIN ACT - |
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Custodian |
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- as tenants by the entireties | |
under
Uniform Gifts to Minors Act |
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- as joint tenants with right of
survivorship
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Additional Abbreviations may also be used though
not in the above list.
Monterey Capital Acquisition Corporation
The Company will furnish without
charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special
rights of each class of shares or series thereof of the Company and the qualifications, limitations, or restrictions of such preferences
and/or rights. This certificate and the rights represented thereby are issued and shall be held subject to all the provisions of the Amended
and Restated Certificate of Incorporation and all amendments thereto and resolutions of the Board of Directors providing for the issue
of Class A Common Stock (copies of which may be obtained from the secretary of the Company), to all of which the holder of this certificate
by acceptance hereof assents.
For value received, ___________________________
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING
ZIP CODE, OF ASSIGNEE)
Rights represented by the within Certificate, and do hereby irrevocably
constitute and appoint
Attorney to transfer said rights on the books of the within named
Company will full power of substitution in the premises.
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| Notice: | The signature to this assignment must correspond with the name as written upon the face of the certificate
in every particular, without alteration or enlargement or any change whatever. |
Signature(s) Guaranteed:
THE SIGNATURE(S) SHOULD
BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).
The holder of this certificate
shall have no right or interest of any kind in or to the funds held in the Company’s trust account (as defined in the Prospectus).
Exhibit 4.5
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this
“Agreement”), dated as of [ ], 2022, is by and between Monterey Capital Acquisition Corporation, a Delaware
corporation (the “Company”), and Continental Stock Transfer & Trust Company, a New York corporation,
as warrant agent (the “Warrant Agent”, also referred to herein, it its capacity as the Company’s transfer
agent, as the “Transfer Agent”). The Company, the Warrant Agent and the Transfer Agent shall individually be
referred to as a “Party” and collectively, as the “Parties”.
WHEREAS, the Company is engaged
in an initial public offering (the “Offering”) of units of the Company’s equity securities (the “Units”),
each such Unit comprised of one share of Class A common stock of the Company, par value $0.0001 per share (“Common Stock”),
one redeemable Public Warrant (as defined below) and one right to receive one-tenth of one share of Common Stock upon the consummation
of a Business Combination (as defined below) (the “Right”) and, in connection therewith, has determined to issue
and deliver up to 10,000,000 warrants (or up to 11,500,000 warrants if the Over-Allotment Option (as defined below) is exercised in full)
to public investors in the Offering (the “Public Warrants”); and
WHEREAS, the Company will
issue 150,000 shares of Class A Common Stock (172,500 if the underwriters exercise their over-allotment
option in full) to the representative or its designee, for nominal consideration (“Representative Shares”);
and
WHEREAS, on [ ], 2022 the
Company entered into that certain Private Placement Warrants Purchase Agreement with Monterrey Acquisition Sponsor, LLC, a Delaware limited
liability company (the “Sponsor”), pursuant to which the Sponsor agreed to purchase an aggregate of 3,200,000
warrants (or 3,500,000 warrants if the over-allotment option is exercised in full) simultaneously with the closing of the Offering bearing
the legend set forth in Exhibit B hereto (the “Private Placement Warrants”) at a purchase price
of $1.00 per Private Placement Warrant; and
WHEREAS, in order to finance
the Company’s transaction costs in connection with an intended initial Business Combination (as defined below), the Sponsor or an
affiliate of the Sponsor or certain of the Company’s executive officers and directors may, but are not obligated to, loan to the
Company funds as the Company may require, of which up to $1,500,000 of such loans may be convertible into up to an additional 1,500,000
warrants at a price of $1.00 per warrant (the “Working Capital Warrants”); and
WHEREAS, following consummation
of the Offering, the Company may issue additional warrants (“Post IPO Warrants”; together with the Private Placement
Warrants, the Working Capital Warrants and the Public Warrants, the “Warrants”) in connection with, or following
the consummation by the Company of, a Business Combination (defined below); and
WHEREAS, the Company has filed
with the Securities and Exchange Commission (the “Commission”) a registration statements on Form S-1, File
No. 333-[ ] (the “Registration Statement”) and prospectus (the “Prospectus”),
for the registration, under the Securities Act of 1933, as amended (the “Securities Act”), of the Units, the
Public Warrants, the Rights, the Representative’s Shares and the Common Stock included in the Units; and
WHEREAS, each Warrant entitles
the holder thereof to purchase one share of Common Stock, for $11.50 per share, subject to adjustment as described herein; and
WHEREAS, the Company desires
the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration,
transfer, exchange, redemption and exercise of the Warrants; and
WHEREAS, the Company desires
to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights,
limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and
WHEREAS, all acts and things
have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or
on behalf of the Warrant Agent (if a physical certificate is issued), as provided herein, the valid, binding and legal obligations of
the Company, and to authorize the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration
of the mutual agreements herein contained, the parties hereto agree as follows:
1. Appointment
of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant
Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement.
2. Warrants.
2.1 Form of
Warrant. Each Warrant shall be issued in registered form only, and, if a physical certificate is issued, shall be in substantially
the form of Exhibit A hereto, the provisions of which are incorporated herein and shall be signed by, or bear the facsimile
signature of, the Chairman of the Board, President, Chief Executive Officer, Chief Financial Officer, Secretary or other principal officer
of the Company. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity
in which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased
to be such at the date of issuance.
2.2 Effect
of Countersignature. If a physical certificate is issued, unless and until countersigned by the Warrant Agent pursuant to this Agreement,
a Warrant certificate shall be invalid and of no effect and may not be exercised by the holder thereof.
2.3 Registration.
2.3.1 Warrant
Register. The Warrant Agent shall maintain books (the “Warrant Register”) for the registration of original
issuance and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants in book entry from, the Warrant
Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance
with instructions delivered to the Warrant Agent by the Company. All of the Public Warrants shall initially be represented by one or
more book-entry certificates (each, a “Book-Entry Warrant Certificate”) deposited with The Depository Trust
Company (the “Depositary”) and registered in the name of Cede & Co., a nominee of the Depositary.
Ownership of beneficial interests in the Public Warrants shall be shown on, and the transfer of such ownership shall be effected through,
records maintained by (i) the Depositary or its nominee for each Book-Entry Warrant Certificate, or (ii) institutions that
have accounts with the Depositary (each such institution, with respect to a Warrant in its account, a “Participant”).
If the Depositary subsequently
ceases to make its book-entry settlement system available for the Public Warrants, the Company may instruct the Warrant Agent regarding
making other arrangements for book-entry settlement. In the event that the Public Warrants are not eligible for, or it is no longer necessary
to have the Public Warrants available in, book-entry form, the Warrant Agent shall provide written instructions to the Depositary to deliver
to the Warrant Agent for cancellation each Book-Entry Warrant Certificate, and the Company shall instruct the Warrant Agent to deliver
to the Depositary definitive certificates in physical form evidencing such Warrants (“Definitive Warrant Certificate”).
Such Definitive Warrant Certificate shall be in the form annexed hereto as Exhibit A, with appropriate insertions, modifications
and omissions, as provided above.
2.3.2 Registered
Holder. Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat
the person in whose name such Warrant is registered in the Warrant Register (the “Registered Holder”) as the
absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on
a Definitive Warrant Certificate made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof,
and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.
2.4 Detachability
of Warrants. The Common Stock and Public Warrants comprising the Units shall begin separate trading on the 52nd day following
the date of the Prospectus or, if such 52nd day is not on a day, other than a Saturday, Sunday or federal holiday, on which
banks in New York City are generally open for normal business (a “Business Day”), then on the immediately succeeding
Business Day following such date, or earlier (the “Detachment Date”) with the consent of EF Hutton, division
of Benchmark Investments, LLC, as representative of the several underwriters (the “Representative”), but in
no event shall the Common Stock and the Public Warrants comprising the Units be separately traded until (A) the Company has filed
a current report on Form 8-K with the Commission containing an audited balance sheet reflecting the receipt by the Company of the
gross proceeds of the Offering, including the proceeds received by the Company from the exercise by the underwriters of their right to
purchase additional Units in the Offering (the “Over-Allotment Option”), if the Over-Allotment Option is exercised
prior to the filing of the current report on Form 8-K, and (B) the Company issues a press release and files with the Commission
a current report on Form 8-K announcing when such separate trading shall begin.
2.5 No
Fractional Warrants Other Than as Part of Units. The Company shall not issue fractional Warrants other than as part of the Units,
each of which is comprised of one share of Common Stock and one-half of one Public Warrant. If, upon the detachment of Public Warrants
from Units or otherwise, a holder of Warrants would be entitled to receive a fractional Warrant, the Company shall round down to the nearest
whole number the number of Warrants to be issued to such holder.
2.6 Private
Placement Warrants and Working Capital Warrants. The Private Placement Warrants and the Working Capital Warrants shall be identical
to the Public Warrants, except that so long as they are held by the Sponsor or any Permitted Transferees (as defined below), as applicable,
the Private Placement Warrants and the Working Capital Warrants: (i) may be exercised for cash or on a cashless basis, (ii) may
not be transferred, assigned or sold until after the completion by the Company of an initial Business Combination (as defined below),
and (iii) shall not be redeemable by the Company; provided, however, during such period the Private Placement Warrants and the Working
Capital Warrants and any shares of Common Stock held by the Sponsor or any of its Permitted Transferees, as applicable, and issued upon
exercise of the Private Placement Warrants and the Working Capital Warrants may be transferred, assigned or sold by the holders thereof:
(a) to
the Company’s officers or directors, any affiliate or family member of any of the Company’s officers or directors, any affiliate
of the Sponsor or to any member(s) of the Sponsor or any of their affiliates, officers, directors and direct and indirect equityholders;
(b) in
the case of an individual, by gift to a member such individual’s immediate family or to a trust, the beneficiary of which is a member
of such individual’s immediate family, an affiliate of such individual or to a charitable organization;
(c) in
the case of an individual, by virtue of the laws of descent and distribution upon death of such person;
(d) in
the case of an individual, pursuant to a qualified domestic relations order;
(e) by
private sales or transfers made in connection with the consummation of an initial Business Combination at prices no greater than the
price at which the Warrants were originally purchased;
(f) in
the event of the Company’s liquidation prior to consummation of the Company’s Business Combination; or
(g) by
virtue of the laws of the State of Delaware or the Sponsor’s limited liability company agreement upon dissolution of the Sponsor;
(h) in
the event of the Company’s liquidation, merger, capital stock exchange, reorganization or other similar transaction which results
in all of its stockholders having the right to exchange their shares of common stock for cash, securities or other property subsequent
to the completion of the Company’s initial Business Combination (as defined below);
provided,
however, that, in each case these permitted transferees (the “Permitted Transferees”) must enter into
a written agreement with the Company agreeing to be bound by the transfer restrictions in this Agreement.
2.7 Working
Capital Warrants. The Working Capital Warrants shall be identical to the Private Placement Warrants.
2.8 Post-IPO
Warrants. The Post-IPO Warrants, when and if issued, shall have the same terms and be in the same form as the Public Warrants.
3. Terms
and Exercise of Warrants.
3.1 Warrant
Price. Each Warrant shall entitle the Registered Holder thereof, subject to the provisions of such Warrant and of this Agreement,
to purchase from the Company the number of shares of Common Stock stated therein, at the price of $11.50 per share, subject to the adjustments
provided in Section 4 hereof and in the last sentence of this Section 3.1. The term “Warrant Price”
as used in this Agreement shall mean the price per share at which shares of Common Stock may be purchased at the time a Warrant is exercised.
The Company in its sole discretion may lower the Warrant Price at any time prior to the Expiration Date (as defined below) for a period
of not less than twenty (20) Business Days, provided, that the Company shall provide at least twenty (20) days prior written notice of
such reduction to Registered Holders of the Warrants and, provided further that any such reduction shall be identical among all of the
Warrants.
3.2 Duration
of Warrants. A Warrant may be exercised only during the period (the “Exercise Period”) commencing on the
later of :(i) the date that the Company completes a merger, capital stock exchange, asset acquisition, stock purchase, reorganization
or similar business combination, involving the Company and one or more businesses (a “Business Combination”),
or (ii) the date that is twelve (12) months from the date of the closing of the Offering, and terminating at 5:00 p.m., New York
City time on the earlier to occur of: (x) the date that is five (5) years after the date on which the Company completes its
initial Business Combination, (y) the liquidation of the Company if the Company fails to complete a Business Combination, or (z) 5:00
p.m., New York City time on the Redemption Date (as defined below) as provided in Section 6.2 hereof (the “Expiration
Date”); provided, however, that the exercise of any Warrant shall be subject to the satisfaction of any applicable
conditions, as set forth in subsection 3.3.2 below with respect to an effective registration statement or a valid exemption therefrom
being available. Except with respect to the right to receive the Redemption Price (as defined below) in the event of a redemption (as
set forth in Section 6 hereof), each outstanding Warrant not exercised on or before the Expiration Date shall become void,
and all rights thereunder and all rights in respect thereof under this Agreement shall cease at 5:00 p.m. New York City time on the
Expiration Date. The Company in its sole discretion may extend the duration of the Warrants by delaying the Expiration Date; provided,
that the Company shall provide at least twenty (20) days prior written notice of any such extension to Registered Holders of the Warrants
and, provided further that any such extension shall be identical in duration among all the Warrants.
3.3 Exercise
of Warrants.
3.3.1 Payment.
Subject to the provisions of the Warrant and this Agreement, a Warrant may be exercised by the Registered Holder thereof by delivering
to the Warrant Agent at its corporate trust department (i) the Definitive Warrant Certificate evidencing the Warrants to be exercised,
or, in the case of a Book-Entry Warrant Certificate, the Warrants to be exercised (the “Book-Entry Warrants”)
on the records of the Depositary to an account of the Warrant Agent at the Depositary designated for such purposes in writing by the Warrant
Agent to the Depositary from time to time, (ii) an election to purchase (“Election to Purchase”) shares
of Common Stock pursuant to the exercise of a Warrant, properly completed and executed by the Registered Holder on the reverse of the
Definitive Warrant Certificate or, in the case of a Book-Entry Warrant Certificate, properly delivered by the Participant in accordance
with the Depositary’s procedures, and (iii) payment in full of the Warrant Price for each full share of Common Stock as to
which the Warrant is exercised and any and all applicable taxes due in connection with the exercise of the Warrant, the exchange of the
Warrant for the shares of Common Stock and the issuance of such shares of Common Stock, as follows:
(a) by
certified check payable to the order of the Warrant Agent or by wire transfer;
(b) in
the event of a redemption pursuant to Section 6 hereof in which the Company’s board of directors (the “Board”)
has elected to require all holders of the Warrants to exercise such Warrants on a “cashless basis,” by surrendering the Warrants
for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common
Stock underlying the Warrants, multiplied by the difference between the Warrant Price and the “Fair Market Value”, as defined
in this subsection 3.3.1(b) by (y) the Fair Market Value. Solely for purposes of this subsection 3.3.1(b) and
Section 6.3, the “Fair Market Value” shall mean the average last reported sale price of the Common Stock for the
ten (10) trading days ending on the third day prior to the date on which the notice of redemption is sent to the holders of the Warrants,
pursuant to Section 6 hereof;
(c) Intentionally
Omitted; or
(d) on
a cashless basis, as provided in Section 7.4 hereof.
3.3.2 Issuance
of Shares of Common Stock on Exercise. As soon as practicable after the exercise of any Warrant and the clearance of the funds in
payment of the Warrant Price (if payment is pursuant to subsection 3.3.1(a)), the Company shall issue to the Registered Holder
of such Warrant a book-entry position or certificate, as applicable, for the number of full shares of Common Stock to which he, she or
it is entitled, registered in such name or names as may be directed by him, her or it, and if such Warrant shall not have been exercised
in full, a new book-entry position or countersigned Warrant, as applicable, for the number of shares of Common Stock as to which such
Warrant shall not have been exercised. If fewer than all the Warrants evidenced by a Book-Entry Warrant Certificate are exercised, a
notation shall be made to the records maintained by the Depositary, its nominee for each Book-Entry Warrant Certificate, or a Participant,
as appropriate, evidencing the balance of the Warrants remaining after such exercise. Notwithstanding the foregoing, the Company shall
not be obligated to deliver any shares of Common Stock pursuant to the exercise of a Warrant and shall have no obligation to settle such
Warrant exercise unless a registration statement under the Securities Act with respect to the shares of Common Stock underlying the Warrants
is then effective and a prospectus relating thereto is current, subject to the Company’s satisfying its obligations under Section 7.4
or a valid exemption from registration is available. No Warrant shall be exercisable and the Company shall not be obligated to issue
shares of Common Stock upon exercise of a Warrant unless the Common Stock issuable upon such Warrant exercise has been registered, qualified
or deemed to be exempt from registration or qualification under the securities laws of the state of residence of the Registered Holder
of the Warrants, except pursuant to Section 7.4. In the event that the conditions in the two immediately preceding sentences
are not satisfied with respect to a Warrant, the holder of such Warrant shall not be entitled to exercise such Warrant and such Warrant
may have no value and expire worthless, in which case the purchaser of a Unit containing such Warrants shall have paid the full purchase
price for the Unit solely for the shares of Common Stock underlying such Unit. In no event will the Company be required to net cash settle
the Warrant exercise. The Company may require holders of Warrants to settle the Warrant on a “cashless basis” pursuant to
subsection 3.3.1(b) and Section 7.4. If, by reason of any exercise of Warrants on a “cashless basis”,
the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share of Common
Stock, the Company shall round down to the nearest whole number, the number of shares of Common Stock to be issued to such holder.
3.3.3 Valid
Issuance. All shares of Common Stock issued upon the proper exercise of a Warrant in conformity with this Agreement shall be validly
issued, fully paid and non-assessable.
3.3.4 Date
of Issuance. Each person in whose name any book-entry position or certificate, as applicable, for shares of Common Stock is issued
shall for all purposes be deemed to have become the holder of record of such shares of Common Stock on the date on which the Warrant,
or book-entry position representing such Warrant, was surrendered and payment of the Warrant Price was made, irrespective of the date
of delivery of such certificate in the case of a certificated Warrant, except that, if the date of such surrender and payment is a date
when the share transfer books of the Company or book-entry system of the Warrant Agent are closed, such person shall be deemed to have
become the holder of such shares of Common Stock at the close of business on the next succeeding date on which the share transfer books
or book-entry system are open.
3.3.5 Maximum
Percentage. A holder of a Warrant may notify the Company in writing in the event it elects to be subject to the provisions contained
in this subsection 3.3.5; however, no holder of a Warrant shall be subject to this subsection 3.3.5 unless he, she
or it makes such election. If the election is made by a holder, the Warrant Agent shall not effect the exercise of the holder’s
Warrant, and such holder shall not have the right to exercise such Warrant, to the extent that after giving effect to such exercise,
such person (together with such person’s affiliates), to the Warrant Agent’s actual knowledge, would beneficially own in
excess of 4.9% or 9.8% (or such other amount as a holder may specify)(the “Maximum Percentage”) of the shares
of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate number
of shares of Common Stock beneficially owned by such person and its affiliates shall include the number of shares of Common Stock issuable
upon exercise of the Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common
Stock that would be issuable upon (x) exercise of the remaining, unexercised portion of the Warrant beneficially owned by such person
and its affiliates and (y) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company
beneficially owned by such person and its affiliates (including, without limitation, any convertible notes or convertible preferred stock
or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For purposes of the Warrant, in determining
the number of outstanding shares of Common Stock, the holder may rely on the number of outstanding shares of Common Stock as reflected
in (1) the Company’s most recent annual report on Form 10-K, quarterly report on Form 10-Q, current report on Form 8-K
or other public filing with the Commission as the case may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any
time, upon the written request of the holder of the Warrant, the Company shall, within two (2) Business Days, confirm orally and
in writing to such holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of equity securities of the Company by the holder and its
affiliates since the date as of which such number of outstanding shares of Common Stock was reported. By written notice to the Company,
the holder of a Warrant may from time to time increase or decrease the Maximum Percentage applicable to such holder to any other percentage
specified in such notice; provided, however, that any such increase shall not be effective until the sixty-first (61st)
day after such notice is delivered to the Company.
4. Adjustments.
4.1 Stock
Dividends.
4.1.1 Split-Ups.
If after the date hereof, and subject to the provisions of Section 4.6 below, the number of outstanding shares of Common
Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock or other similar
event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on
exercise of each Warrant shall be increased in proportion to such increase in the outstanding shares of Common Stock. A rights offering
to holders of the Common Stock entitling holders to purchase shares of Common Stock at a price less than the “Fair Market Value”
(as defined below) shall be deemed a stock dividend of a number of shares of Common Stock equal to the product of (i) the number
of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering
that are convertible into or exercisable for the Common Stock) and (ii) one (1) minus the quotient of (x) the price per
share of Common Stock paid in such rights offering divided by (y) the Fair Market Value. For purposes of this subsection 4.1.1,
(i) if the rights offering is for securities convertible into or exercisable for Common Stock, in determining the price payable
for Common Stock, there shall be taken into account any consideration received for such rights, as well as any additional amount payable
upon exercise or conversion and (ii) “Fair Market Value” means the volume weighted average price of the Common Stock
as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of Common
Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
4.1.2 Extraordinary
Dividends. If the Company, at any time while the Warrants are outstanding and unexpired, shall pay a dividend or make a distribution
in cash, securities or other assets to the holders of the Common Stock on account of such shares of Common Stock (or other shares of the
Company’s capital stock into which the Warrants are convertible), other than (a) as described in subsection 4.1.1 above,
(b) Ordinary Cash Dividends (as defined below), (c) to satisfy the redemption rights of the holders of the Common Stock in connection
with a proposed initial Business Combination, (d) as a result of the repurchase of shares of Common Stock by the Company if a proposed
Business Combination is presented to the stockholders of the Company for approval, (e) to satisfy the redemption rights of the holders
of Common Stock in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation to
modify the substance or timing of the Company’s obligation to redeem 100% of the public shares of Common Stock if the Company does
not complete the Business Combination within the period set forth in the Company’s amended and restated certificate of incorporation
or (f) in connection with the redemption of public shares of Common Stock upon the failure of the Company to complete its initial
Business Combination and any subsequent distribution of its assets upon its liquidation (any such non-excluded event being referred to
herein as an “Extraordinary Dividend”), then the Warrant Price shall be decreased, effective immediately after
the effective date of such Extraordinary Dividend, by the amount of cash and/or the fair market value (as determined by the Board, in
good faith) of any securities or other assets paid on each share of Common Stock in respect of such Extraordinary Dividend. For purposes
of this subsection 4.1.2, “Ordinary Cash Dividends” means any cash dividend or cash distribution which,
when combined on a per share basis, with the per share amounts of all other cash dividends and cash distributions paid on the Common Stock
during the 365-day period ending on the date of declaration of such dividend or distribution (as adjusted to appropriately reflect any
of the events referred to in other subsections of this Section 4 and excluding cash dividends or cash distributions that resulted
in an adjustment to the Warrant Price or to the number of shares of Common Stock issuable on exercise of each Warrant) does not exceed
$0.50 (being 5% of the offering price of the Units in the Offering).
4.2 Aggregation
of Shares. If after the date hereof, and subject to the provisions of Section 4.6 hereof, the number of outstanding shares
of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or other
similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event,
the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to such decrease in outstanding
shares of Common Stock.
4.3 Adjustments
in Exercise Price.
4.3.1 Whenever
the number of shares of Common Stock purchasable upon the exercise of the Warrants is adjusted, as provided in subsection 4.1.1
or Section 4.2 above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price immediately
prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon
the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares
of Common Stock so purchasable immediately thereafter.
4.3.2 If
(i) the Company issues additional shares of Common Stock or securities convertible into or exercisable or exchangeable for shares
of Common Stock for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or
effective issue price of less than $9.20 per share of Common Stock, with such issue price or effective issue price to be determined in
good faith by the Board (and in the case of any such issuance to the Sponsor or its affiliates, without taking into account any founder
shares held by such holder or affiliates, as applicable, prior to such issuance) (the “New Issuance Price”),
(ii) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon,
available for the funding of the initial Business Combination on the date of the consummation thereof (net of redemptions) and (iii) the
volume weighted average trading price of the Common Stock during the 20 trading day period starting on the trading day prior to the day
on which the Company consummates the initial Business Combination (such price, the “Market Value”) is below
$9.20 per share, the Warrant Price shall be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and
the New Issuance Price and the Redemption Trigger Price (as defined below) shall be adjusted to equal to 180% of the higher of the Market
Value and the Newly Issued Price.
4.4 Replacement
of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the issued and outstanding shares
of Common Stock (other than a change under subsections 4.1.1 or 4.1.2 or Section 4.2 hereof or that solely affects
the par value of such shares of Common Stock), or in the case of any merger or consolidation of the Company with or into another entity
or conversion of the Company as another entity (other than a consolidation or merger in which the Company is the continuing corporation
and is not a subsidiary of any entity whose shareholders did not own all or substantially all of the Common Stock in substantially the
same proportions immediately prior to such transaction and that does not result in any reclassification or reorganization of the outstanding
shares of Common Stock), or in the case of any sale or conveyance to another entity of the assets or other property of the Company as
an entirety or substantially as an entirety in connection with which the Company is liquidated or dissolved, the holders of the Warrants
shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and
in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights
represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Warrants would
have received if such holder had exercised his, her or its Warrant(s) immediately prior to such event. If any reclassification or
reorganization also results in a change in shares of Common Stock covered by Section 4.1 or 4.2, then such adjustment
shall be made pursuant to Section 4.1, Section 4.2, Section 4.3, and this Section 4.4.
The provisions of this Section 4.4 shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations,
sales or other transfers. In no event will the Warrant Price be reduced to less than the par value per share issuable upon exercise of
the Warrant.
4.5 Notices
of Changes in Warrant. Upon every adjustment of the Warrant Price or the number of shares of Common Stock issuable upon exercise of
a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from
such adjustment and the increase or decrease, if any, in the number of shares of Common Stock purchasable at such price upon the exercise
of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the
occurrence of any event specified in Sections 4.1, 4.2, 4.3 or 4.4, the Company shall give written notice
of the occurrence of such event to each holder of a Warrant, at the last address set forth for such holder in the Warrant Register, of
the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality
or validity of such event.
4.6 No
Fractional Shares. Notwithstanding any provision contained in this Agreement to the contrary, the Company shall not issue fractional
shares of Common Stock upon the exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the
holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall,
upon such exercise, round down to the nearest whole number the number of shares of Common Stock to be issued to such holder.
4.7 Form of
Warrant. The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued
after such adjustment may state the same Warrant Price and the same number of shares of Common Stock as is stated in the Warrants initially
issued pursuant to this Agreement; provided, however, that the Company may at any time in its sole discretion make any change in
the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued
or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.
4.8 Other
Events. In case any event shall occur affecting the Company as to which none of the provisions of preceding subsections of this Section 4
are strictly applicable, but which would require an adjustment to the terms of the Warrants in order to (i) avoid an adverse impact
on the Warrants and (ii) effectuate the intent and purpose of this Section 4, then, in each such case, the Company shall
appoint a firm of independent public accountants, investment banking or other appraisal firm of recognized national standing, which shall
give its opinion as to whether or not any adjustment to the rights represented by the Warrants is necessary to effectuate the intent and
purpose of this Section 4 and, if they determine that an adjustment is necessary, the terms of such adjustment, provided,
however, that under no circumstances shall the Warrants be adjusted pursuant to this Section 4.8 as a result of any issuance
of securities in connection with the Business Combination. The Company shall adjust the terms of the Warrants in a manner that is consistent
with any adjustment recommended in such opinion. For the avoidance of doubt, all adjustments made pursuant to this Section 4.8
shall be made equally to all outstanding Warrants.
4.9 No
Adjustment. For the avoidance of doubt, no adjustment shall be made to the terms of the Warrants solely as a result of an adjustment
to the conversion ratio of the Company’s Class B common stock (the “Class B Common Stock”) into
shares of Common Stock or the conversion of the shares of Class B Common Stock into shares of Common Stock, in each case, pursuant
to the Company’s Charter, as amended from time to time.
5. Transfer
and Exchange of Warrants.
5.1 Registration
of Transfer. The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register,
upon surrender of such Warrant for transfer, in the case of certificated Warrants, properly endorsed with signatures properly guaranteed
and accompanied by appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number
of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent. In the case of certificated Warrants, the Warrants
so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request.
5.2 Procedure
for Surrender of Warrants. Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or transfer,
and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the Registered Holder of the
Warrants so surrendered, representing an equal aggregate number of Warrants; provided, however, that except as otherwise provided
herein or in any Book-Entry Warrant Certificate or Definitive Warrant Certificate, each Book-Entry Warrant Certificate and Definitive
Warrant Certificate may be transferred only in whole and only to the Depositary, to another nominee of the Depositary, to a successor
depository, or to a nominee of a successor depository; provided further, however, that in the event that a Warrant surrendered
for transfer bears a restrictive legend (as in the case of the Private Placement Warrants and the Working Capital Warrants), the Warrant
Agent shall not cancel such Warrant and issue new Warrants in exchange thereof until the Warrant Agent has received an opinion of counsel
for the Company stating that such transfer may be made and indicating whether the new Warrants must also bear a restrictive legend.
5.3 Fractional
Warrants. The Warrant Agent shall not be required to effect any registration of transfer or exchange which shall result in the issuance
of a warrant certificate or book-entry position for a fraction of a warrant.
5.4 Service
Charges. No service charge shall be made for any exchange or registration of transfer of Warrants.
5.5 Warrant
Execution and Countersignature. The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms
of this Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company, whenever
required by the Warrant Agent, shall supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.
5.6 Transfer
of Warrants. Prior to the Detachment Date, the Public Warrants may be transferred or exchanged only together with the Unit in which
such Warrant is included, and only for the purpose of effecting, or in conjunction with, a transfer or exchange of such Unit. Furthermore,
each transfer of a Unit on the register relating to such Units shall operate also to transfer the Warrants included in such Unit. Notwithstanding
the foregoing, the provisions of this Section 5.6 shall have no effect on any transfer of Warrants on and after the Detachment
Date.
6. Redemption.
6.1 Redemption.
Subject to Section 6.4 hereof, not less than all of the outstanding Warrants may be redeemed, at the option of the
Company, at any time while they are exercisable and prior to their expiration, at the office of the Warrant Agent, upon notice to the
Registered Holders of the Warrants, as described in Section 6.2 below, at the price of $0.01 per Warrant (the “Redemption
Price”), provided that the last sales price of the Common Stock reported has been at least $18.00 per share (subject to
adjustment in compliance with Section 4 hereof) (the “Redemption Trigger Price”), on each of twenty
(20) trading days within the thirty (30) trading-day period ending on the third day prior to the date on which notice of the redemption
is given and provided that there is an effective registration statement covering the shares of Common Stock issuable upon exercise of
the Warrants, and a current prospectus relating thereto, available throughout the 30-day Redemption Period (as defined in Section 6.2
below) unless the Company has elected to require the exercise of the Warrants on a “cashless basis” pursuant to subsection
3.3.1; provided, however, that if and when the Warrants become redeemable by the Company, the Company may not exercise such redemption
right if the issuance of shares of Common Stock upon exercise of the Warrants is not exempt from registration or qualification under applicable
state blue sky laws or the Company is unable to effect such registration or qualification.
6.2 Date
Fixed for, and Notice of, Redemption. In the event that the Company elects to redeem all of the Warrants, the Company shall fix a
date for the redemption (the “Redemption Date”). Notice of redemption shall be mailed by first class mail, postage
prepaid, by the Company not less than thirty (30) days prior to the Redemption Date (the “30-day Redemption Period”)
to the Registered Holders of the Warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice
mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Registered Holder received
such notice.
6.3 Exercise
After Notice of Redemption. The Warrants may be exercised, for cash (or on a “cashless basis” in accordance with subsection
3.3.1(b) of this Agreement) at any time after notice of redemption shall have been given by the Company pursuant to Section 6.2
hereof and prior to the Redemption Date. In the event that the Company determines to require all holders of Warrants to exercise their
Warrants on a “cashless basis” pursuant to subsection 3.3.1, the notice of redemption shall contain the information
necessary to calculate the number of shares of Common Stock to be received upon exercise of the Warrants, including the “Fair Market
Value” (as such term is defined in subsection 3.3.1(b) hereof) in such case. On and after the Redemption Date, the record
holder of the Warrants shall have no further rights except to receive, upon surrender of the Warrants, the Redemption Price.
6.4 Exclusion
of Private Placement Warrants and Working Capital Warrants. The Company agrees that the redemption rights provided in this Section 6 shall
not apply to the Private Placement Warrants or the Working Capital Warrants if at the time of the redemption such Private Placement Warrants
or the Working Capital Warrants continue to be held by the Sponsor or any Permitted Transferees, as applicable. However, once such Private
Placement Warrants or Working Capital Warrants are transferred (other than to Permitted Transferees under Section 2.6),
the Company may redeem the Private Placement Warrants and the Working Capital Warrants, provided that the criteria for redemption are
met, including the opportunity of the holder of such Private Placement Warrants or the Working Capital Warrants to exercise the Private
Placement Warrants and the Working Capital Warrants prior to redemption pursuant to Section 6.3. Private Placement Warrants
and Working Capital Warrants that are transferred to persons other than Permitted Transferees shall upon such transfer cease to be Private
Placement Warrants or Working Capital Warrants and shall become Public Warrants under this Agreement.
7. Other
Provisions Relating to Rights of Holders of Warrants.
7.1 No
Rights as Stockholder. A Warrant does not entitle the Registered Holder thereof to any of the rights of a stockholder of the Company,
including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to consent
or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other
matter.
7.2 Lost,
Stolen, Mutilated, or Destroyed Warrants. If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent
may on such terms as to indemnity or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant,
include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or
destroyed. Any such new Warrant shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone.
7.3 Reservation
of Common Stock. The Company shall at all times reserve and keep available a number of its authorized but unissued shares of Common
Stock that shall be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Agreement.
7.4 Registration
of Common Stock; Cashless Exercise at Company’s Option.
7.4.1 Registration
of the Common Stock. The Company agrees that as soon as practicable, but in no event later than fifteen (15) Business Days after
the closing of its initial Business Combination, it shall use its best efforts to file with the Commission a registration statement for
the registration, under the Securities Act, of the shares of Common Stock issuable upon exercise of the Warrants. The Company shall use
its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current
prospectus relating thereto, until the expiration of the Warrants in accordance with the provisions of this Agreement. If any such registration
statement has not been declared effective by the 60th Business Day following the closing of the Business Combination, holders of the
Warrants shall have the right, during the period beginning on the 61st Business Day after the closing of the Business Combination
and ending upon such registration statement being declared effective by the Commission, and during any other period when the Company
shall fail to have maintained an effective registration statement covering the shares of Common Stock issuable upon exercise of the Warrants,
to exercise such Warrants on a “cashless basis,” by exchanging the Warrants (in accordance with Section 3(a)(9) of
the Securities Act (or any successor rule) or another exemption) for that number of shares of Common Stock equal to the quotient obtained
by dividing (x) the product of the number of shares of Common Stock underlying the Warrants, multiplied by the difference between
the Warrant Price and the “Fair Market Value” (as defined below) by (y) the Fair Market Value. Solely for purposes of
this subsection 7.4.1, “Fair Market Value” shall mean the volume weighted average price of the Common Stock as reported
during the ten (10) trading day period ending on the third day prior to the date that notice of exercise is received by the Warrant
Agent from the holder of such Warrants or its securities broker or intermediary. The date that notice of cashless exercise is received
by the Warrant Agent shall be conclusively determined by the Warrant Agent. In connection with the “cashless exercise” of
a Warrant, the Company shall, upon request, provide the Warrant Agent with an opinion of counsel for the Company (which shall be an outside
law firm with securities law experience) stating that (i) the exercise of the Warrants on a cashless basis in accordance with this
subsection 7.4.1 is not required to be registered under the Securities Act and (ii) the shares of Common Stock issued upon
such exercise shall be freely tradable under United States federal securities laws by anyone who is not an affiliate (as such term is
defined in Rule 144 under the Securities Act (or any successor statute)) of the Company and, accordingly, shall not be required
to bear a restrictive legend. Except as provided in subsection 7.4.2, for the avoidance of any doubt, unless and until all of
the Warrants have been exercised or have expired, the Company shall continue to be obligated to comply with its registration obligations
under the first three sentences of this subsection 7.4.1.
7.4.2 Cashless
Exercise at Company’s Option. If the Common Stock is at the time of any exercise of a Warrant not listed on a national securities
exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities
Act (or any successor statute), the Company may, at its option, (i) require holders of Warrants who exercise Warrants to exercise
such Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act (or any successor
statute) as described in subsection 7.4.1 and (ii) in the event the Company so elects, the Company shall not be required
to file or maintain in effect a registration statement for the registration, under the Securities Act, of the Common Stock issuable upon
exercise of the Warrants, notwithstanding anything in this Agreement to the contrary. If the Company does not elect at the time of exercise
to require a holder of Warrants who exercises Warrants to exercise such Warrants on a “cashless basis,” it agrees to use
its best efforts to register or qualify for sale the Common Stock issuable upon exercise of the Warrant under the blue sky laws of the
state of residence of the exercising Warrant holder to the extent an exemption is not available.
8. Concerning
the Warrant Agent and Other Matters.
8.1 Payment
of Taxes. The Company shall from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant
Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of the Warrants, but the Company shall not be
obligated to pay any transfer taxes in respect of the Warrants or such shares of Common Stock.
8.2 Resignation,
Consolidation, or Merger of Warrant Agent.
8.2.1 Appointment
of Successor Warrant Agent. The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged
from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office
of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor
Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after
it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of a Warrant (who shall, with
such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the
State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost. Any successor
Warrant Agent, whether appointed by the Company or by such court, shall be a corporation organized and existing under the laws of the
State of New York, in good standing and having its principal office in the Borough of Manhattan, City and State of New York, and authorized
under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority. After appointment,
any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor
Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason
it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument
transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon
request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for
more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities,
duties, and obligations.
8.2.2 Notice
of Successor Warrant Agent. In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the
predecessor Warrant Agent and the Transfer Agent for the Common Stock not later than the effective date of any such appointment.
8.2.3 Merger
or Consolidation of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated
or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant
Agent under this Agreement without any further act.
8.3 Fees
and Expenses of Warrant Agent.
8.3.1 Remuneration.
The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such Warrant Agent hereunder and shall, pursuant
to its obligations under this Agreement, reimburse the Warrant Agent upon demand for all reasonable and documented third party expenditures
that the Warrant Agent may reasonably incur in the execution of its duties hereunder.
8.3.2 Further
Assurances. The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and
delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the carrying
out or performing of the provisions of this Agreement.
8.4 Liability
of Warrant Agent.
8.4.1 Reliance
on Company Statement. Whenever in the performance of its duties under this Agreement, the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established
by a statement signed by the Chief Executive Officer, Chief Financial Officer, President, Secretary, Assistant Secretary, Executive Vice
President, Vice President, Secretary or Chairman of the Board of the Company and delivered to the Warrant Agent. The Warrant Agent may
rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Agreement.
8.4.2 Indemnity.
The Warrant Agent shall be liable hereunder only for its own fraud, gross negligence, willful misconduct, bad faith, or breach of this
Agreement. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments,
costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement, except for any
amounts arising out of, in connection with or resulting from the Warrant Agent’s fraud, gross negligence, willful misconduct, bad
faith, or breach of this Agreement.
8.4.3 Exclusions.
The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or execution
of any Warrant (except its countersignature thereof). The Warrant Agent shall not be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Warrant. The Warrant Agent shall not be responsible to make any adjustments
required under the provisions of Section 4 hereof or responsible for the manner, method, or amount of any such adjustment
or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement
or any Warrant or as to whether any shares of Common Stock shall, when issued, be valid and fully paid and non-assessable.
8.5 Acceptance
of Agency. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms
and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently
account for, and pay to the Company, all monies received by the Warrant Agent for the purchase of shares of Common Stock through the exercise
of the Warrants.
8.6 Waiver.
The Warrant Agent has no right of set-off or any other right, title, interest or claim of any kind (“Claim”)
in, or to any distribution of, the Trust Account (as defined in that certain Investment Management Trust Agreement, dated as of the date
hereof, by and between the Company and the Warrant Agent as trustee thereunder) and hereby agrees not to seek recourse, reimbursement,
payment or satisfaction for any Claim against the Trust Account for any reason whatsoever. The Warrant Agent hereby irrevocably waives
any and all Claims against the Trust Account, including any monies therein or any distribution therefrom and any and all rights to seek
access to the Trust Account.
9. Miscellaneous
Provisions.
9.1 Successors.
All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns.
9.2 Notices.
Any notice, statement or demand authorized by this Agreement to be given or made by the Warrant Agent or by the holder of any Warrant
to or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery, one business day after delivery to
an overnight courier servicer, or if sent by certified mail or private courier service within five (5) days after deposit of such
notice, postage prepaid, in each case addressed (until another address is filed in writing by the Company with the Warrant Agent), as
follows:
Monterey Capital Acquisition Corporation
32 Garrison Street, #50-407
Boston, MA 02116
Attention: Bala Padmakumar
With copy to:
Mintz, Levin, Cohn, Feris, Glovsky and Popeo,
P.C.
One Financial Center
Boston, MA 02111
Attention: Thomas R. Burton, III, Esq.
Any notice, statement or demand authorized by
this Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given
when so delivered if by hand or overnight delivery, one business day after delivery to an overnight courier servicer, or if sent by certified
mail or private courier service within five (5) days after deposit of such notice, postage prepaid, in each case addressed (until
another address is filed in writing by the Warrant Agent with the Company), as follows:
Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, NY 10004
Attention: Compliance Department
9.3 Applicable
Law and Exclusive Forum. The validity, interpretation, and performance of this Agreement and of the Warrants shall be governed in
all respects by the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application
of the substantive laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising out
of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States
District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive
forum for any such action, proceeding or claim. The Company hereby waives any objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum. Notwithstanding the foregoing, the provisions of this paragraph will not apply to suits brought to enforce
any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America
are the sole and exclusive forum.
Any person or entity purchasing
or otherwise acquiring any interest in the Warrants shall be deemed to have notice of and to have consented to the forum provisions in
this Section 9.3. If any action, the subject matter of which is within the scope the forum provisions above, is filed in a
court other than a court located within the State of New York or the United States District Court for the Southern District of New York
(a “foreign action”) in the name of any warrant holder, such warrant holder shall be deemed to have consented
to: (x) the personal jurisdiction of the state and federal courts located within the State of New York or the United States District
Court for the Southern District of New York in connection with any action brought in any such court to enforce the forum provisions (an
“enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement
action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.
9.4 Persons
Having Rights under this Agreement. Nothing in this Agreement shall be construed to confer upon, or give to, any person or corporation
other than the parties hereto and the Registered Holders of the Warrants and, for purposes of Sections 7.4, 9.4 and 9.9,
the Representatives, any right, remedy, or claim under or by reason of this Agreement or of any covenant, condition, stipulation, promise,
or agreement hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Agreement shall be for the sole
and exclusive benefit of the parties hereto and, for purposes of Sections 7.4, 9.4 and 9.9, the Representatives,
and their successors and assigns and of the Registered Holders of the Warrants.
9.5 Examination
of the Warrant Agreement. A copy of this Agreement shall be available at all reasonable times at the office of the Warrant Agent in
the Borough of Manhattan, City and State of New York, for inspection by the Registered Holder of any Warrant. The Warrant Agent may require
any such holder to submit such holder’s Warrant for inspection by the Warrant Agent.
9.6 No
Waiver of Rights, Powers and Remedies. No failure or delay by a party hereto in exercising any right, power or remedy under this Agreement,
and no course of dealing between the parties hereto, shall operate as a waiver of any such right, power or remedy of such party. No single
or partial exercise of any right, power or remedy under this Agreement by a party hereto, nor any abandonment or discontinuance of steps
to enforce any such right, power or remedy, shall preclude such party from any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder. The election of any remedy by a party hereto shall not constitute a waiver of the right of such
party to pursue other available remedies. No notice to or demand on a party not expressly required under this Agreement shall entitle
the party receiving such notice or demand to any other or further notice or demand in similar or other circumstances or constitute a waiver
of the rights of the party giving such notice or demand to any other or further action in any circumstances without such notice or demand.
9.7 Counterparts.
This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. In the event that any
signature is delivered by facsimile transmission or any other form of electronic delivery, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature
page were an original thereof.
9.8 Effect
of Headings. The section headings herein are for convenience only and are not part of this Agreement and shall not affect the interpretation
thereof.
9.9 Amendments.
This Agreement may be amended by the parties hereto without the consent of any Registered Holder (i) for the purpose of curing any
ambiguity, or curing, correcting or supplementing any mistake including to conform the provisions of this Agreement to the description
of the terms of the Warrants and this Agreement set forth in the Prospectus or any defective provision contained herein or (ii) for
the purpose of adding or changing any other provisions with respect to matters or questions arising under this Agreement as the parties
may deem necessary or desirable and that the parties deem shall not adversely affect the interest of the Registered Holders. All other
modifications or amendments, including, for the avoidance of doubt, any amendment to increase the Warrant Price or shorten the Exercise
Period, shall require the vote or written consent of the Registered Holders of a majority of the then outstanding Warrants. Notwithstanding
anything to the contrary herein, the Company may lower the Warrant Price or extend the duration of the Exercise Period pursuant to Sections
3.1 and 3.2, respectively, without the consent of the Registered Holders.
9.10 Severability.
This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the
validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to
such invalid or unenforceable provision as may be possible and be valid and enforceable.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be duly executed as of the date first above written.
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MONTEREY CAPITAL ACQUISITION CORPORATION |
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Bala Padmakumar |
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Chief Executive Officer |
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CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, as Warrant Agent |
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[Signature
Page to Warrant Agreement]
EXHIBIT A
[Form of Warrant Certificate]
[FACE]
Number
Warrants
THIS WARRANT SHALL BE VOID IF NOT EXERCISED
PRIOR TO
THE EXPIRATION OF THE EXERCISE PERIOD PROVIDED
FOR
IN THE WARRANT AGREEMENT DESCRIBED BELOW
MONTEREY CAPITAL ACQUISITION CORPORATION
Incorporated Under the Laws of the State of Delaware
CUSIP [ ]
Warrant Certificate
This
Warrant Certificate certifies that ___________, or registered assigns, is the registered holder of warrant(s) evidenced hereby
(the “Warrants” and each, a “Warrant”) to purchase shares of Class A common stock,
$0.0001 par value per share (“Common Stock”), of Monterey Capital Acquisition Corporation, a Delaware corporation
(the “Company”). Each Warrant entitles the holder, upon exercise during the period set forth in the Warrant
Agreement referred to below, to receive from the Company that number of fully paid and non-assessable shares of Common Stock as set forth
below, at the exercise price (the “Exercise Price”) as determined pursuant to the Warrant Agreement, payable
in lawful money (or through “cashless exercise” as provided for in the Warrant Agreement) of the United States
of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent referred
to below, subject to the conditions set forth herein and in the Warrant Agreement. Defined terms used in this Warrant Certificate but
not defined herein shall have the meanings given to them in the Warrant Agreement.
Each Warrant is initially
exercisable for one fully paid and non-assessable share of Common Stock. No fractional shares will be issued upon exercise of any Warrant.
If, upon the exercise of Warrants, a holder would be entitled to receive a fractional interest in a share of Common Stock, the Company
will, upon exercise, round down to the nearest whole number the number of shares of Common Stock to be issued to the Warrant holder. The
number of shares of Common Stock issuable upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events
set forth in the Warrant Agreement.
The initial Exercise Price
per share of Common Stock for any Warrant is equal to $11.50 per whole share. The Exercise Price is subject to adjustment upon the occurrence
of certain events set forth in the Warrant Agreement.
Subject to the conditions
set forth in the Warrant Agreement, the Warrants may be exercised only during the Exercise Period and to the extent not exercised by the
end of such Exercise Period, such Warrants shall become void.
Reference is hereby made to
the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
This Warrant Certificate shall
not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall
be governed by and construed in accordance with the internal laws of the State of New York, without regard to conflicts of laws principles
thereof.
[Signature Page Follows]
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MONTEREY CAPITAL ACQUISITION CORPORATION |
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By: |
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Name: |
Bala Padmakumar |
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Chief Executive Officer |
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CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, as Warrant Agent |
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[Form of Warrant Certificate]
[Reverse]
The Warrants evidenced by
this Warrant Certificate are part of a duly authorized issue of Warrants entitling the holder on exercise to receive shares of Common
Stock and are issued or to be issued pursuant to a Warrant Agreement dated as of ___________, 2022 (the “Warrant Agreement”),
duly executed and delivered by the Company to Continental Stock Transfer & Trust Company, a New York corporation, as warrant
agent (the “Warrant Agent”), which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities
thereunder of the Warrant Agent, the Company and the holders (the words “holders” or “holder”
meaning the Registered Holders or Registered Holder, respectively) of the Warrants. A copy of the Warrant Agreement may be obtained by
the holder hereof upon written request to the Company. Defined terms used in this Warrant Certificate but not defined herein shall have
the meanings given to them in the Warrant Agreement.
Warrants may be exercised
at any time during the Exercise Period set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate
may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed
and executed, together with payment of the Exercise Price as specified in the Warrant Agreement (or through “cashless exercise”
as provided for in the Warrant Agreement) at the principal corporate trust office of the Warrant Agent. In the event that upon any exercise
of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there
shall be issued to the holder hereof or his, her or its assignee, a new Warrant Certificate evidencing the number of Warrants not exercised.
Notwithstanding anything else
in this Warrant Certificate or the Warrant Agreement, no Warrant may be exercised unless at the time of exercise (i) a registration
statement covering the shares of Common Stock to be issued upon exercise is effective under the Securities Act and (ii) a prospectus
thereunder relating to the shares of Common Stock is current, except through “cashless exercise” as provided for in the Warrant
Agreement.
The Warrant Agreement provides
that upon the occurrence of certain events the number of shares of Common Stock issuable upon exercise of the Warrants set forth on the
face hereof may, subject to certain conditions, be adjusted. If, upon exercise of a Warrant, the holder thereof would be entitled to receive
a fractional interest in a share of Common Stock, the Company shall, upon exercise, round down to the nearest whole number of shares of
Common Stock to be issued to the holder of the Warrant.
Warrant Certificates, when
surrendered at the principal corporate trust office of the Warrant Agent by the Registered Holder thereof in person or by legal representative
or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement,
but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate
a like number of Warrants.
Upon due presentation for
registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant Certificates
of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
The Company and the Warrant
Agent may deem and treat the Registered Holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the
contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company.
Election to Purchase
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably
elects to exercise the right, represented by this Warrant Certificate, to receive ______________ shares of Common Stock and herewith tenders
payment for such shares of Common Stock to the order of Monterey Capital Acquisition Corporation (the “Company”)
in the amount of $______________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares of Common
Stock be registered in the name of ______________, whose address is______________ and that such shares of Common Stock be delivered to
______________ whose address is ______________. If said number of shares of Common Stock is less than all of the shares of Common Stock
purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares of Common
Stock be registered in the name of ______________, whose address is ______________ and that such Warrant Certificate be delivered to ______________,
whose address is ______________.
In the event that the Warrant
has been called for redemption by the Company pursuant to Section 6 of the Warrant Agreement and the Company has required
cashless exercise pursuant to Section 6.3 of the Warrant Agreement, the number of shares of Common Stock that this Warrant
is exercisable for shall be determined in accordance with subsection 3.3.1(b) and Section 6.3 of the Warrant Agreement.
In the event that the Warrant
is to be exercised on a “cashless” basis pursuant to Section 7.4 of the Warrant Agreement, the number of shares
of Common Stock that this Warrant is exercisable for shall be determined in accordance with Section 7.4 of the Warrant Agreement.
In the event that the Warrant
may be exercised, to the extent allowed by the Warrant Agreement, through cashless exercise (i) the number of shares of Common Stock
that this Warrant is exercisable for would be determined in accordance with the relevant section of the Warrant Agreement which allows
for such cashless exercise and (ii) the holder hereof shall complete the following: The undersigned hereby irrevocably elects to
exercise the right, represented by this Warrant Certificate, through the cashless exercise provisions of the Warrant Agreement, to receive
shares of Common Stock. If said number of shares of Common Stock is less than all of the shares of Common Stock purchasable hereunder
(after giving effect to the cashless exercise), the undersigned requests that a new Warrant Certificate representing the remaining balance
of such shares of Common Stock be registered in the name of ______________, whose address is ______________and that such Warrant Certificate
be delivered to ______________, whose address is ______________.
[Signature Page Follows]
| Date: __________________,
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THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15 (OR ANY SUCCESSOR RULE)).
EXHIBIT B
LEGEND
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES
LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. IN ADDITION, SUBJECT TO ANY ADDITIONAL LIMITATIONS ON TRANSFER DESCRIBED IN THE LETTER
AGREEMENT BY AND AMONG MONTEREY CAPITAL ACQUISITION CORPORATION (THE “COMPANY”), MONTERREY ACQUISITION SPONSOR,
LLC AND THE OTHER PARTIES THERETO, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED PRIOR TO THE DATE
THAT IS THIRTY (30) DAYS AFTER THE DATE UPON WHICH THE COMPANY COMPLETES ITS INITIAL BUSINESS COMBINATION (AS DEFINED IN SECTION 3
OF THE WARRANT AGREEMENT REFERRED TO HEREIN) EXCEPT TO A PERMITTED TRANSFEREE (AS DEFINED IN SECTION 2 OF THE WARRANT AGREEMENT)
WHO AGREES IN WRITING WITH THE COMPANY TO BE SUBJECT TO SUCH TRANSFER PROVISIONS.
SECURITIES EVIDENCED BY THIS CERTIFICATE AND SHARES
OF CLASS A COMMON STOCK OF THE COMPANY ISSUED UPON EXERCISE OF SUCH SECURITIES SHALL BE ENTITLED TO REGISTRATION RIGHTS UNDER A REGISTRATION
RIGHTS AGREEMENT TO BE EXECUTED BY THE COMPANY.”
Exhibit 4.6
RIGHTS AGREEMENT
This Rights Agreement (this
“Agreement”) is made as of [●], 2022 between Monterey Capital Acquisition Corporation, a Delaware corporation
(the “Company”), and Continental Stock Transfer & Trust Company, a New York corporation (the “Rights
Agent”).
WHEREAS, the Company has received
a firm commitment from EF Hutton, division of Benchmark Investments, LLC. (“EF Hutton”), as representative of
the several underwriters, to purchase up to an aggregate of 10,000,000 units (including up to 1,500,000 additional units if the underwriters’
over-allotment option is exercised in full), each unit (“Unit”) comprised of one share of Class A common
stock of the Company, $0.0001 par value (the “Class A Common Stock”), one redeemable warrant entitling
the holder thereof to purchase one share of Class A Common Stock (“Public Warrants”), and one right to
receive one-tenth (1/10) of one Class A Common Stock (a “Public Right”) upon the happening of the triggering
event described herein, and in connection therewith, will issue and deliver up to an aggregate of 11,500,000 Public Rights upon consummation
of such public offering, 1,500,000 of which are attributable to the over-allotment option (“Public Offering”);
WHEREAS, on [●], 2022,
the Company entered into certain Private Placement Warrant Subscription Purchase Agreement with Monterrey Acquisition Sponsor, LLC (the
“Sponsor”), pursuant to which the Sponsor agreed to purchase an aggregate of 3,200,000 Private Placement Warrants (or 3,500,000
Private Placement Warrants if the over-allotment option is exercised in full by the Underwriters) simultaneously with the closing of the
Public Offering at a purchase price of $1.00 per Warrant and in connection therewith, will issue and deliver up to an aggregate of 3,200,000
rights (or 3,500,000 if the over-allotment option is exercised in full by the Underwriters);
WHEREAS, the Company has filed
with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-1, File No. 333-[●]
(“Registration Statement”), for the registration, under the Securities Act of 1933, as amended (“Act”)
of, among other securities, the Units, Public Warrants, Public Rights, representative shares (“Representative Shares”),
and the Class A Common Stock issuable to the holders of the Units, Public Rights and Public Warrants;
WHEREAS, the Company desires
the Rights Agent to act on behalf of the Company, and the Rights Agent is willing to so act, in connection with the issuance, registration,
transfer and exchange of the Rights;
WHEREAS, the Company desires
to provide for the form and provisions of the Rights, the terms upon which they shall be issued, and the respective rights, limitation
of rights, and immunities of the Company, the Rights Agent, and the holders of the Rights; and
WHEREAS, all acts and things
have been done and performed which are necessary to make the Rights, when executed on behalf of the Company and countersigned by or on
behalf of the Rights Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution
and delivery of this Agreement.
NOW, THEREFORE, in consideration
of the mutual agreements herein contained, the parties hereto agree as follows:
1. Appointment
of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company for the Rights, and the Rights Agent
hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement.
2. Rights.
2.1 Form of
Right. Each Right shall be issued in registered form only, shall be in substantially the form of Exhibit A hereto, the
provisions of which are incorporated herein and shall be signed by, or bear the facsimile signature of, the Chairman of the Board or Chief
Executive Officer and Treasurer, Secretary or Assistant Secretary of the Company and shall bear a facsimile of the Company’s seal.
In the event the person whose facsimile signature has been placed upon any Right shall have ceased to serve in the capacity in which such
person signed the Right before such Right is issued, it may be issued with the same effect as if he or she had not ceased to be such at
the date of issuance.
2.2 Effect
of Countersignature. Unless and until countersigned by the Rights Agent pursuant to this Agreement, a Right shall be invalid and of
no effect and may not be exchanged for Class A Common Stock.
2.3 Registration.
2.3.1 Right
Register. The Rights Agent shall maintain books (“Right Register”) for the registration of original issuance
and the registration of transfer of the Rights. Upon the initial issuance of the Rights, the Rights Agent shall issue and register the
Rights in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to
the Rights Agent by the Company.
2.3.2 Registered
Holder. Prior to due presentment for registration of transfer of any Right, the Company and the Rights Agent may deem and treat
the person in whose name such Right shall be registered upon the Right Register (“registered holder”) as
the absolute owner of such Right and of each Right represented thereby (notwithstanding any notation of ownership or other writing
on the Right Certificate made by anyone other than the Company or the Rights Agent), for the purpose of the exchange thereof, and
for all other purposes, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary.
2.4 Detachability
of Rights. The securities comprising the Units, including the Rights, will not be separately transferable until the ninetieth (90th)
day after the date hereof unless EF Hutton informs the Company of its decision to allow earlier separate trading, but in no event will
separate trading of the securities comprising the Units begin until (i) the Company files a Current Report on Form 8-K which
includes an audited balance sheet reflecting the receipt by the Company of the gross proceeds of the Public Offering including the proceeds
received by the Company from the exercise of the over-allotment option, if the over-allotment option is exercised on the date hereof,
and (ii) the Company issues a press release and files a Current Report on Form 8-K announcing when such separate trading shall
begin.
3. Terms
and Exchange of Rights.
3.1 Rights.
Each Right shall entitle the holder thereof to receive one-tenth of one share of Class A Common Stock upon the happening of the Exchange
Event (described below). Subject to Section 3.3.1 below with respect to the registered holders of Rights, in the event that the Company
is not the surviving entity immediately following the Exchange Event, holders of Rights shall automatically receive the kind and amount
of securities or properties of the surviving entity as the holders of each one-tenth of one share of Class A Common Stock is entitled
to receive in the Exchange Event. No additional consideration shall be paid by a holder of Rights in order to receive his, her or its
shares of Class A Common Stock upon the Exchange Event as the purchase price for such shares of Class A Common Stock has been
included in the purchase price for the Units. In no event will the Company be required to net cash settle the Rights or issue fractional
shares of Class A Common Stock.
3.2 Exchange
Event. The Exchange Event shall be the Company’s consummation of an initial Business Combination (as defined in the Company’s
Certificate of Incorporation and all amendments thereto).
3.3 Exchange
of Rights.
3.3.1 Issuance
of Certificates. As soon as practicable upon the occurrence of the Exchange Event, the Company shall direct registered holders of
the Rights to return their Rights Certificates to the Rights Agent. Upon receipt of a valid Rights Certificate, the Company shall issue
to the registered holder of such Right(s) a certificate or certificates for the number of full Class A Common Stock to which
he, she or it is entitled, registered in such name or names as may be directed by him, her or it; provided that in the event that the
Company is not the surviving entity following the Exchange Event, the Company shall notify the registered holders of Rights at least two
business days prior to the occurrence of the Exchange Event and the registered holders of Rights shall have the right to receive the kind
and amount of securities or properties of the surviving entity pursuant to Section 3.3.4 of this Agreement provided that they affirmatively
elect to such conversion. Notwithstanding the foregoing, or any provision contained in this Agreement to the contrary, in no event will
the Company be required to net cash settle the Rights. The Company shall not issue fractional Class A Common Stock upon exchange
of Rights. At the time of the Exchange Event, the Company will instruct the Rights Agent to round down to the nearest whole Class A
Common Stock.
3.3.2 Valid
Issuance. All shares of Class A Common Stock issued upon an Exchange Event in conformity with this Agreement and the Amended
and Restated Certificate of Incorporation of the Company shall be validly issued, fully paid and nonassessable.
3.3.3 Date
of Issuance. Each person in whose name any such certificate for Class A Common Stock is issued shall for all purposes be deemed
to have become the holder of record of such shares on the date of the Exchange Event, irrespective of the date of delivery of such certificate.
3.3.4 Company
Not Surviving Following Exchange Event. If the Exchange Event results in the Company is not the surviving entity, the definitive agreement
will provide for the holders of Rights to receive the same kind and amount of securities or properties of the surviving entity as the
holders of the Class A Common Stock will receive in with the Exchange Event, for the number of shares of Class A Common Stock
such holder is entitled to pursuant to Section 3.3.1 above.
3.4 Duration
of Rights. If the Exchange Event does not occur within the time period as described in the Company’s Memorandum and Articles
of Association and all amendments thereto, and such Business Combination has not yet been consummated within the applicable time period,
the Rights shall expire and shall be worthless.
4. Transfer
and Exchange of Rights.
4.1 Registration
of Transfer. The Rights Agent shall register the transfer, from time to time, of any outstanding Right upon the Right Register, upon
surrender of such Right for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions
for transfer. Upon any such transfer, a new Right representing an equal aggregate number of Rights shall be issued and the old Right
shall be cancelled by the Rights Agent. The Rights so cancelled shall be delivered by the Rights Agent to the Company from time to time
upon request.
4.2 Procedure
for Surrender of Rights. Rights may be surrendered to the Rights Agent, together with a written request for exchange or transfer,
and thereupon the Rights Agent shall issue in exchange therefor one or more new Rights as requested by the registered holder of the Rights
so surrendered, representing an equal aggregate number of Rights; provided, however, that in the event that a Right surrendered for transfer
bears a restrictive legend, the Rights Agent shall not cancel such Right and issue new Rights in exchange therefor until the Rights Agent
has received an opinion of counsel for the Company stating that such transfer may be made and indicating whether the new Rights must also
bear a restrictive legend.
4.3 Fractional
Rights. The Rights Agent will not issue fractional shares in connection with an exchange or transfer of rights. Fractional shares
will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware
General Corporations Law. As a result, you must hold rights in multiples of 10 in order to receive shares for all of your rights upon
closing of a business combination.
4.4 Service
Charges. No service charge shall be made for any exchange or registration of transfer of Rights.
4.5 Adjustments
to Conversion Ratios. The number of shares of Class A Common Stock that the holders of Rights are entitled to receive as a result
of the occurrence of an Exchange Event shall be equitably adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend, reorganization, recapitalization, reclassification, combination, exchange of stock or other like change with respect
to the Class A Common Stock occurring on or after the date hereof and prior to the Exchange Event.
4.6 Right
Execution and Countersignature. The Rights Agent is hereby authorized to countersign and to deliver, in accordance with the terms
of this Agreement, the Rights required to be issued pursuant to the provisions of this Section 4, and the Company, whenever
required by the Rights Agent, will supply the Rights Agent with Rights duly executed on behalf of the Company for such purpose.
5. Other
Provisions Relating to Rights of Holders of Rights.
5.1 No
Rights as Stockholder. Until exchange of a Right for Class A Common Stock as provided for herein, a Right does not entitle the
registered holder thereof to any of the rights of a stockholder of the Company, including, without limitation, the right to receive dividends,
or other distributions, exercise any preemptive rights to vote or to consent or to receive notice as stockholders in respect of the meetings
of stockholders or the election of directors of the Company or any other matter.
5.2 Lost,
Stolen, Mutilated, or Destroyed Rights. If any Right is lost, stolen, mutilated, or destroyed, the Company and the Rights Agent may
on such terms as to indemnity or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Right, include
the surrender thereof), issue a new Right of like denomination, tenor, and date as the Right so lost, stolen, mutilated, or destroyed.
Any such new Right shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated,
or destroyed Right shall be at any time enforceable by anyone.
5.3 Reservation
of Class A Common Stock. The Company shall at all times reserve and keep available a number of its authorized but unissued shares
of Class A Common Stock that will be sufficient to permit the exchange of all outstanding Rights issued pursuant to this Agreement.
6. Concerning
the Rights Agent and Other Matters.
6.1 Payment
of Taxes. The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Rights
Agent in respect of the issuance or delivery of shares of Class A Common Stock upon the exchange of Rights, but the Company shall
not be obligated to pay any transfer taxes in respect of the Rights or such shares.
6.2 Resignation,
Consolidation, or Merger of Rights Agent.
6.2.1 Appointment
of Successor Rights Agent. The Rights Agent, or any successor to it hereafter appointed, may resign its duties and be discharged
from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office
of the Rights Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor
Rights Agent in place of the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after it has
been notified in writing of such resignation or incapacity by the Rights Agent or by the holder of the Right (who shall, with such notice,
submit his, her or its Right for inspection by the Company), then the holder of any Right may apply to the Supreme Court of the State
of New York for the County of New York for the appointment of a successor Rights Agent at the Company’s cost. Any successor Rights
Agent, whether appointed by the Company or by such court, shall be a corporation organized and existing under the laws of the State of
New York, in good standing and having its principal office in the Borough of Manhattan, City and State of New York, and authorized under
such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority. After appointment,
any successor Rights Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor
Rights Agent with like effect as if originally named as Rights Agent hereunder, without any further act or deed; but if for any reason
it becomes necessary or appropriate, the predecessor Rights Agent shall execute and deliver, at the expense of the Company, an instrument
transferring to such successor Rights Agent all the authority, powers, and rights of such predecessor Rights Agent hereunder; and upon
request of any successor Rights Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for
more fully and effectually vesting in and confirming to such successor Rights Agent all such authority, powers, rights, immunities, duties,
and obligations.
6.2.2 Notice
of Successor Rights Agent. In the event a successor Rights Agent shall be appointed, the Company shall give notice thereof to the
predecessor Rights Agent and the transfer agent for the Class A Common Stock not later than the effective date of any such appointment.
6.2.3 Merger
or Consolidation of Rights Agent. Any corporation into which the Rights Agent may be merged or with which it may be consolidated
or any corporation resulting from any merger or consolidation to which the Rights Agent shall be a party shall be the successor Rights
Agent under this Agreement without any further act.
6.3 Fees
and Expenses of Rights Agent.
6.3.1 Remuneration.
The Company agrees to pay the Rights Agent reasonable remuneration for its services as such Rights Agent hereunder and will reimburse
the Rights Agent upon demand for all expenditures that the Rights Agent may reasonably incur in the execution of its duties hereunder.
6.3.2 Further
Assurances. The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and
delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Rights Agent for the carrying
out or performing of the provisions of this Agreement.
6.4 Liability
of Rights Agent.
6.4.1 Reliance
on Company Statement. Whenever in the performance of its duties under this Agreement, the Rights Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established
by a statement signed by the Chief Executive Officer or Chief Financial Officer and delivered to the Rights Agent. The Rights Agent may
rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Agreement.
6.4.2 Indemnity.
The Rights Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith. Subject to Section 6.6,
the Company agrees to indemnify the Rights Agent and save it harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Rights Agent in the execution of this Agreement except as a result of the
Rights Agent’s gross negligence, willful misconduct, or bad faith.
6.4.3 Exclusions.
The Rights Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or execution
of any Right (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Right; nor shall it by any act hereunder be deemed to make any representation or warranty as to
the authorization or reservation of any shares of Class A Common Stock to be issued pursuant to this Agreement or any Right or as
to whether any shares of Class A Common Stock will, when issued, be valid and fully paid and nonassessable.
6.5 Acceptance
of Agency. The Rights Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms
and conditions herein set forth.
6.6 Waiver.
The Rights Agent hereby waives any right of set-off or any other right, title, interest or claim of any kind (“Claim”)
in, or to any distribution of, the Trust Account (as defined in that certain Investment Management Trust Agreement, dated as of the date
hereof, by and between the Company and the Rights Agent as trustee thereunder) and hereby agrees not to seek recourse, reimbursement,
payment or satisfaction for any Claim against the Trust Account for any reason whatsoever.
7. Miscellaneous
Provisions.
7.1 Successors.
All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns.
7.2 Notices.
Any notice, statement or demand authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right to
or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private
courier service within five days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by
the Company with the Rights Agent), as follows:
Monterey Capital Acquisition Corporation
419 Webster Street
Monterey, California 93940
Attn: Bala Padmakumar
Any notice, statement or demand
authorized by this Agreement to be given or made by the holder of any Right or by the Company to or on the Rights Agent shall be sufficiently
given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after
deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Rights Agent with the Company), as
follows:
Continental Stock Transfer &
Trust Company One State Street, 30th Floor New York, NY 10004 Attn: Compliance Department
and
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Thomas R. Burton, III, Esq.,
and Jeffrey P. Schultz
and
EF Hutton, division of Benchmark Investments,
LLC
590 Madison Avenue,
39th Floor
New York, NY 10022
Attn.: [_____]
and
Seward & Kissel LLP
One Battery Park Plaza
New York, New York, 10004
Attn: Keith J. Billotti, Esq.
7.3 Applicable
Law. The validity, interpretation, and performance of this Agreement and of the Rights shall be governed in all respects by the laws
of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive
laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in
any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for
the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby
waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons
to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested,
postage prepaid, addressed to it at the address set forth in Section 7.2 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the Company in any action, proceeding or claim.
7.4 Persons
Having Rights under this Agreement. Nothing in this Agreement expressed and nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the
registered holders of the Rights and, any right, remedy, or claim under or by reason of this Agreement or of any covenant, condition,
stipulation, promise, or agreement hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Agreement
shall be for the sole and exclusive benefit of the parties hereto and their successors and assigns and of the registered holders of the
Rights.
7.5 Examination
of this Agreement. A copy of this Agreement shall be available at all reasonable times at the office of the Rights Agent in the Borough
of Manhattan, City and State of New York, for inspection by the registered holder of any Right. The Rights Agent may require any such
holder to submit his, her or its Right for inspection by it.
7.6 Counterparts.
This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
7.7 Effect
of Headings. The Section headings herein are for convenience only and are not part of this Agreement and shall not affect the
interpretation thereof.
7.8 Amendments.
This Agreement may be amended by the parties hereto without the consent of any registered holder for the purpose of curing any ambiguity,
or of curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect
to matters or questions arising under this Agreement as the parties may deem necessary or desirable and that the parties deem shall not
adversely affect the interest of the registered holders. All other modifications or amendments shall require the written consent or vote
of the registered holders of a majority of the then outstanding Rights. The provisions of Section 3, Section 7.4 and this Section 7.8
may not be modified, amended or deleted without the prior written consent of EF Hutton.
7.9 Severability.
This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the
validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to
such invalid or unenforceable provision as may be possible and be valid and enforceable.
[Signature Page Follows]
IN WITNESS WHEREOF, this Agreement
has been duly executed by the parties hereto as of the day and year first above written.
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MONTEREY CONTINENTAL ACQUISITION CORPORATION |
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By: |
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Name: Bala Padmakumar |
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Title: Chief Executive Officer |
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CONTINENTAL STOCK TRANSFER &
TRUST COMPANY |
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By: |
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Name: |
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Title: |
EXHIBIT A
MONTEREY CAPITAL ACQUISITION CORPORATION.
INCORPORATED UNDER THE LAWS OF THE STATE OF
DELAWARE
RIGHT
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP
THIS
CERTIFIES THAT, for value received [ ] is the registered holder of a right or rights (the “Right”)
to automatically receive one-tenth of one share of Class A common stock, $0.0001 par value (“Class A Common Stock”),
of Monterey Capital Acquisition Corporation (the “Company”) for each Right evidenced by this Rights Certificate
on the Company’s completion of an initial business combination (as defined in the prospectus relating to the Company’s initial
public offering (“Prospectus”)) upon surrender of this Right Certificate pursuant to the Rights Agreement between
the Company and Continental Stock Transfer & Trust Company, as Rights Agent. In no event will the Company be required to net
cash settle any Right.
Upon liquidation of the Company
in the event an initial business combination is not consummated during the required period as identified in the Company’s Amended
and Restated Certificate of Incorporation, the Right shall expire and be worthless. As more fully described in the Prospectus, the holder
of a Right shall have no right or interest of any kind in the Company’s trust account (as defined in the Prospectus) established
in connection with the Company’s initial public offering.
Upon due presentment for registration
of transfer of the Right Certificate at the office or agency of the Rights Agent, a new Right Certificate or Right Certificates of like
tenor and evidencing in the aggregate a like number of Rights shall be issued to the transferee in exchange for this Right Certificate,
without charge except for any applicable tax or other governmental charge. The Company shall not issue fractional shares of Class A
Common Stock upon exchange of Rights. The Company reserves the right to deal with any fractional entitlement at the relevant time in any
manner (as provided in the Rights Agreement).
The Company and the Right
Agent may deem and treat the registered holder as the absolute owner of this Right Certificate (notwithstanding any notation of ownership
or other writing hereon made by anyone), for the purpose of any conversion hereof, of any distribution to the registered holder, and for
all other purposes, and neither the Company nor the Right Agent shall be affected by any notice to the contrary.
This Right does not entitle
the registered holder to any of the rights of a stockholder of the Company.
Dated:
| CHAIRMAN |
| CHIEF FINANCIAL
OFFICER |
The following abbreviations, when used in the inscription
on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
| TEN COM -
as tenants in common | UNIF
GIFT MIN ACT |
-____________ |
Custodian |
|
| | | (Cust) |
|
(Minor) |
| TEN ENT - as tenants by the entireties |
|
under Uniform Gifts to Minors Act |
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(State) |
| JT TEN - as joint tenants with right of survivorship and not as tenants in common |
|
Additional Abbreviations may also be used though
not in the above list.
Monterey Capital Acquisition Corporation
The Company will furnish without
charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special
rights of each class of shares or series thereof of the Company and the qualifications, limitations, or restrictions of such preferences
and/or rights. This certificate and the rights represented thereby are issued and shall be held subject to all the provisions of the Amended
and Restated Certificate of Incorporation and all amendments thereto and resolutions of the Board of Directors providing for the issue
of Class A Common Stock (copies of which may be obtained from the secretary of the Company), to all of which the holder of this certificate
by acceptance hereof assents.
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For value received, |
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hereby sell, assign and transfer unto |
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING
ZIP CODE, OF ASSIGNEE)
Rights represented by the within Certificate, and do hereby irrevocably
constitute and appoint
Attorney to transfer said rights on the books of the within named
Company will full power of substitution in the premises.
Dated
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| Notice: | The signature to this assignment must correspond with the name as written upon the face of the certificate
in every particular, without alteration or enlargement or any change whatever. |
Signature(s) Guaranteed:
THE SIGNATURE(S) SHOULD
BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).
The holder of this certificate
shall have no right or interest of any kind in or to the funds held in the Company’s trust account (as defined in the Prospectus).
Exhibit 5.1
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Chrysler Center
666 Third Avenue
New York, NY 10017
212-935-3000
www.mintz.com |
April 22, 2022
Monterey Capital Acquisition Corporation
419 Webster Street
Monterey, California 93940
Ladies and Gentlemen:
We have acted as legal counsel to Monterey Capital
Acquisition Corporation, a Delaware corporation (the “Company”), in connection with the preparation and filing with the Securities
and Exchange Commission (the “Commission”) of a Registration Statement on Form S-1 (the “Registration Statement”),
pursuant to which the Company is registering the offer and sale under the Securities Act of 1933, as amended (the “Securities Act”),
of an aggregate of (a) 11,500,000 units of the Company (the “Units”), including up to an additional 1,500,000 Units subject
to the underwriters’ option, with each Unit consisting of one share of Class A common stock, par value $0.0001 per share (the
“Common Stock”) and one redeemable warrant, entitling the holder thereof to purchase one share of Common Stock (the “Warrants”),
and one right to receive one-tenth (1/10) of one share of Common Stock upon the consummation of an initial business combination (the “Rights”),
as set forth in the prospectus included in the Registration Statement (the “Prospectus”), (b) all shares of Common Stock,
all Warrants, and all Rights in each case, issued as part of the Units, (c) all shares of Common Stock underlying the Warrants (the
“Warrant Shares”), and (d) all shares of Common Stock underlying the Rights (the “Rights Shares”). The term
“Units” also includes any additional Units (and the underlying securities) that may be issued by the Company pursuant to Rule 462(b) under
the Securities Act in connection with the Offering.
The Units are to be sold by the Company pursuant
to an underwriting agreement (the “Underwriting Agreement”) to be entered into by and between the Company and the underwriters
named therein that is filed as Exhibit 1.1 to the Registration Statement. This opinion is being rendered in connection with the filing
of the Registration Statement with the Commission. All capitalized terms used herein and not otherwise defined shall have the respective
meanings given to them in the Registration Statement.
In connection with this opinion, we have examined
the Company’s Certificate of Incorporation and By Laws, each as currently in effect, and the form of the Underwriting Agreement;
the form of warrant agreement (the “Warrant Agreement”) proposed to be entered into by the Company and Continental Stock Transfer
and Trust Company (“Continental”), as warrant agent (the “Warrant Agent”) that is filed as Exhibit 4.5 to
the Registration Statement, the form of rights agreement (the “Rights Agreement”) proposed to be entered into by the Company
and Continental, as rights agent (the “Rights Agent”) that is to be filed as Exhibit 4.6 and the form of Unit certificate
filed as Exhibit 4.1 to the Registration Statement (together with the Underwriting Agreement, the Warrant Agreement and Rights Agreement
the “Transaction Documents”), and such other records of the corporate proceedings of the Company and certificates of the Company’s
officers as we have deemed relevant; and the Registration Statement and the exhibits thereto.
In
our examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies
and the authenticity of the originals of such copies, that all parties to such documents had
the power, corporate or other, to enter into and perform all obligations thereunder and all such documents have been duly authorized by
all requisite action, corporate or other, and duly executed and delivered by all parties thereto. As to any facts material to the opinions
expressed herein that we did not independently establish or verify, we have relied upon oral or written statements and representations
of officers and other representatives of the Company and others. In rendering the opinions set forth below, we have further assumed that,
before the issuance of the Units, the Common Stock, the Rights, and the Warrants, (i) the Registration Statement will have become
effective under the Securities Act and (ii) the conditions to consummating the transactions contemplated by the Underwriting Agreement
will have been satisfied or duly waived and such transactions are consummated.
Our opinion is limited to the
laws of the State of New York and the General Corporation Law of the State of Delaware and we express no opinion with respect to
the laws of any other jurisdiction. No opinion is expressed herein with respect to the qualification of the Units, the Warrants, the Rights
or the Common Stock under the securities or blue sky laws of any state or any foreign jurisdiction.
| BOSTON |
LONDON |
LOS
ANGELES |
NEW YORK |
SAN DIEGO |
SAN
FRANCISCO |
WASHINGTON |
| MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO,
P.C. |
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Please note that we are opining only as to the
matters expressly set forth herein, and no opinion should be inferred as to any other matters. This opinion is based upon currently existing
statutes, rules, regulations and judicial decisions, and we disclaim any obligation to advise you of any change in any of these sources
of law or subsequent legal or factual developments which might affect any matters or opinions set forth herein.
Based on the foregoing, and subject to the qualifications
stated herein, we are of the opinion that:
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1. |
The Units, when delivered to and paid for by the underwriters in accordance with the terms of the Underwriting Agreement, and assuming the due authorization, execution and delivery thereof by Continental Stock Transfer & Trust Company, as transfer agent, will constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). |
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2. |
The Common Stock included in the Units, when the Units are delivered to and paid for by the underwriters in accordance with the terms of the Underwriting Agreement, will be validly issued, fully paid and nonassessable. |
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3. |
The Warrants included in the Units, when the Units are delivered to and paid for by the underwriters in accordance with the terms of the Underwriting Agreement, and assuming the due authorization, execution and delivery of such Warrants by Continental Stock Transfer & Trust Company, as the warrant agent, will constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). |
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4. |
The Common Stock issuable upon exercise of the Warrants, assuming the due authorization, execution and delivery of such Warrants by each of the Company and the Warrant Agent, in accordance with the Warrant Agreement, will be validly issued, fully paid, and nonassessable. |
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5. |
The Rights included in the Units, when the Units are delivered to and paid for by the underwriters in accordance with the terms of the Underwriting Agreement, and assuming the due authorization, execution and delivery of such Rights by Continental Stock Transfer & Trust Company, as the rights agent, will constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). |
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6. |
The Common Stock issuable upon exercise of the Rights, assuming the due authorization, execution and delivery of such Rights by each of the Company and the Rights Agent, in accordance with the Rights Agreement, will be validly issued, fully paid, and nonassessable. |
We understand that you wish to file this opinion
with the Commission as an exhibit to the Registration Statement in accordance with the requirements of Item 601(b)(5) of Regulation
S-K promulgated under the Securities Act and to reference the firm’s name under the caption “Legal Matters” in the prospectus
which forms part of the Registration Statement, and we hereby consent thereto. In giving this consent, we do not admit that we are within
the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the
Commission promulgated thereunder.
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Very truly yours, |
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/s/ Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. |
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Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. |
Exhibit 10.1
[____________], 2022
Monterey Capital Acquisition Corporation
419 Webster Street
Monterey, CA 93940
Re: Initial
Public Offering
Ladies and Gentlemen:
This letter (this “Letter
Agreement”) is being delivered to you in accordance with the Underwriting Agreement (the “Underwriting Agreement”)
entered into by and among Monterey Capital Acquisition Corporation, a Delaware corporation (the “Company”),
and EF Hutton, division of Benchmark Investments, LLC, as representative (the “Representative”) of the several
underwriters (each, an “Underwriter” and collectively, the “Underwriters”), relating
to an underwritten initial public offering (the “Public Offering”), of 11,500,000 of the Company’s units
(including up to 1,500,000 units that may be purchased to cover over-allotments, if any) (the “Units”), each
comprised of one share of the Company’s Class A common stock, par value $0.0001 per share (the “Common Stock”),
one redeemable warrant and one right to receive one-tenth (1/10) of one share of Common Stock (the “Rights”).
Each warrant (a “Warrant”) entitles the holder thereof to purchase one share of Common Stock at a price of $11.50
per share, subject to adjustment. The Units will be sold in the Public Offering pursuant to a registration statement on Form S-1
(File No. 333-[_____]) and prospectus (the “Prospectus”) filed by the Company with the U.S. Securities
and Exchange Commission (the “Commission”) and the Company has applied to have the Units listed on The Nasdaq
Global Market. Certain capitalized terms used herein are defined in paragraph 11 hereof.
In order to induce the Company
and the Underwriters to enter into the Underwriting Agreement and to proceed with the Public Offering and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, each of Monterrey Acquisition Sponsor, LLC, a Delaware limited
liability company (the “Sponsor”), and the undersigned individuals, each of whom is a member of the Company’s
board of directors and/or management team or an advisor of the Company (each, an “Insider” and collectively,
the “Insiders”), hereby agrees with the Company as follows:
1. The
Sponsor and each Insider agrees that if the Company seeks stockholder approval of a proposed Business Combination, then in connection
with such proposed Business Combination, it, he or she shall (i) vote any shares of Capital Stock owned by it, him or her in favor
of any proposed Business Combination and (ii) not redeem any shares of Common Stock owned by it, him or her in connection with such
stockholder approval. If the Company engages in a tender offer in connection with any proposed Business Combination, the Sponsor and
each Insider agrees that it, he or she will not seek to sell its, his or her shares of Capital Stock to the Company in connection with
such tender offer.
2. The
Sponsor and each Insider hereby agrees that in the event that the Company fails to consummate a Business Combination within the timeframe
set forth in the Company’s amended and restated certificate of incorporation, as it may be amended from time to time (the “Charter”),
the Sponsor and each Insider shall take all reasonable steps to cause the Company to (i) cease all operations except for the purpose
of winding up, (ii) as promptly as reasonably possible but not more than 10 business days thereafter, subject to lawfully available
funds therefor, redeem 100% of the Common Stock sold as part of the Units in the Public Offering (the “Offering Shares”),
at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account (as defined below), including
interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $100,000
of interest to pay dissolution expenses), divided by the number of then outstanding Offering Shares, which redemption will completely
extinguish all Public Stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if
any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval
of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in the case
of clauses (ii) and (iii) to the Company’s obligations under Delaware law to provide for claims of creditors and other
requirements of applicable law. The Sponsor and each Insider agrees not to propose any amendment to the Charter to modify (i) the
substance or timing of the ability of holders of Offering Shares to allow redemption in connection with a Business Combination or amendments
to the Charter prior thereto or (ii) (A) the Company’s obligation to redeem 100% of the Offering Shares if the Company
does not complete a Business Combination within such time set forth in the Charter or (B) any other provisions relating to stockholders’
rights or pre-initial Business Combination activity, unless the Company provides its public stockholders with the opportunity to redeem
their shares of Common Stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to
the Company to pay its taxes, divided by the number of then outstanding Offering Shares.
The Sponsor and each Insider
acknowledges that it, he or she has no right, title, interest or claim of any kind in or to any monies held in the Trust Account or any
other asset of the Company as a result of any liquidation of the Company with respect to the Founder Shares held by it, him or her. The
Sponsor and each Insider hereby further waives, with respect to any shares of Common Stock held by it, him or her, if any, whether acquired
now or hereafter, any redemption rights it, he or she may have in connection with the consummation of a Business Combination or amendments
to the Charter prior thereto, including, without limitation, any such rights available in the context of a stockholder vote to approve
such Business Combination or a stockholder vote to approve an amendment to the Charter to modify (i) (A) the substance or timing
of the Company’s obligation to allow redemption in connection with a Business Combination or to redeem 100% of the Offering Shares
if the Company has not consummated a Business Combination within the time period set forth in the Charter or (B) any other provisions
relating to stockholders’ rights or pre-initial Business Combination activity or (ii) in the context of a tender offer made
by the Company to purchase shares of Common Stock (although the Sponsor, the Insiders and their respective affiliates shall be entitled
to redemption and liquidation rights with respect to any Offering Shares it or they hold if the Company fails to consummate a Business
Combination within the time period set forth in the Charter).
3. During
the period commencing on the date of the Underwriting Agreement and ending 180 days after such date, the Sponsor and each Insider shall
not, without the prior written consent of the Representative, (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge,
grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and the rules and regulations of the Commission promulgated thereunder,
with respect to any Units, shares of Capital Stock, Warrants, Rights or any securities convertible into, or exercisable, or exchangeable
for, shares of Capital Stock owned by it, him or her, (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of any Units, shares of Capital Stock, Warrants, Rights or any securities
convertible into, or exercisable, or exchangeable for, shares of Capital Stock owned by it, him or her, whether any such transaction is
to be settled by delivery of such securities, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction
specified in clause (i) or (ii). Each of the Insiders and the Sponsor acknowledges and agrees that, prior to the effective date of
any release or waiver, of the restrictions set forth in this paragraph 3 or paragraph 7 below, the Company shall announce the impending
release or waiver by press release through a major news service at least two business days before the effective date of the release or
waiver. Any release or waiver granted shall only be effective two business days after the publication date of such press release. The
provisions of this paragraph will not apply if the release or waiver is effected solely to permit a transfer not for consideration and
the transferee has agreed in writing to be bound by the same terms described in this Letter Agreement to the extent and for the duration
that such terms remain in effect at the time of the transfer.
4. In
the event of the liquidation of the Trust Account upon the failure of the Company to consummate its initial Business Combination within
the time period set forth in the Charter, the Sponsor (which for purposes of clarification shall not extend to any other shareholders,
members or managers of the Sponsor) (the “Indemnitor”) agrees to indemnify and hold harmless the Company against
any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all legal or other expenses
reasonably incurred in investigating, preparing or defending against any litigation, whether pending or threatened) to which the Company
may become subject as a result of any claim by (i) any third party for services rendered (other than the Company’s independent
public accountants) or products sold to the Company or (ii) any prospective target business with which the Company has entered into
a written letter of intent, confidentiality or other similar agreement or Business Combination agreement (a “Target”);
provided, however, that such indemnification of the Company by the Indemnitor shall (x) apply only to the extent necessary to ensure
that such claims by a third party or a Target do not reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00
per Offering Share and (ii) the actual amount per Offering Share held in the Trust Account as of the date of the liquidation of
the Trust Account, if less than $10.10 per Offering Share is then held in the Trust Account due to reductions in the value of the trust
assets, less interest earned on the Trust Account which may be withdrawn to pay taxes, (y) not apply to any claims by a third party
or a Target which executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable)
and (z) not apply to any claims under the Company’s indemnity of the Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. The Indemnitor shall have the right to defend against any such claim with counsel of its
choice reasonably satisfactory to the Company if, within 15 days following written receipt of notice of the claim to the Indemnitor,
the Indemnitor notifies the Company in writing that it shall undertake such defense.
5. To
the extent that the Underwriters do not exercise their over-allotment option to purchase up to an additional 1,500,000 Units in full
within 45 days from the date of the Prospectus (and as further described in the Prospectus), the Sponsor agrees to forfeit, at no cost,
a number of Founder Shares in the aggregate equal to 375,000 multiplied by a fraction, (i) the numerator of which is 1,500,000 minus
the number of Units purchased by the Underwriters upon the exercise of their over-allotment option, and (ii) the denominator of
which is 1,500,000. The Sponsor will be required to forfeit only that number of Founder Shares as is necessary so that the Initial Stockholders
will own an aggregate of 20.0% of the Company’s issued and outstanding shares of Capital Stock after the Public Offering.
6. (a) Each
of the officers and directors of the Company hereby agrees not to participate in the formation of, or become an officer or director of,
any other special purpose acquisition company with a class of securities registered under the Exchange Act until the Company has entered
into a definitive agreement regarding an initial Business Combination or until the Company has liquidated the Trust Account.
(b) The
Sponsor and each Insider hereby agrees and acknowledges that: (i) the Underwriters and the Company would be irreparably injured in
the event of a breach by such Sponsor or an Insider of its, his or her obligations under paragraphs 1, 2, 3, 4, 5, 6(a), 7(a), 7(b), and
9, as applicable, of this Letter Agreement (ii) monetary damages may not be an adequate remedy for such breach and (iii) the
non-breaching party shall be entitled to injunctive relief, in addition to any other remedy that such party may have in law or in equity,
in the event of such breach.
7. (a) The
Sponsor and each Insider agrees that it, he or she shall not Transfer any Founder Shares (or shares of Common Stock issuable upon conversion
thereof) until the earlier of (A) 180 days after the completion of the Company’s initial Business Combination or (B) subsequent
to the Business Combination, (x) if the last sale price of the Common Stock equals or exceeds $12.00 per share (as adjusted for
stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period
commencing at least 150 days after the Company’s initial Business Combination or (y) the date on which the Company completes
a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s
stockholders having the right to exchange their shares of Common Stock for cash, securities or other property (the “Founder
Shares Lock-up Period”).
(b) The
Sponsor and each Insider agrees that it, he or she shall not Transfer any Private Placement Warrants or shares of Common Stock issued
or issuable upon the exercise of the Private Placement Warrants, until after the completion of a Business Combination (the “Private
Placement Lock-up Period”, together with the Founder Shares Lock-up Period, the “Lock-up Periods”).
(c) Notwithstanding
the provisions set forth in paragraphs 7(a) and (b), Transfers of the Founder Shares, Private Placement Warrants and shares of Common
Stock issued or issuable upon the exercise or conversion of the Private Placement Warrants or the Founder Shares that are held by the
Sponsor, any Insider or any of their permitted transferees (that have complied with this paragraph 7(c)), are permitted (a) to the
Company’s officers or directors, any affiliate or family member of any of the Company’s officers or directors or any affiliate
of the Sponsor or to any member(s) of the Sponsor; (b) in the case of an individual, by gift to a member of such individual’s
immediate family or to a trust, the beneficiary of which is a member of such individual’s immediate family, an affiliate of such
individual or to a charitable organization; (c) in the case of an individual, by virtue of laws of descent and distribution upon
death of such individual; (d) in the case of an individual, pursuant to a qualified domestic relations order; (e) by private
sales or transfers made in connection with the consummation of an initial Business Combination at prices no greater than the price at
which the shares or warrants were originally purchased; (f) in the event of the Company’s liquidation prior to the completion
of an initial Business Combination; (g) by virtue of the laws of the State of Delaware or the Sponsor’s limited liability
company agreement upon dissolution of the Sponsor, or (h) in the event of the Company’s liquidation, merger, capital stock
exchange, reorganization or other similar transaction which results in all of the Company’s stockholders having the right to exchange
their shares of common stock for cash, securities or other property subsequent to the completion of the Company’s initial Business
Combination; provided, however, that in the case of clauses (a) through (e) or (g), these permitted transferees
must enter into a written agreement with the Company agreeing to be bound by the transfer restrictions herein.
8. The
Sponsor and each Insider represents and warrants that it, he or she has never been suspended or expelled from membership in any securities
or commodities exchange or association or had a securities or commodities license or registration denied, suspended or revoked. Each
Insider’s biographical information furnished to the Company (including any such information included in the Prospectus) is true
and accurate in all respects and does not omit any material information with respect to the Insider’s background. Each Insider’s
questionnaire furnished to the Company is true and accurate in all respects. Each Insider represents and warrants that: it, he or she
is not subject to or a respondent in any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or
refrain from any act or practice relating to the offering of securities in any jurisdiction; it, he or she has never been convicted of,
or pleaded guilty to, any crime (i) involving fraud, (ii) relating to any financial transaction or handling of funds of another
person, or (iii) pertaining to any dealings in any securities and it, he or she is not currently a defendant in any such criminal
proceeding.
9. Except
as disclosed in the Prospectus, neither the Sponsor nor any officer, director, advisor or affiliate of the Sponsor, nor any officer,
director or advisor of the Company, shall receive from the Company any finder’s fee, reimbursement, consulting fee, monies in respect
of any repayment of a loan or other compensation prior to, or in connection with any services rendered in order to effectuate, the consummation
of the Company’s initial Business Combination (regardless of the type of transaction that it is).
10. The
Sponsor and each Insider has full right and power, without violating any agreement to which it is bound (including, without limitation,
any non-competition or non-solicitation agreement with any employer or former employer), to enter into this Letter Agreement and, as applicable,
to serve as an officer and/or director on the board of directors or an advisor of the Company and hereby consents to being named in the
Prospectus as an officer and/or director of the Company or an advisor of the Company.
11. As
used herein, (i) “Business Combination” shall mean a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination, involving the Company and one or more businesses; (ii) “Capital
Stock” shall mean, collectively, the Common Stock and the Founder Shares; (iii) “Founder Shares”
shall mean (a) the 2,875,000 shares of the Company’s Class B common stock, par value $0.0001 per share, initially issued
to the Sponsor (up to 375,000 Shares of which are subject to complete or partial forfeiture by the Sponsor if the over-allotment option
is not exercised by the Underwriters) for an aggregate purchase price of $25,000, or $0.009 per share, prior to the consummation of the
Public Offering; (iv) “Initial Stockholders” shall mean the Sponsor and any Insider that holds Founder
Shares; (v) “Private Placement Warrants” shall mean the 3,200,000 Warrants (or 3,500,000 Warrants if the
over-allotment option is exercised in full) that the Sponsor has agreed to purchase for an aggregate purchase price of $3,200,000 (or
$3,500,000 if the over-allotment option is exercised in full) in the aggregate, or $1.00 per Warrant, in a private placement that shall
occur simultaneously with the consummation of the Public Offering; (vi) “Public Stockholders” shall mean
the holders of securities issued in the Public Offering; (vii) “Trust Account” shall mean the trust fund
into which a portion of the net proceeds of the Public Offering shall be deposited; and (viii) “Transfer”
shall mean the (a) sale of, offer to sell, contract or agreement to sell, hypothecate, pledge, grant of any option to purchase or
otherwise dispose of or agreement to dispose of, directly or indirectly, or establishment or increase of a put equivalent position or
liquidation with respect to or decrease of a call equivalent position within the meaning of Section 16 of the Exchange Act, and the
rules and regulations of the Commission promulgated thereunder with respect to, any security, (b) entry into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any security, whether any
such transaction is to be settled by delivery of such securities, in cash or otherwise, or (c) public announcement of any intention
to effect any transaction specified in clause (a) or (b).
12. The
Company will maintain an insurance policy or policies providing directors’ and officers’ liability insurance, and each director
of the Company shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage
available for any of the Company’s directors or officers.
13. This
Letter Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and
supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they
relate in any way to the subject matter hereof or the transactions contemplated hereby. This Letter Agreement may not be changed, amended,
modified or waived (other than to correct a typographical error) as to any particular provision, except by a written instrument executed
by all parties hereto.
14. No
party hereto may assign either this Letter Agreement or any of its rights, interests, or obligations hereunder without the prior written
consent of the other parties. Any purported assignment in violation of this paragraph shall be void and ineffectual and shall not operate
to transfer or assign any interest or title to the purported assignee. This Letter Agreement shall be binding on the Sponsor and each
Insider and their respective successors, heirs and assigns and permitted transferees.
15. Nothing
in this Letter Agreement shall be construed to confer upon, or give to, any person or corporation other than the parties hereto any right,
remedy or claim under or by reason of this Letter Agreement or of any covenant, condition, stipulation, promise or agreement hereof. All
covenants, conditions, stipulations, promises and agreements contained in this Letter Agreement shall be for the sole and exclusive benefit
of the parties hereto and their successors, heirs, personal representatives and assigns and permitted transferees; provided, however,
that the Representatives on behalf of the Underwriters are third party beneficiaries of this Letter Agreement.
16. This
Letter Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
17. This
Letter Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the
validity or enforceability of this Letter Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Letter Agreement a provision
as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.
18. This
Letter Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving
effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The parties
hereto (i) all agree that any action, proceeding, claim or dispute arising out of, or relating in any way to, this Letter Agreement
shall be brought and enforced in the courts of New York City, in the State of New York, and irrevocably submit to such jurisdiction and
venue, which jurisdiction and venue shall be exclusive and (ii) waive any objection to such exclusive jurisdiction and venue or that
such courts represent an inconvenient forum.
19. Any
notice, consent or request to be given in connection with any of the terms or provisions of this Letter Agreement shall be in writing
and shall be sent by express mail or similar private courier service, by certified mail (return receipt requested), by hand delivery or
facsimile transmission.
20. This
Letter Agreement shall terminate on the earlier of (i) the expiration of the Lock-up Periods or (ii) the liquidation of the
Company; provided, however, that this Letter Agreement shall earlier terminate in the event that the Public Offering is not consummated
and closed by August 31, 2022; provided further that paragraph 4 of this Letter Agreement shall survive such liquidation.
[Signature Page Follows]
Sincerely,
Acknowledged and Agreed:
MONTEREY CAPITAL ACQUISITION CORPORATION
| By: |
| |
| Name: Bala Padmakumar | |
| Title: Chief Executive Officer | |
[Signature
Page to Letter Agreement]
Exhibit 10.2
THIS PROMISSORY NOTE (“NOTE”) HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT
ONLY AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE THEREOF UNDER THE SECURITIES ACT OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
PROMISSORY NOTE
| Principal Amount: Up to $300,000 |
Dated as of October 6, 2021 |
New York, New York
Monterey Capital Acquisition
Corporation, a Delaware corporation and blank check company (the “Maker”), promises to pay to the order of Monterrey
Acquisition Sponsor, LLC, a Delaware limited liability company, or its registered assigns or successors in interest (the “Payee”),
or order, the principal sum of up to Three Hundred Thousand Dollars ($300,000) in lawful money of the United States of America, on the
terms and conditions described below. All payments on this Note shall be made by check or wire transfer of immediately available funds
or as otherwise determined by the Maker to such account as the Payee may from time to time designate by written notice in accordance with
the provisions of this Note.
1. Principal.
The principal balance of this Note shall be payable by the Maker on the earlier of: (i) June 24, 2022 or (ii) the date
on which Maker consummates an initial public offering of its securities. The principal balance may be prepaid at any time. Under no circumstances
shall any individual, including but not limited to any officer, director, employee or shareholder of the Maker, be obligated personally
for any obligations or liabilities of the Maker hereunder.
2. Interest.
No interest shall accrue on the unpaid principal balance of this Note.
3. Drawdown
Requests. Maker and Payee agree that Maker may request up to Three Hundred Thousand Dollars ($300,000)
for costs reasonably related to Maker’s initial public offering of its securities. The principal of this Note may be drawn down
from time to time prior to the earlier of: (i) June 24, 2022 or (ii) the date on which Maker consummates an initial public
offering of its securities, upon written request from Maker to Payee (each, a “Drawdown Request”). Each Drawdown Request
must state the amount to be drawn down, and must not be an amount less than Ten Thousand Dollars ($10,000) unless agreed upon by Maker
and Payee. Payee shall fund each Drawdown Request no later than five (5) business days after receipt of a Drawdown Request; provided,
however, that the maximum amount of drawdowns collectively under this Note is Three Hundred Thousand Dollars ($300,000). Once an amount
is drawn down under this Note, it shall not be available for future Drawdown Requests even if prepaid. No fees, payments or other amounts
shall be due to Payee in connection with, or as a result of, any Drawdown Request by Maker. Notwithstanding the foregoing, all payments
shall be applied first to payment in full of any costs incurred in the collection of any sum due under this Note, including (without limitation)
reasonable attorneys’ fees, and then to the reduction of the unpaid principal balance of this Note.
4 Application
of Payments. All payments shall be applied first to payment in full of any costs incurred in
the collection of any sum due under this Note, including (without limitation) reasonable attorney’s fees, then to the payment in
full of any late charges and finally to the reduction of the unpaid principal balance of this Note.
5. Events
of Default. The following shall constitute an event of default (“Event of Default”):
(a) Failure
to Make Required Payments. Failure by Maker to pay the principal amount due pursuant to this Note within five (5) business days
of the date specified above.
(b) Voluntary
Bankruptcy, Etc. The commencement by Maker of a voluntary case under any applicable bankruptcy, insolvency, reorganization, rehabilitation
or other similar law, or the consent by it to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of Maker or for any substantial part of its property, or the making by it of any assignment for
the benefit of creditors, or the failure of Maker generally to pay its debts as such debts become due, or the taking of corporate action
by Maker in furtherance of any of the foregoing.
(c) Involuntary
Bankruptcy, Etc. The entry of a decree or order for relief by a court having jurisdiction in the premises in respect of Maker in an
involuntary case under any applicable bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of Maker or for any substantial part of its property, or ordering the winding-up or liquidation
of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days.
6. Remedies.
(a) Upon
the occurrence of an Event of Default specified in Section 5(a) hereof, Payee may, by written notice to Maker, declare this
Note to be due immediately and payable, whereupon the unpaid principal amount of this Note, and all other amounts payable hereunder, shall
become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the documents evidencing the same to the contrary notwithstanding.
(b) Upon
the occurrence of an Event of Default specified in Sections 5(b) and 5(c), the unpaid principal balance of this Note, and all other
sums payable with regard to this Note, shall automatically and immediately become due and payable, in all cases without any action on
the part of Payee.
7. Waivers.
Maker and all endorsers and guarantors of, and sureties for, this Note waive presentment for payment, demand, notice of dishonor, protest,
and notice of protest with regard to the Note, all errors, defects and imperfections in any proceedings instituted by Payee under the
terms of this Note, and all benefits that might accrue to Maker by virtue of any present or future laws exempting any property, real or
personal, or any part of the proceeds arising from any sale of any such property, from attachment, levy or sale under execution, or providing
for any stay of execution, exemption from civil process, or extension of time for payment; and Maker agrees that any real estate that
may be levied upon pursuant to a judgment obtained by virtue hereof or any writ of execution issued hereon, may be sold upon any such
writ in whole or in part in any order desired by Payee.
8. Unconditional
Liability. Maker hereby waives all notices in connection with the delivery, acceptance, performance,
default, or enforcement of the payment of this Note, and agrees that its liability shall be unconditional, without regard to the liability
of any other party, and shall not be affected in any manner by any indulgence, extension of time, renewal, waiver or modification granted
or consented to by Payee, and consents to any and all extensions of time, renewals, waivers, or modifications that may be granted by Payee
with respect to the payment or other provisions of this Note, and agrees that additional makers, endorsers, guarantors, or sureties may
become parties hereto without notice to Maker or affecting Maker’s liability hereunder.
9. Notices.
All notices, statements or other documents which are required or contemplated by this Note shall be made in writing and delivered: (i) personally
or sent by first class registered or certified mail, overnight courier service or facsimile or electronic transmission to the address
designated in writing, (ii) by facsimile to the number most recently provided to such party or such other address or fax number as
may be designated in writing by such party or (iii) by electronic mail, to the electronic mail address most recently provided to
such party or such other electronic mail address as may be designated in writing by such party. Any notice or other communication so transmitted
shall be deemed to have been given on the day of delivery, if delivered personally, on the business day following receipt of written confirmation,
if sent by facsimile or electronic transmission, one (1) business day after delivery to an overnight courier service or five (5) days
after mailing if sent by mail.
10. Construction.
THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF.
11. Severability.
Any provision contained in this Note which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
12. Trust
Waiver. Notwithstanding anything herein to the contrary, the Payee hereby waives any and all
right, title, interest or claim of any kind (“Claim”) in or to any distribution of or from the trust account to be
established in which the proceeds of the initial public offering (the “IPO”) to be conducted by the Maker (including
the deferred underwriters discounts and commissions) and the proceeds of the sale of the warrants to be issued in a private placement
to occur prior to the closing of the IPO are to be deposited, as described in greater detail in the registration statement and prospectus
to be filed with the Securities and Exchange Commission in connection with the IPO, and hereby agrees not to seek recourse, reimbursement,
payment or satisfaction for any Claim against the trust account for any reason whatsoever.
13. Amendment;
Waiver. Any amendment hereto or waiver of any provision hereof may be made with, and only with,
the written consent of the Maker and the Payee.
14. Assignment.
No assignment or transfer of this Note or any rights or obligations hereunder may be made by any party hereto (by operation of law or
otherwise) without the prior written consent of the other party hereto and any attempted assignment without the required consent shall
be void.
[Signature page follows]
IN
WITNESS WHEREOF, Maker, intending to be legally bound hereby, has caused this Note to be duly executed by the undersigned as
of the day and year first above written.
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Monterey Capital Acquisition
Corporation |
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|
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By: |
/s/ Bala Padmakumar |
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Name: Bala Padmakumar |
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Title: Chief Executive Officer |
Exhibit 10.3
THIS PROMISSORY NOTE (“NOTE”) HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT
ONLY AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE THEREOF UNDER THE SECURITIES ACT OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
AMENDED AND RESTATED PROMISSORY NOTE
| Principal Amount:
Up to $400,000 | Dated as of February 14,
2022 |
New York, New York
THIS AMENDED AND RESTATED
PROMISSORY NOTE (this “Note”) is made as of this 14th day of February, 2022, by Monterey Capital Acquisition Corporation,
a Delaware corporation and blank check company (the “Maker”), in favor of Monterrey Acquisition Sponsor, LLC, a Delaware
limited liability company, or its registered assigns or successors in interest (the “Payee”).
RECITALS
WHEREAS,
on October 6, 2021, the Maker issued a promissory note in favor of the Payee in an aggregate principal amount of up to Three Hundred
Thousand Dollars ($300,000) (the “Original Note”), and on February 14, 2022, the Maker borrowed Three Hundred
Thousand Dollars ($300,000) thereunder (the “Initial Borrowing”), leaving none of the principal amount available for
borrowing as of the date hereof; and
WHEREAS,
the Maker and the Payee desire to amend and restate the Original Note to increase the amount of the Original Note in accordance with Section 13
of the Original Note.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Original
Note is hereby amended and restated as follows:
Maker promises to pay to the
order of Payee, or order, the principal sum of up to Four Hundred Thousand Dollars ($400,000) in lawful money of the United States of
America, on the terms and conditions described below. All payments on this Note shall be made by check or wire transfer of immediately
available funds or as otherwise determined by the Maker to such account as the Payee may from time to time designate by written notice
in accordance with the provisions of this Note.
1. Principal.
The principal balance of this Note shall be payable by the Maker on the earlier of: (i) June 24, 2022 or (ii) the date
on which Maker consummates an initial public offering of its securities. The principal balance may be prepaid at any time. Under no circumstances
shall any individual, including but not limited to any officer, director, employee or shareholder of the Maker, be obligated personally
for any obligations or liabilities of the Maker hereunder.
2. Interest.
No interest shall accrue on the unpaid principal balance of this Note.
3. Drawdown
Requests. Maker and Payee agree that Maker may request up to Four Hundred Thousand Dollars ($400,000)
for costs reasonably related to Maker’s initial public offering of its securities. The principal of this Note may be drawn down
from time to time prior to the earlier of: (i) June 24, 2022 or (ii) the date on which Maker consummates an initial public
offering of its securities, upon written request from Maker to Payee (each, a “Drawdown Request”). Each Drawdown Request
must state the amount to be drawn down, and must not be an amount less than Ten Thousand Dollars ($10,000) unless agreed upon by Maker
and Payee. Payee shall fund each Drawdown Request no later than five (5) business days after receipt of a Drawdown Request; provided,
however, that the maximum amount of drawdowns collectively under this Note is Four Hundred Thousand Dollars ($400,000). Once an amount
is drawn down under this Note, it shall not be available for future Drawdown Requests even if prepaid. No fees, payments or other amounts
shall be due to Payee in connection with, or as a result of, any Drawdown Request by Maker. Notwithstanding the foregoing, all payments
shall be applied first to payment in full of any costs incurred in the collection of any sum due under this Note, including (without limitation)
reasonable attorneys’ fees, and then to the reduction of the unpaid principal balance of this Note.
4 Application
of Payments. All payments shall be applied first to payment in full of any costs incurred in
the collection of any sum due under this Note, including (without limitation) reasonable attorney’s fees, then to the payment in
full of any late charges and finally to the reduction of the unpaid principal balance of this Note.
5. Events
of Default. The following shall constitute an event of default (“Event of Default”):
(a) Failure
to Make Required Payments. Failure by Maker to pay the principal amount due pursuant to this Note within five (5) business days
of the date specified above.
(b) Voluntary
Bankruptcy, Etc. The commencement by Maker of a voluntary case under any applicable bankruptcy, insolvency, reorganization, rehabilitation
or other similar law, or the consent by it to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of Maker or for any substantial part of its property, or the making by it of any assignment for
the benefit of creditors, or the failure of Maker generally to pay its debts as such debts become due, or the taking of corporate action
by Maker in furtherance of any of the foregoing.
(c) Involuntary
Bankruptcy, Etc. The entry of a decree or order for relief by a court having jurisdiction in the premises in respect of Maker in an
involuntary case under any applicable bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of Maker or for any substantial part of its property, or ordering the winding-up or liquidation
of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days.
6. Remedies.
(a) Upon
the occurrence of an Event of Default specified in Section 5(a) hereof, Payee may, by written notice to Maker, declare this
Note to be due immediately and payable, whereupon the unpaid principal amount of this Note, and all other amounts payable hereunder, shall
become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the documents evidencing the same to the contrary notwithstanding.
(b) Upon
the occurrence of an Event of Default specified in Sections 5(b) and 5(c), the unpaid principal balance of this Note, and all other
sums payable with regard to this Note, shall automatically and immediately become due and payable, in all cases without any action on
the part of Payee.
7. Waivers.
Maker and all endorsers and guarantors of, and sureties for, this Note waive presentment for payment, demand, notice of dishonor, protest,
and notice of protest with regard to the Note, all errors, defects and imperfections in any proceedings instituted by Payee under the
terms of this Note, and all benefits that might accrue to Maker by virtue of any present or future laws exempting any property, real or
personal, or any part of the proceeds arising from any sale of any such property, from attachment, levy or sale under execution, or providing
for any stay of execution, exemption from civil process, or extension of time for payment; and Maker agrees that any real estate that
may be levied upon pursuant to a judgment obtained by virtue hereof or any writ of execution issued hereon, may be sold upon any such
writ in whole or in part in any order desired by Payee.
8. Unconditional
Liability. Maker hereby waives all notices in connection with the delivery, acceptance, performance,
default, or enforcement of the payment of this Note, and agrees that its liability shall be unconditional, without regard to the liability
of any other party, and shall not be affected in any manner by any indulgence, extension of time, renewal, waiver or modification granted
or consented to by Payee, and consents to any and all extensions of time, renewals, waivers, or modifications that may be granted by Payee
with respect to the payment or other provisions of this Note, and agrees that additional makers, endorsers, guarantors, or sureties may
become parties hereto without notice to Maker or affecting Maker’s liability hereunder.
9. Notices.
All notices, statements or other documents which are required or contemplated by this Note shall be made in writing and delivered: (i) personally
or sent by first class registered or certified mail, overnight courier service or facsimile or electronic transmission to the address
designated in writing, (ii) by facsimile to the number most recently provided to such party or such other address or fax number as
may be designated in writing by such party or (iii) by electronic mail, to the electronic mail address most recently provided to
such party or such other electronic mail address as may be designated in writing by such party. Any notice or other communication so transmitted
shall be deemed to have been given on the day of delivery, if delivered personally, on the business day following receipt of written confirmation,
if sent by facsimile or electronic transmission, one (1) business day after delivery to an overnight courier service or five (5) days
after mailing if sent by mail.
10. Construction.
THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF.
11. Severability.
Any provision contained in this Note which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
12. Trust
Waiver. Notwithstanding anything herein to the contrary, the Payee hereby waives any and all
right, title, interest or claim of any kind (“Claim”) in or to any distribution of or from the trust account to be
established in which the proceeds of the initial public offering (the “IPO”) to be conducted by the Maker (including
the deferred underwriters discounts and commissions) and the proceeds of the sale of the warrants to be issued in a private placement
to occur prior to the closing of the IPO are to be deposited, as described in greater detail in the registration statement and prospectus
to be filed with the Securities and Exchange Commission in connection with the IPO, and hereby agrees not to seek recourse, reimbursement,
payment or satisfaction for any Claim against the trust account for any reason whatsoever.
13. Amendment;
Waiver. Any amendment hereto or waiver of any provision hereof may be made with, and only with,
the written consent of the Maker and the Payee.
14. Assignment.
No assignment or transfer of this Note or any rights or obligations hereunder may be made by any party hereto (by operation of law or
otherwise) without the prior written consent of the other party hereto and any attempted assignment without the required consent shall
be void.
[Signature page follows]
IN
WITNESS WHEREOF, Maker, intending to be legally bound hereby, has caused this Note to be duly executed by the undersigned as
of the day and year first above written.
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Monterey Capital Acquisition Corporation |
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|
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By: |
/s/ Bala Padmakumar |
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|
Name: Bala Padmakumar |
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|
Title: Chief Executive Officer |
Exhibit 10.4
INVESTMENT MANAGEMENT TRUST AGREEMENT
This Investment Management
Trust Agreement (this “Agreement”) is made effective as of [ ],
2022, by and between Monterey Capital Acquisition Corporation, a Delaware corporation (the “Company”), and Continental
Stock Transfer & Trust Company, a New York corporation (the “Trustee”).
WHEREAS, the Company’s
registration statement on Form S-1, File No. 333-[_____] (the “Registration Statement”)
and prospectus (the “Prospectus”) for the initial public offering of the Company’s units (the “Units”),
each of which consists of one share of the Company’s Class A common stock, par value $0.0001 per share (the “Common
Stock”), one right to receive one-tenth (1/10) of one share of Common Stock and one redeemable warrant, each warrant entitling
the holder thereof to purchase one share of Common Stock (such initial public offering hereinafter referred to as the “Offering”),
has been declared effective as of the date hereof by the U.S. Securities and Exchange Commission; and
WHEREAS, the Company has entered
into an Underwriting Agreement (the “Underwriting Agreement”) with EF Hutton, division of
Benchmark Investments, LLC, as representative (the “Representative”) of the several underwriters (the “Underwriters”)
named therein; and
WHEREAS, if we are unable
to complete our initial business combination within 12 months, or if we decide to extend the period of time to consummate our business
combination up to two times by an additional three months each time, at $0.10 per extension, for a total of $0.20 aggregate in trust,
within 18 months (the “Extension Option”), from the closing of this offering, we will redeem 100% of the public shares at
a per share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the
funds held in the trust account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution
expenses), divided by the number of then outstanding public shares, subject to applicable law and certain conditions as further described
herein. In the event we decide to exercise the Extension Option, investors will not have voting rights nor redemption rights in connection
with such additional three-month extensions.
WHEREAS, as described in the
Prospectus, $101,000,000 of the gross proceeds of the Offering and sale of the Private Placement Warrants (as defined in the Underwriting
Agreement) (or $116,150,000, if the Underwriters’ over-allotment option is exercised in full) will be delivered to the Trustee to
be deposited and held in a segregated trust account located at all times in the United States (the “Trust Account”)
for the benefit of the Company and the holders of the Common Stock included in the Units issued in the Offering as hereinafter provided
(the amount to be delivered to the Trustee (and any interest subsequently earned thereon) is referred to herein as the “Property,”
the stockholders for whose benefit the Trustee shall hold the Property will be referred to as the “Public Stockholders,”
and the Public Stockholders and the Company will be referred to together as the “Beneficiaries”); and
WHEREAS, pursuant to the Underwriting
Agreement, a portion of the Property equal to $4,000,000 (or $4,600,000 if the Underwriters’ over-allotment option is exercised
in full) is attributable to deferred underwriting discounts and commissions that will be payable by the Company to the Underwriters upon
and concurrently with the consummation of the Business Combination (as defined below) (the “Deferred Discount”);
and
WHEREAS, the Company and the
Trustee desire to enter into this Agreement to set forth the terms and conditions pursuant to which the Trustee shall hold the Property.
NOW THEREFORE, IT IS AGREED:
1. Agreements
and Covenants of Trustee. The Trustee hereby agrees and covenants to:
(a) Hold
the Property in trust for the Beneficiaries in accordance with the terms of this Agreement in the Trust Account established by the Trustee
in the United States at [JPMorgan Chase Bank N.A.] (or at another U.S. chartered commercial bank with consolidated assets of $100 billion
or more) and at a brokerage institution selected by the Trustee that is reasonably satisfactory to the Company;
(b) Manage,
supervise and administer the Trust Account subject to the terms and conditions set forth herein;
(c) In
a timely manner, upon the written instruction of the Company, invest and reinvest the Property solely in United States government securities
within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, having a maturity of 185 days or less,
or in money market funds meeting the conditions of Rule 2a-7(d) promulgated under the Investment Company Act of 1940, as amended
(or any successor rule), which invest only in direct U.S. government treasury obligations, as determined by the Company; it being understood
that the Trust Account will earn no interest while account funds are uninvested awaiting the Company’s instructions hereunder; and
while account funds are invested or uninvested the Trustee may earn bank credits or other consideration;
(d) Collect
and receive, when due, all interest or other income arising from the Property, which shall become part of the “Property,”
as such term is used herein;
(e) Promptly
notify the Company and the Representative of all communications received by the Trustee with respect to any Property requiring action
by the Company;
(f) Supply
any necessary information or documents as may be requested by the Company (or its authorized agents) in connection with the Company’s
preparation of the tax returns relating to assets held in the Trust Account, or in connection with the preparation of the Company’s
financial statements by the Company’s auditors;
(g) Participate
in any plan or proceeding for protecting or enforcing any right or interest arising from the Property if, as and when instructed by the
Company to do so;
(h) Render
to the Company monthly written statements of the activities of, and amounts in, the Trust Account reflecting all receipts and disbursements
of the Trust Account;
(i) Commence
liquidation of the Trust Account only after and within two business days of (x) receipt of, and only in accordance with, the terms
of a letter from the Company (“Termination Letter”) in a form substantially similar to that
attached hereto as either Exhibit A or Exhibit B, as applicable, signed on behalf of the Company
by its Chief Executive Officer, Chief Financial Officer, President, Executive Vice President, Vice President, Secretary or Chairman of
the board of directors of the Company (the “Board”) or other authorized officer of the Company, and, in the
case of a Termination Letter in a form substantially similar to the attached hereto as Exhibit A, acknowledged and agreed
to by the Representative, and complete the liquidation of the Trust Account and distribute the Property in the Trust Account, including
interest not previously released to the Company to pay its taxes (less up to $100,000 of interest that may be released to the Company
to pay dissolution expenses), only as directed in the Termination Letter and the other documents referred to therein, or (y) the
date which is the later of (1) 18 months after the closing of the Offering and (2) such later date as may be approved by the
Company’s stockholders in accordance with the Company’s amended and restated certificate of incorporation (“Charter”)
if a Termination Letter has not been received by the Trustee prior to such date, in which case the Trust Account shall be liquidated in
accordance with the procedures set forth in the Termination Letter attached as Exhibit B and the Property in the
Trust Account, including interest not previously released to the Company to pay its taxes (less up to $100,000 of interest that may be
released to the Company to pay dissolution expenses) shall be distributed to the Public Stockholders of record as of such date;
(j) Upon
written request from the Company, which may be given from time to time in a form substantially similar to that attached hereto as Exhibit C,
withdraw from the Trust Account and distribute to the Company the amount of interest earned on the Property requested by the Company to
cover any tax obligation owed by the Company as a result of assets of the Company or interest or other income earned on the Property,
which amount shall be delivered directly to the Company by electronic funds transfer or other method of prompt payment, and the Company
shall forward such payment to the relevant taxing authority; provided, however, that to the extent there is not
sufficient cash in the Trust Account to pay such tax obligation, the Trustee shall liquidate such assets held in the Trust Account as
shall be designated by the Company in writing to make such distribution, so long as there is no reduction in the principal amount per
share initially deposited in the Trust Account; provided, further, that if the tax to be paid is a franchise tax,
the written request by the Company to make such distribution shall be accompanied by a copy of the franchise tax bill from the State of
Delaware for the Company (it being acknowledged and agreed that any such amount in excess of interest income earned on the Property shall
not be payable from the Trust Account). The written request of the Company referenced above shall constitute presumptive evidence that
the Company is entitled to said funds, and the Trustee shall have no responsibility to look beyond said request;
(k) Upon
written request from the Company, which may be given from time to time in a form substantially similar to that attached hereto as Exhibit D,
the Trustee shall distribute to the Public Stockholders on behalf of the Company the amount requested by the Company to be used to redeem
shares of Common Stock from Public Stockholders properly submitted in connection with a stockholder vote to approve an amendment to the
Charter (x) to modify the substance or timing of the Company’s obligation to allow redemption in connection with an initial
Business Combination or amendments to the Charter prior thereto or the Company’s obligation to redeem 100% of its public shares
of Common Stock if the Company has not consummated an initial Business Combination within such time as is described in the Charter or
(y) with respect to any other provision relating to stockholders’ rights or pre-initial Business Combination activity. The
written request of the Company referenced above shall constitute presumptive evidence that the Company is entitled to distribute said
funds, and the Trustee shall have no responsibility to look beyond said request; and
(l) Only
release the Property in accordance with a written instruction, signed by an Authorized Representative (as such term is defined below)
of the Company substantially in the form attached as Exhibit A, B, C or D, as applicable, attached hereto; and
(m) Not
make any withdrawals or distributions from the Trust Account other than pursuant to Section 1(i), (j) or
(k) above.
2. Agreements
and Covenants of the Company. The Company hereby agrees and covenants to:
(a) Give
all instructions to the Trustee hereunder in writing, signed by at least two of the Company’s Chairman of the Board, Chief Executive
Officer, Chief Financial Officer, President, Executive Vice President, Vice President or Secretary (the “Authorized Representative”).
In addition, except with respect to its duties under Sections 1(i), 1(j) and 1(k) hereof,
the Trustee shall be entitled to rely on, and shall be protected in relying on, any verbal or telephonic advice or instruction which it,
in good faith and with reasonable care, believes to be given by any one of the persons authorized above to give written instructions,
provided that the Company shall promptly confirm such instructions in writing;
(b) Subject
to Section 4 hereof, hold the Trustee harmless and indemnify the Trustee from and against any and all expenses,
including reasonable counsel fees and disbursements, or losses suffered by the Trustee in connection with any action taken by it hereunder
and in connection with any action, suit or other proceeding brought against the Trustee involving any claim, or in connection with any
claim or demand, which in any way arises out of or relates to this Agreement, the services of the Trustee hereunder, or the Property or
any interest earned on the Property, except for expenses and losses resulting from the Trustee’s gross negligence, fraud or willful
misconduct. Promptly after the receipt by the Trustee of notice of demand or claim or the commencement of any action, suit or proceeding,
pursuant to which the Trustee intends to seek indemnification under this Section 2(b), it shall notify the Company in
writing of such claim (hereinafter referred to as the “Indemnified Claim”), provided, that
no failure or delay by the Trustee to so notify the Company shall relieve the Company from its obligations under this Agreement, except
as and to the extent it is found, in a final, unappealable judgment by a court of competent jurisdiction, that such failure or delay actually
and materially prejudiced the Company. The Trustee shall have the right to conduct and manage the defense against such Indemnified Claim; provided that
the Trustee shall obtain the consent of the Company with respect to the selection of counsel, which consent shall not be unreasonably
withheld or delayed. The Trustee may not agree to settle any Indemnified Claim without the prior written consent of the Company, which
such consent shall not be unreasonably withheld or delayed. The Company may participate in such action with its own counsel, and at its
sole cost and expense;
(c) Pay
the Trustee the fees set forth on Schedule A hereto, including an initial acceptance fee, annual administration fee,
and transaction processing fee which fees shall be subject to modification by the parties from time to time. It is expressly understood
that the Property shall not be used to pay such fees unless and until the closing of the Business Combination (defined below). The Company
shall pay the Trustee the initial acceptance fee and the first annual administration fee at the consummation of the Offering. The Company
shall not be responsible for any other fees or charges of the Trustee except as set forth in this Section 2(c), Schedule
A and as may be provided in Section 2(b) hereof;
(d) In
connection with any vote of the Company’s stockholders regarding a merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination involving the Company and one or more businesses (the “Business Combination”),
provide to the Trustee an affidavit or certificate of the inspector of elections for the stockholder meeting verifying the vote of such
stockholders regarding such Business Combination;
(e) Provide
the Representative with a copy of any Termination Letter(s) and/or any other correspondence that is sent to the Trustee with respect
to any proposed withdrawal from the Trust Account promptly after it issues the same;
(f) Unless
otherwise agreed between the Company and the Representative, ensure that any Instruction Letter (as defined in Exhibit A)
delivered in connection with a Termination Letter in the form of Exhibit A expressly provides that the Deferred Discount is
paid directly to the account or accounts directed by the Representative on behalf of the Underwriters prior to any transfer of the funds
held in the Trust Account to the Company or any other person;
(g) Instruct
the Trustee to make only those distributions that are permitted under this Agreement, and refrain from instructing the Trustee to make
any distributions that are not permitted under this Agreement; and
(h) Within
four (4) business days after the Underwriters exercise the over-allotment option (or any unexercised portion thereof) or such over-allotment
expires, provide the Trustee with a notice in writing of the total amount of the Deferred Discount, which shall in no event be less than
$3,500,000.
3. Limitations
of Liability. The Trustee shall have no responsibility or liability to:
(a) Imply
obligations, perform duties, inquire or otherwise be subject to the provisions of any agreement or document other than this Agreement
and that which is expressly set forth herein;
(b) Take
any action with respect to the Property, other than as directed in Section 1 hereof, and the Trustee shall have
no liability to any third party except for liability arising out of the Trustee’s gross negligence, fraud or willful misconduct;
(c) Institute
any proceeding for the collection of any principal and income arising from, or institute, appear in or defend any proceeding of any kind
with respect to, any of the Property unless and until it shall have received instructions from the Company given as provided herein to
do so and the Company shall have advanced or guaranteed to it funds sufficient to pay any expenses incident thereto;
(d) Refund
any depreciation in principal of any Property;
(e) Assume
that the authority of any person designated by the Company to give instructions hereunder shall not be continuing unless provided otherwise
in such designation, or unless the Company shall have delivered a written revocation of such authority to the Trustee;
(f) The
other parties hereto or to anyone else for any action taken or omitted by it, or any action suffered by it to be taken or omitted, in
good faith and in the Trustee’s best judgment, except for the Trustee’s gross negligence, fraud or willful misconduct. The
Trustee may rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion or advice of counsel
(including counsel chosen by the Trustee, which counsel may be the Company’s counsel), statement, instrument, report or other paper
or document (not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability
of any information therein contained) which the Trustee believes, in good faith and with reasonable care, to be genuine and to be signed
or presented by the proper person or persons. The Trustee shall not be bound by any notice or demand, or any waiver, modification, termination
or rescission of this Agreement or any of the terms hereof, unless evidenced by a written instrument delivered to the Trustee, signed
by the proper party or parties and, if the duties or rights of the Trustee are affected, unless it shall give its prior written consent
thereto;
(g) Verify
the accuracy of the information contained in the Registration Statement;
(h) Provide
any assurance that any Business Combination entered into by the Company or any other action taken by the Company is as contemplated by
the Registration Statement;
(i) File
information returns with respect to the Trust Account with any local, state or federal taxing authority or provide periodic written statements
to the Company documenting the taxes payable by the Company, if any, relating to any interest income earned on the Property;
(j) Prepare,
execute and file tax reports, income or other tax returns and pay any taxes with respect to any income generated by, and activities relating
to, the Trust Account, regardless of whether such tax is payable by the Trust Account or the Company, including, but not limited to, franchise
and income tax obligations, except pursuant to Section 1(j) hereof; or
(k) Verify
calculations, qualify or otherwise approve the Company’s written requests for distributions pursuant to Sections 1(i), 1(j) or 1(k) hereof.
4. Trust
Account Waiver. The Trustee has no right of set-off or any right, title, interest or claim of any kind (“Claim”)
to, or to any monies in, the Trust Account, and hereby irrevocably waives any Claim to, or to any monies in, the Trust Account that it
may have now or in the future. In the event the Trustee has any Claim against the Company under this Agreement, including, without limitation,
under Section 2(b) or Section 2(c) hereof, the Trustee shall pursue such Claim solely against
the Company and its assets outside the Trust Account and not against the Property or any monies in the Trust Account.
5. Termination.
This Agreement shall terminate as follows:
(a) If
the Trustee gives written notice to the Company that it desires to resign under this Agreement, the Company shall use its reasonable efforts
to locate a successor trustee, pending which the Trustee shall continue to act in accordance with this Agreement. At such time that the
Company notifies the Trustee that a successor trustee has been appointed and has agreed to become subject to the terms of this Agreement,
the Trustee shall transfer the management of the Trust Account to the successor trustee, including but not limited to the transfer of
copies of the reports and statements relating to the Trust Account, whereupon this Agreement shall terminate; provided, however,
that in the event that the Company does not locate a successor trustee within ninety (90) days of receipt of the resignation notice from
the Trustee, the Trustee may submit an application to have the Property deposited with any court in the State of New York or with the
United States District Court for the Southern District of New York and upon such deposit, the Trustee shall be immune from any liability
whatsoever; or
(b) At
such time that the Trustee has completed the liquidation of the Trust Account and its obligations in accordance with the provisions of Section 1(i) hereof
(which section may not be amended under any circumstances) and distributed the Property in accordance with the provisions of the Termination
Letter, this Agreement shall terminate except with respect to Section 2(b).
6. Miscellaneous.
(a) The
Company and the Trustee each acknowledge that the Trustee will follow the security procedures set forth below with respect to funds transferred
from the Trust Account. The Company and the Trustee will each restrict access to confidential information relating to such security procedures
to authorized persons. Each party must notify the other party immediately if it has reason to believe unauthorized persons may have obtained
access to such confidential information, or of any change in its authorized personnel. In executing funds transfers, the Trustee shall
rely upon all information supplied to it by the Company, including, account names, account numbers, and all other identifying information
relating to a Beneficiary, Beneficiary’s bank or intermediary bank. Except for any liability arising out of the Trustee’s
gross negligence, fraud or willful misconduct, the Trustee shall not be liable for any loss, liability or expense resulting from any error
in the information or transmission of the funds.
(b) This
Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect
to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. This Agreement may
be executed in several original or facsimile counterparts, each one of which shall constitute an original, and together shall constitute
but one instrument.
(c) This
Agreement contains the entire agreement and understanding of the parties hereto with respect to the subject matter hereof. This Agreement
or any provision hereof may only be changed, amended or modified (other than to correct a typographical error) by a writing signed by
each of the parties hereto; provided, however, that no such change, amendment or modification to Section 1(i), 2(f) or Exhibit A
may be made without the prior written consent of the Representative.
(d) This
Agreement or any provision hereof may only be changed, amended or modified pursuant to Section 6(c) hereof with
the Consent of the Stockholders. For purposes of this Section 6(d), the “Consent of the Stockholders”
means receipt by the Trustee of a certificate from the inspector of elections of the stockholder meeting certifying that the Company’s
stockholders of record as of a record date established in accordance with Section 213(a) of the Delaware General Corporation
Law, as amended (“DGCL”) (or any successor rule), who hold sixty-five percent (65%) or more of all then outstanding
shares of the Common Stock and Class B common stock, par value $0.0001 per share, of the Company voting together as a single class,
have voted in favor of such change, amendment or modification. No such amendment will affect any Public Stockholder who has otherwise
indicated his or her election to redeem his or her shares of Common Stock in connection with a stockholder vote sought to amend this Agreement
(i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with an initial Business
Combination or to redeem 100% of the Common Stock if the Company does not complete its initial Business Combination within the time frame
specified in the Charter or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial Business
Combination activity. Except for any liability arising out of the Trustee’s gross negligence, fraud or willful misconduct, the Trustee
may rely conclusively on the certification from the inspector or elections referenced above and shall be relieved of all liability to
any party for executing the proposed amendment in reliance thereon.
(e) The
parties hereto consent to the jurisdiction and venue of any state or federal court located in the City of New York, State of New York,
for purposes of resolving any disputes hereunder. AS TO ANY CLAIM, CROSS-CLAIM OR COUNTERCLAIM IN ANY WAY RELATING TO THIS AGREEMENT,
EACH PARTY WAIVES THE RIGHT TO TRIAL BY JURY.
(f) Any
notice, consent or request to be given in connection with any of the terms or provisions of this Agreement shall be in writing and shall
be sent by express mail or similar private courier service, by certified mail (return receipt requested), by hand delivery or by electronic
mail:
if to the Trustee, to:
Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, NY 10004
Attn: Francis Wolf and Celeste Gonzalez
Email: fwolf@continentalstock.com;
cgonzalez@continentalstock.com
if to the Company, to:
Monterey Capital Acquisition Corporation
Bala Padmakumar
Chief Executive Officer
419 Webster Street
Monterey, CA 93940
in each case, with copies to:
Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo,
P.C.
One Financial Center
Boston, MA 02111
Attn: Thomas R. Burton, Esq.
Telephone: (617) 542-6000
and
EF Hutton
590 Madison Avenue, 39th Floor
New York, NY 10022
Attn.: [_____]
and
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
Attn.: Keith J. Billotti, Esq.
Telephone: (212) 574-1200
(g) Each
of the Company and the Trustee hereby represents that it has the full right and power and has been duly authorized to enter into this
Agreement and to perform its respective obligations as contemplated hereunder. The Trustee acknowledges and agrees that it shall not make
any claims or proceed against the Trust Account, including by way of set-off, and shall not be entitled to any funds in the Trust Account
under any circumstance.
(h) This
Agreement is the joint product of the Trustee and the Company and each provision hereof has been subject to the mutual consultation, negotiation
and agreement of such parties and shall not be construed for or against any party hereto.
(i) This
Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same instrument. Delivery of a signed counterpart of this Agreement by facsimile or electronic transmission
shall constitute valid and sufficient delivery thereof.
(j) Each
of the Company and the Trustee hereby acknowledges and agrees that [Representative], on behalf of the Underwriters, is a third party beneficiary
of this Agreement.
(k) Except
as specified herein, no party to this Agreement may assign its rights or delegate its obligations hereunder to any other person or entity.
[Signature Page Follows]
IN WITNESS WHEREOF,
the parties have duly executed this Investment Management Trust Agreement as of the date first written above.
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CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Trustee |
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By: |
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Name: |
Francis Wolf |
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Title: |
Vice President |
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MONTEREY CAPITAL ACQUISITION CORPORATION |
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By: |
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Name: |
Bala Padmakumar |
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Title: |
Chief Executive Officer |
[Signature
Page to Investment Management Trust Agreement]
SCHEDULE A
| Fee Item | |
Time and method of payment | |
Amount | |
| Initial set-up fee. | |
Initial closing of Offering by wire transfer. | |
$ | 3,500.00 | |
| Trustee administration fee | |
Payable annually. First year fee payable, at initial closing of Offering by wire transfer, thereafter by wire transfer or check. | |
$ | 10,000.00 | |
| Transaction processing fee for disbursements to Company under Sections 1(i) and (j) | |
Billed to Company following disbursement made to Company under Section 1 | |
$ | 250.00 | |
| Paying Agent services as required pursuant to Sections 1(i) and 1(k) | |
Billed to Company upon delivery of service pursuant to Section 1(i) and 1(k) | |
| Prevailing rates | |
EXHIBIT A
[Letterhead of Company]
[Insert date]
Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, New York 10004
Attn: Francis Wolf and Celeste Gonzalez
| Re: | Trust Account -
Termination Letter |
Dear Mr. Wolf and Ms. Gonzalez:
Pursuant to Section 1(i) of
the Investment Management Trust Agreement between Monterey Capital Acquisition Corporation, a Delaware corporation (the “Company”),
and Continental Stock Transfer & Trust Company (the “Trustee”), dated as of [ ],
2022 (the “Trust Agreement”), this is to advise you that the Company has entered into an
agreement with (the “Target Business”) to consummate a business combination with Target Business (the “Business Combination”)
on or about [ ]. The Company shall notify you at least seventy-two (72) hours in advance of the actual date of the consummation of the
Business Combination (the “Consummation Date”). Capitalized terms used but not defined herein
shall have the meanings set forth in the Trust Agreement.
In accordance with the terms
of the Trust Agreement, we hereby authorize you to commence to liquidate all of the assets of the Trust Account and transfer the proceeds
to a segregated account held by you on behalf of the Beneficiaries to the effect that, on the Consummation Date, all of the funds held
in the Trust Operating Account at [JPMorgan Chase Bank N.A.] will be immediately available for transfer to the account or accounts that
the Company shall direct on the Consummation Date (including as directed to it by the Representative on behalf of the Underwriters (with
respect to the Deferred Discount)). It is acknowledged and agreed that while the funds are on deposit in the trust operating account at
[JPMorgan Chase Bank, N.A.] awaiting distribution, the Company will not earn any interest or dividends.
On the Consummation Date,
(i) counsel for the Company shall deliver to you written notification that the Business Combination has been consummated, or will
be consummated concurrently with your transfer of funds to the accounts as directed by the Company (the “Notification”)
and (ii) the Company shall deliver to you (a) a certificate by the Chief Executive Officer, which verifies that the Business
Combination has been approved by a vote of the Company’s stockholders, if a vote is held and (b) a joint written instruction
signed by the Company and the Representative with respect to the transfer of the funds held in the Trust Account, including payment of
amounts owed to public stockholders who have properly exercised their redemption rights and payment of the Deferred Discount to the Representative
from the Trust Account (the “Instruction Letter”). You are hereby directed and authorized to transfer the
funds held in the Trust Account immediately upon your receipt of the Notification and the Instruction Letter, in accordance with the terms
of the Instruction Letter. In the event that certain deposits held in the Trust Account may not be liquidated by the Consummation Date
without penalty, you will notify the Company in writing of the same and the Company shall direct you as to whether such funds should remain
in the Trust Account and be distributed after the Consummation Date to the Company. Upon the distribution of all the funds, net of any
payments necessary for reasonable unreimbursed expenses related to liquidating the Trust Account, your obligations under the Trust Agreement
shall be terminated.
In the event that the Business
Combination is not consummated on the Consummation Date described in the notice thereof and we have not notified you on or before the
original Consummation Date of a new Consummation Date, then upon receipt by the Trustee of written instructions from the Company, the
funds held in the Trust Account shall be reinvested as provided in Section 1(c) of the Trust Agreement on the business day immediately
following the Consummation Date as set forth in such notice as soon thereafter as possible.
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Very truly yours, |
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MONTEREY CAPITAL ACQUISITION CORPORATION |
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By: |
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Name: Bala Padmakumar |
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Title: Chief Executive Officer |
| Acknowledged & Agreed by: |
|
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| EF HUTTON, DIVISION OF BENCHMARK INVESTMENTS, LLC |
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| By: |
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Name: |
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Title: |
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EXHIBIT B
[Letterhead of Company]
[Insert date]
Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, New York 10004
Attn: Francis Wolf and Celeste Gonzalez
| Re: | Trust Account -
Termination Letter |
Dear Mr. Wolf and Ms. Gonzalez:
Pursuant
to Section 1(i) of the Investment Management Trust Agreement between Monterey Capital Acquisition Corporation, a Delaware corporation
(the “Company”), and Continental Stock Transfer & Trust Company (the “Trustee”),
dated as of [ ], 2022 (the “Trust Agreement”),
this is to advise you that the Company has been unable to effect a business combination with a Target Business (the “Business Combination”)
within the time frame specified in the Company’s amended and restated certificate of incorporation. Capitalized terms used but not
defined herein shall have the meanings set forth in the Trust Agreement.
In accordance with the terms
of the Trust Agreement, we hereby authorize you to liquidate all of the assets in the Trust Account and to transfer the total proceeds
into a segregated account held by you on behalf of the Beneficiaries to await distribution to the Public Stockholders. The Company has
selected [_____] (1) as the effective date for the purpose of determining when the Public Stockholders will be entitled
to receive their share of the liquidation proceeds. You agree to be the Paying Agent of record and, in your separate capacity as Paying
Agent, agree to distribute said funds directly to the Company’s Public Stockholders in accordance with the terms of the Trust Agreement
and the Amended and Restated Certificate of Incorporation of the Company. Upon the distribution of all the funds, net of any payments
necessary for reasonable unreimbursed expenses related to liquidating the Trust Account, your obligations under the Trust Agreement shall
be terminated, except to the extent otherwise provided in Section 1(j) of the Trust Agreement.
| (1) | 18 months from the closing of
the Offering, or at a later date, if extended. |
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Very truly yours, |
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MONTEREY CAPITAL ACQUISITION CORPORATION |
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|
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By: |
|
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Name: Bala Padmakumar |
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|
Title: Chief Executive Officer |
| cc: | EF Hutton, division of Benchmark
Investments, LLC |
EXHIBIT C
[Letterhead of Company]
[Insert date]
Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, New York 10004
Attn: Francis Wolf and Celeste Gonzalez
| Re: | Trust Account -
Withdrawal Instruction |
Dear Mr. Wolf and Ms. Gonzalez:
Pursuant to Section 1(j) of
the Investment Management Trust Agreement between Monterey Capital Acquisition Corporation, a Delaware corporation (the “Company”),
and Continental Stock Transfer & Trust Company (the “Trustee”), dated as of [ ], 2022 (the “Trust Agreement”),
the Company hereby requests that you deliver to the Company $[ ] of the interest income earned on the Property as of the date hereof.
Capitalized terms used but not defined herein shall have the meanings set forth in the Trust Agreement.
The Company needs such funds
to pay for the tax obligations as set forth on the attached tax return or tax statement. In accordance with the terms of the Trust Agreement,
you are hereby directed and authorized to transfer (via wire transfer) such funds promptly upon your receipt of this letter to the Company’s
operating account at:
[WIRE INSTRUCTION INFORMATION]
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Very truly yours, |
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|
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MONTEREY CAPITAL ACQUISITION CORPORATION |
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|
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By: |
|
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Name: Bala Padmakumar |
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|
Title: Chief Executive Officer |
| cc: | EF Hutton, division of Benchmark
Investments, LLC |
EXHIBIT D
[Letterhead of Company]
[Insert date]
Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, New York 10004
Attn: Francis Wolf and Celeste Gonzalez
| Re: | Trust Account -
Stockholder Redemption Withdrawal Instruction |
Dear Mr. Wolf and Ms. Gonzalez:
Pursuant
to Section 1(k) of the Investment Management Trust Agreement between Monterey Capital Acquisition Corporation, a
Delaware corporation (the “Company”), and Continental Stock Transfer & Trust Company (the “Trustee”),
dated as of [ ], 2022 (the “Trust Agreement”),
the Company hereby requests that you deliver to the redeeming Public Stockholders of the Company $[_____] of the principal and interest
income earned on the Property as of the date hereof to a segregated account held by you on behalf of the Beneficiaries for distribution
to the Stockholders who have requested redemption of their Common Stock. Capitalized terms used but not defined herein shall have the
meanings set forth in the Trust Agreement.
The Company needs such funds
to pay its Public Stockholders who have properly elected to have their shares of Common Stock redeemed by the Company in connection with
a stockholder vote to approve an amendment to the Company’s amended and restated certificate of incorporation (A) to modify
the substance or timing of the Company’s obligation to allow redemption in connection with an initial Business Combination or to
redeem 100% of public shares of Common Stock if the Company has not consummated an initial Business Combination within such time as is
described in the Company’s amended and restated certificate of incorporation or (B) with respect to any other provision relating
to stockholders’ rights or pre-initial Business Combination activity. As such, you are hereby directed and authorized to transfer
(via wire transfer) such funds promptly upon your receipt of this letter.
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Very truly yours, |
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|
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MONTEREY CAPITAL ACQUISITION CORPORATION |
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|
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By: |
|
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|
Name: Bala Padmakumar |
| |
|
Title: Chief Executive Officer |
| cc: | EF Hutton, division of Benchmark
Investments, LLC |
Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT
(this “Agreement”), dated as of [______], 2022, is made and entered into by and among Monterey Capital Acquisition
Corporation, a Delaware corporation (the “Company”) and Monterrey Acquisition Sponsor, LLC, a Delaware limited
liability company (the “Sponsor,” together with any person or entity who hereafter becomes a party to this Agreement
pursuant to Section 5.2 of this Agreement, a “Holder” and collectively the “Holders”).
RECITALS
WHEREAS,
the Company and the Sponsor have entered into that certain Securities Subscription Agreement, dated as of October 6, 2021, pursuant
to which the Sponsor purchased an aggregate of 2,875,000 shares (the “Founder Shares”) of
the Company’s Class B common stock, par value $0.0001 per share, up to 375,000 of which would be forfeited to the Company
for no consideration depending on the extent to which the underwriters of the Company’s initial public offering exercise their over-allotment
option;
WHEREAS,
the Founder Shares are convertible into shares of the Company’s Class A common stock, par value $0.0001 per share (the “Common Stock”),
on the terms and conditions provided in the Company’s amended and restated certificate of incorporation;
WHEREAS,
on [______], 2022, the Company and the Sponsor entered into that certain Private Placement Warrants Purchase Agreement, pursuant to which
the Sponsor agreed to purchase 3,200,000 warrants (or 3,500,000 warrants if the over-allotment option is exercised in full) at a price
of $1.00 per warrant (the “Private Placement Warrants”), in a private
placement transaction occurring simultaneously with the closing of the Company’s initial public offering;
WHEREAS,
in order to finance the Company’s transaction costs in connection with an intended initial Business Combination (as defined below)
the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may loan to the Company funds as the
Company may require, of which up to $1,500,000 of such loans may be convertible into warrants, each to purchase one share of Common Stock
(“Working Capital Warrants”) at a price of $1.00 per warrant; and
WHEREAS,
the Company and the Holders desire to enter into this Agreement, pursuant to which the Company shall grant the Holders certain registration
rights with respect to certain securities of the Company, as set forth in this Agreement.
NOW, THEREFORE,
in consideration of the representations, covenants and agreements contained herein, and certain other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
The terms defined in this Article I shall, for all purposes of this Agreement, have the respective meanings
set forth below:
“Adverse Disclosure”
shall mean any public disclosure of material non-public information, which disclosure, in the good faith judgment of the Chief Executive
Officer or principal financial officer of the Company, after consultation with counsel to the Company, (i) would be required to be
made in any Registration Statement or Prospectus in order for the applicable Registration Statement or Prospectus not to contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements contained therein (in the case of any prospectus
and any preliminary prospectus, in the light of the circumstances under which they were made) not misleading, (ii) would not be required
to be made at such time if the Registration Statement were not being filed, and (iii) the Company has a bona fide business purpose
for not making such information public.
“Agreement”
shall have the meaning given in the Preamble.
“Board”
shall mean the Board of Directors of the Company.
“Business Combination”
shall mean any merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination
with one or more businesses, involving the Company.
“Commission”
shall mean the Securities and Exchange Commission.
“Common Stock”
shall have the meaning given in the Recitals hereto.
“Company”
shall have the meaning given in the Preamble.
“Demand Registration”
shall have the meaning given in subsection 2.1.1.
“Demanding Holder”
shall have the meaning given in subsection 2.1.1.
“Exchange Act”
shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.
“Form S-1”
shall have the meaning given in subsection 2.1.1.
“Form S-3”
shall have the meaning given in subsection 2.3.
“Founder Shares”
shall have the meaning given in the Recitals hereto and shall be deemed to include the shares of Common Stock issuable upon conversion
thereof.
“Founder Shares Lock-up Period”
shall mean, with respect to the Founder Shares, the period ending on the earlier of (A) 180 days after the completion of the Company’s
initial Business Combination or (B) subsequent to the Business Combination, (x) if the last sale price of the Common Stock equals
or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20
trading days within any 30-trading day period commencing at least 150 days after the Company’s initial Business Combination or (y) the
date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results
in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property.
“Holders”
shall have the meaning given in the Preamble.
“Insider Letter”
shall mean that certain letter agreement, dated as of [______], 2022, by and among the Company, the Sponsor and each of the Company’s
officers, directors, director nominees and advisors.
“Maximum Number of Securities”
shall have the meaning given in subsection 2.1.4.
“Misstatement”
shall mean an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement
or Prospectus, or necessary to make the statements in a Registration Statement or Prospectus (in the light of the circumstances under
which they were made) not misleading.
“Permitted Transferees”
shall mean any person or entity to whom a Holder of Registrable Securities is permitted to transfer such Registrable Securities prior
to the expiration of the Founder Shares Lock-up Period or Private Placement Lock-up Period, as the case may be, under the Insider Letter,
this Agreement and any other applicable agreement between such Holder and the Company, and to any transferee thereafter.
“Piggyback Registration”
shall have the meaning given in subsection 2.2.1.
“Private Placement Lock-up Period”
shall mean, with respect to Private Placement Warrants that are held by the initial purchasers of such Private Placement Warrants or their
Permitted Transferees, and any of the securities underlying the Private Placement Warrants, including the Common Stock issued or issuable
upon the exercise of the Private Placement Warrants, that are held by the initial purchasers of the Private Placement Warrants or their
Permitted Transferees, the period ending upon the completion of the Company’s initial Business Combination.
“Private Placement Warrants”
shall have the meaning given in the Recitals hereto.
“Pro Rata”
shall have the meaning given in subsection 2.1.4.
“Prospectus”
shall mean the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended
by any and all post-effective amendments and including all material incorporated by reference in such prospectus.
“Registrable Security”
shall mean (a) the Founder Shares and the shares of Common Stock issued or issuable upon the conversion of any Founder Shares, (b) the
Private Placement Warrants and the Common Stock issued or issuable upon the exercise of the Private Placement Warrants, (c) any outstanding
share of the Common Stock or any other equity security (including the shares of Common Stock issued or issuable upon the exercise of any
other equity security) of the Company held by a Holder as of the date of this Agreement, (d) any Working Capital Warrants (including
the Common Stock issued or issuable upon the exercise of the Working Capital Warrants), and (e) any other equity security of the
Company issued or issuable with respect to any such share of the Common Stock by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or reorganization; provided, however, that,
as to any particular Registrable Security, such securities shall cease to be Registrable Securities when: (A) a Registration Statement
with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold,
transferred, disposed of or exchanged in accordance with such Registration Statement; (B) such securities shall have been otherwise
transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company
and subsequent public distribution of such securities shall not require registration under the Securities Act; (C) such securities
shall have ceased to be outstanding; (D) such securities may be sold without registration pursuant to Rule 144 promulgated under
the Securities Act (or any successor rule promulgated thereafter by the Commission) (but with no volume or other restrictions or
limitations); or (E) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other
public securities transaction.
“Registration”
shall mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements
of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming
effective.
“Registration Expenses”
shall mean the out-of-pocket expenses of a Registration, including, without limitation, the following:
(A) all registration
and filing fees (including fees with respect to filings required to be made with the Financial Industry Regulatory Authority, Inc.)
and any securities exchange on which the Common Stock is then listed;
(B) fees and
expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the Underwriters in
connection with blue sky qualifications of Registrable Securities);
(C) printing,
messenger, telephone and delivery expenses;
(D) reasonable
fees and disbursements of counsel for the Company;
(E) reasonable
fees and disbursements of all independent registered public accountants of the Company incurred specifically in connection with such Registration;
and
(F) reasonable
fees and expenses of one (1) legal counsel selected by the majority-in-interest of the Demanding Holders initiating a Demand Registration
to be registered for offer and sale in the applicable Registration.
“Registration Statement”
shall mean any registration statement that covers the Registrable Securities pursuant to the provisions of this Agreement, including the
Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration
statement, and all exhibits to and all material incorporated by reference in such registration statement.
“Requesting Holder”
shall have the meaning given in subsection 2.1.1.
“Securities Act”
shall mean the Securities Act of 1933, as amended from time to time.
“Sponsor”
shall have the meaning given in the Recitals hereto.
“Underwriter”
shall mean a securities dealer who purchases any Registrable Securities as principal in an Underwritten Offering and not as part of such
dealer’s market-making activities.
“Underwritten Registration”
or “Underwritten Offering” shall mean a Registration in which securities of the Company are
sold to an Underwriter in a firm commitment underwriting for distribution to the public.
“Working Capital
Warrants” shall have the meaning given in the Recitals hereto.
ARTICLE II
REGISTRATIONS
2.1 Demand
Registration.
2.1.1 Request
for Registration. Subject to the provisions of subsection 2.1.4 and Section 2.4 hereof, at any time and from
time to time on or after the date the Company consummates the Business Combination, the Holders of at least a majority in interest of
the then-outstanding number of Registrable Securities (the “Demanding Holders”) may make
a written demand for Registration of all or part of their Registrable Securities, which written demand shall describe the amount and type
of securities to be included in such Registration and the intended method(s) of distribution thereof (such written demand a “Demand Registration”).
The Company shall, within ten (10) days of the Company’s receipt of the Demand Registration, notify, in writing, all other
Holders of Registrable Securities of such demand, and each Holder of Registrable Securities who thereafter wishes to include all or a
portion of such Holder’s Registrable Securities in a Registration pursuant to a Demand Registration (each such Holder that includes
all or a portion of such Holder’s Registrable Securities in such Registration, a “Requesting Holder”)
shall so notify the Company, in writing, within five (5) days after the receipt by the Holder of the notice from the Company. Upon
receipt by the Company of any such written notification from a Requesting Holder(s) to the Company, such Requesting Holder(s) shall
be entitled to have their Registrable Securities included in a Registration pursuant to a Demand Registration and the Company shall effect,
as soon thereafter as practicable, but not more than forty five (45) days immediately after the Company’s receipt of the Demand
Registration, the Registration of all Registrable Securities requested by the Demanding Holders and Requesting Holders pursuant to such
Demand Registration. Under no circumstances shall the Company be obligated to effect more than an aggregate of three (3) Registrations
pursuant to a Demand Registration under this subsection 2.1.1 with respect to any or all Registrable Securities; provided, however,
that a Registration shall not be counted for such purposes unless a Form S-1 or any similar long-form registration statement that
may be available at such time (“Form S-1”) has become effective and all of the Registrable Securities requested
by the Requesting Holders to be registered on behalf of the Requesting Holders in such Form S-1 Registration have been sold, in accordance
with Section 3.1 of this Agreement.
2.1.2 Effective
Registration. Notwithstanding the provisions of subsection 2.1.1 above or any other part of this Agreement, a Registration
pursuant to a Demand Registration shall not count as a Registration unless and until (i) the Registration Statement filed with the
Commission with respect to a Registration pursuant to a Demand Registration has been declared effective by the Commission and (ii) the
Company has complied with all of its obligations under this Agreement with respect thereto; provided, further,
that if, after such Registration Statement has been declared effective, an offering of Registrable Securities in a Registration pursuant
to a Demand Registration is subsequently interfered with by any stop order or injunction of the Commission, federal or state court or
any other governmental agency the Registration Statement with respect to such Registration shall be deemed not to have been declared effective,
unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest
of the Demanding Holders initiating such Demand Registration thereafter affirmatively elect to continue with such Registration and accordingly
notify the Company in writing, but in no event later than five (5) days, of such election; and provided, further,
that the Company shall not be obligated or required to file another Registration Statement until the Registration Statement that has been
previously filed with respect to a Registration pursuant to a Demand Registration becomes effective or is subsequently terminated.
2.1.3 Underwritten
Offering. Subject to the provisions of subsection 2.1.4 and Section 2.4 hereof, if a majority-in-interest of the
Demanding Holders so advise the Company as part of their Demand Registration that the offering of the Registrable Securities pursuant
to such Demand Registration shall be in the form of an Underwritten Offering, then the right of such Demanding Holder or Requesting Holder
(if any) to include its Registrable Securities in such Registration shall be conditioned upon such Holder’s participation in such
Underwritten Offering and the inclusion of such Holder’s Registrable Securities in such Underwritten Offering to the extent provided
herein. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this subsection
2.1.3 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten
Offering by the majority-in-interest of the Demanding Holders initiating the Demand Registration.
2.1.4 Reduction
of Underwritten Offering. If the managing Underwriter or Underwriters in an Underwritten Registration pursuant to a Demand Registration,
in good faith, advises the Company, the Demanding Holders and the Requesting Holders (if any) in writing that the dollar amount or number
of Registrable Securities that the Demanding Holders and the Requesting Holders (if any) desire to sell, taken together with all other
Common Stock or other equity securities that the Company desires to sell and the Common Stock, if any, as to which a Registration has
been requested pursuant to separate written contractual piggy-back registration rights held by any other stockholders who desire to sell,
exceeds the maximum dollar amount or maximum number of equity securities that can be sold in the Underwritten Offering without adversely
affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum
dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”),
then the Company shall include in such Underwritten Offering, as follows: (i) first, the Registrable Securities of the Demanding
Holders and the Requesting Holders (if any) (pro rata based on the respective number of Registrable Securities that each Demanding Holder
and Requesting Holder (if any) has requested be included in such Underwritten Registration and the aggregate number of Registrable Securities
that the Demanding Holders and Requesting Holders have requested be included in such Underwritten Registration (such proportion is referred
to herein as “Pro Rata”)) that can be sold without exceeding the Maximum Number of Securities;
(ii) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), the Registrable
Securities of Holders (Pro Rata, based on the respective number of Registrable Securities that each Holder has so requested) exercising
their rights to register their Registrable Securities pursuant to subsection 2.2.1 hereof, without exceeding the Maximum
Number of Securities; and (iii) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing
clauses (i) and (ii), the Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding
the Maximum Number of Securities; and (iv) fourth, to the extent that the Maximum Number of Securities has not been reached under
the foregoing clauses (i), (ii) and (iii), the Common Stock or other equity securities of other persons or entities that the Company
is obligated to register in a Registration pursuant to separate written contractual arrangements with such persons and that can be sold
without exceeding the Maximum Number of Securities.
2.1.5 Demand
Registration Withdrawal. A majority-in-interest of the Demanding Holders initiating a Demand Registration or a majority-in-interest
of the Requesting Holders (if any), pursuant to a Registration under subsection 2.1.1 shall have the right to withdraw
from a Registration pursuant to such Demand Registration for any or no reason whatsoever upon written notification to the Company and
the Underwriter or Underwriters (if any) of their intention to withdraw from such Registration prior to the effectiveness of the Registration
Statement filed with the Commission with respect to the Registration of their Registrable Securities pursuant to such Demand Registration.
Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in
connection with a Registration pursuant to a Demand Registration prior to its withdrawal under this subsection 2.1.5.
2.2 Piggyback
Registration.
2.2.1 Piggyback
Rights. If, at any time on or after the date the Company consummates a Business Combination, the Company proposes to file a Registration
Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or
exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of the Company (or by
the Company and by the stockholders of the Company including, without limitation, pursuant to Section 2.1 hereof),
other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an
exchange offer or offering of securities solely to the Company’s existing stockholders, (iii) for an offering of debt that
is convertible into equity securities of the Company or (iv) for a dividend reinvestment plan, then the Company shall give written
notice of such proposed filing to all of the Holders of Registrable Securities as soon as practicable but not less than ten (10) days
before the anticipated filing date of such Registration Statement, which notice shall (A) describe the amount and type of securities
to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters,
if any, in such offering, and (B) offer to all of the Holders of Registrable Securities the opportunity to register the sale of such
number of Registrable Securities as such Holders may request in writing within five (5) days after receipt of such written notice
(such Registration a “Piggyback Registration”). The Company shall, in good faith, cause such
Registrable Securities to be included in such Piggyback Registration and shall use its best efforts to cause the managing Underwriter
or Underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested by the Holders pursuant to this subsection
2.2.1 to be included in a Piggyback Registration on the same terms and conditions as any similar securities of the Company included
in such Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of
distribution thereof. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this subsection
2.2.1 shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten
Offering by the Company.
2.2.2 Reduction
of Piggyback Registration. If the managing Underwriter or Underwriters in an Underwritten Registration that is to be a Piggyback Registration,
in good faith, advises the Company and the Holders of Registrable Securities participating in the Piggyback Registration in writing that
the dollar amount or number of the Common Stock that the Company desires to sell, taken together with (i) the Common Stock, if any,
as to which Registration has been demanded pursuant to separate written contractual arrangements with persons or entities other than the
Holders of Registrable Securities hereunder (ii) the Registrable Securities as to which registration has been requested pursuant
to Section 2.2 hereof, and (iii) the Common Stock, if any, as to which Registration has been requested pursuant
to separate written contractual piggy-back registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities,
then:
(a) If
the Registration is undertaken for the Company’s account, the Company shall include in any such Registration (A) first, the
Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities;
(B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable
Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.2.1 hereof,
Pro Rata, which can be sold without exceeding the Maximum Number of Securities; and (C) third, to the extent that the Maximum Number
of Securities has not been reached under the foregoing clauses (A) and (B), the Common Stock, if any, as to which Registration has
been requested pursuant to written contractual piggy-back registration rights of other stockholders of the Company, which can be sold
without exceeding the Maximum Number of Securities;
(b) If
the Registration is pursuant to a request by persons or entities other than the Holders of Registrable Securities, then the Company shall
include in any such Registration (A) first, the Common Stock or other equity securities, if any, of such requesting persons or entities,
other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (B) second,
to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of
Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.2.1, pro rata based on the
number of Registrable Securities that each Holder has requested be included in such Underwritten Registration and the aggregate number
of Registrable Securities that the Holders have requested to be included in such Underwritten Registration, which can be sold without
exceeding the Maximum Number of Securities; (C) third, to the extent that the Maximum Number of Securities has not been reached under
the foregoing clauses (A) and (B), the Common Stock or other equity securities that the Company desires to sell, which can be sold
without exceeding the Maximum Number of Securities; and (D) fourth, to the extent that the Maximum Number of Securities has not been
reached under the foregoing clauses (A), (B) and (C), the Common Stock or other equity securities for the account of other persons
or entities that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities,
which can be sold without exceeding the Maximum Number of Securities.
2.2.3 Piggyback
Registration Withdrawal. Any Holder of Registrable Securities shall have the right to withdraw from a Piggyback Registration for any
or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of his, her or its intention
to withdraw from such Piggyback Registration prior to the effectiveness of the Registration Statement filed with the Commission with respect
to such Piggyback Registration. The Company (whether on its own good faith determination or as the result of a request for withdrawal
by persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission in connection
with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement. Notwithstanding anything to the contrary
in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Registration
prior to its withdrawal under this subsection 2.2.3.
2.2.4 Unlimited
Piggyback Registration Rights. For purposes of clarity, any Registration effected pursuant to Section 2.2 hereof
shall not be counted as a Registration pursuant to a Demand Registration effected under Section 2.1 hereof.
2.3 Registrations
on Form S-3. Any Holder of Registrable Securities may at any time, and from time to time, request in writing that the Company,
pursuant to Rule 415 under the Securities Act (or any successor rule promulgated thereafter by the Commission), register the
resale of any or all of their Registrable Securities on Form S-3 or any similar short form registration statement that may be available
at such time (“Form S-3”); provided, however, that the Company shall not be obligated
to effect such request through an Underwritten Offering. Within five (5) days of the Company’s receipt of a written request
from a Holder or Holders of Registrable Securities for a Registration on Form S-3, the Company shall promptly give written notice
of the proposed Registration on Form S-3 to all other Holders of Registrable Securities, and each Holder of Registrable Securities
who thereafter wishes to include all or a portion of such Holder’s Registrable Securities in such Registration on Form S-3
shall so notify the Company, in writing, within ten (10) days after the receipt by the Holder of the notice from the Company. As
soon as practicable thereafter, but not more than twelve (12) days after the Company’s initial receipt of such written request for
a Registration on Form S-3, the Company shall register all or such portion of such Holder’s Registrable Securities as are specified
in such written request, together with all or such portion of Registrable Securities of any other Holder or Holders joining in such request
as are specified in the written notification given by such Holder or Holders; provided, however, that the Company
shall not be obligated to effect any such Registration pursuant to Section 2.3 hereof if (i) a Form S-3
is not available for such offering; or (ii) the Holders of Registrable Securities, together with the Holders of any other equity
securities of the Company entitled to inclusion in such Registration, propose to sell the Registrable Securities and such other equity
securities (if any) at any aggregate price to the public of less than $10,000,000.
2.4 Restrictions
on Registration Rights. If (A) during the period starting with the date sixty (60) days prior to the Company’s good faith
estimate of the date of the filing of, and ending on a date one hundred and twenty (120) days after the effective date of, a Company initiated
Registration and provided that the Company has delivered written notice to the Holders prior to receipt of a Demand Registration pursuant
to subsection 2.1.1 and it continues to actively employ, in good faith, all reasonable efforts to cause the applicable
Registration Statement to become effective; (B) the Holders have requested an Underwritten Registration and the Company and the Holders
are unable to obtain the commitment of underwriters to firmly underwrite the offer; or (C) in the good faith judgment of the Board
such Registration would be seriously detrimental to the Company and the Board concludes as a result that it is essential to defer the
filing of such Registration Statement at such time, then in each case the Company shall furnish to such Holders a certificate signed by
the Chairman of the Board stating that in the good faith judgment of the Board it would be seriously detrimental to the Company for such
Registration Statement to be filed in the near future and that it is therefore essential to defer the filing of such Registration Statement.
In such event, the Company shall have the right to defer such filing for a period of not more than thirty (30) days; provided, however,
that the Company shall not defer its obligation in this manner more than once in any 12-month period.
ARTICLE III
COMPANY PROCEDURES
3.1 General
Procedures. If at any time on or after the date the Company consummates a Business Combination the Company is required to effect the
Registration of Registrable Securities, the Company shall use its best efforts to effect such Registration to permit the sale of such
Registrable Securities in accordance with the intended plan of distribution thereof, and pursuant thereto the Company shall, as expeditiously
as possible:
3.1.1 prepare
and file with the Commission as soon as practicable a Registration Statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such Registration Statement to become effective and remain effective until all Registrable
Securities covered by such Registration Statement have been sold;
3.1.2 prepare
and file with the Commission such amendments and post-effective amendments to the Registration Statement, and such supplements to the
Prospectus, as may be requested by any Holder or any Underwriter of Registrable Securities or as may be required by the rules, regulations
or instructions applicable to the registration form used by the Company or by the Securities Act or rules and regulations thereunder
to keep the Registration Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance
with the intended plan of distribution set forth in such Registration Statement or supplement to the Prospectus;
3.1.3 prior
to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to the
Underwriters, if any, and each Holder of Registrable Securities included in such Registration, and each such Holder’s legal
counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement
(in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such
Registration Statement (including each preliminary Prospectus), and such other documents as the Underwriters and each Holder of
Registrable Securities included in such Registration or the legal counsel for any such Holders may request in order to facilitate
the disposition of the Registrable Securities owned by such Holders;
3.1.4 prior
to any public offering of Registrable Securities, use its best efforts to (i) register or qualify the Registrable Securities covered
by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as any Holder
of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and (ii) take
such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by
such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other
acts and things that may be necessary or advisable to enable the Holders of Registrable Securities included in such Registration Statement
to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the
Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify
or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then
otherwise so subject;
3.1.5 cause
all such Registrable Securities to be listed on each securities exchange or automated quotation system on which similar securities issued
by the Company are then listed;
3.1.6 provide
a transfer agent or warrant agent, as applicable, and registrar for all such Registrable Securities no later than the effective date of
such Registration Statement;
3.1.7 advise
each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding
for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued;
3.1.8 at
least five (5) days prior to the filing of any Registration Statement or Prospectus or any amendment or supplement to such Registration
Statement or Prospectus or any document that is to be incorporated by reference into such Registration Statement or Prospectus, furnish
a copy thereof to each seller of such Registrable Securities and its counsel, including, without limitation, providing copies promptly
upon receipt of any comment letters received with respect to any such Registration Statement or Prospectus;
3.1.9 notify
the Holders at any time when a Prospectus relating to such Registration Statement is required to be delivered under the Securities Act,
of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes
a Misstatement, and then to correct such Misstatement as set forth in Section 3.4 hereof;
3.1.10 permit
a representative of the Holders (such representative to be selected by a majority of the participating Holders), the Underwriters, if
any, and any attorney or accountant retained by such Holders or Underwriter to participate, at each such person’s own expense, in
the preparation of the Registration Statement, and cause the Company’s officers, directors and employees to supply all information
reasonably requested by any such representative, Underwriter, attorney or accountant in connection with the Registration; provided, however,
that such representatives or Underwriters enter into a confidentiality agreement, in form and substance reasonably satisfactory to the
Company, prior to the release or disclosure of any such information; and provided further, the Company may not
include the name of any Holder or Underwriter or any information regarding any Holder or Underwriter in any Registration Statement or
Prospectus, any amendment or supplement to such Registration Statement or Prospectus, any document that is to be incorporated by reference
into such Registration Statement or Prospectus, or any response to any comment letter, without the prior written consent of such Holder
or Underwriter and providing each such Holder or Underwriter a reasonable amount of time to review and comment on such applicable document,
which comments the Company shall include unless contrary to applicable law;
3.1.11 obtain
a “cold comfort” letter from the Company’s independent registered public accountants in the event of an
Underwritten Registration which the participating Holders may rely on, in customary form and covering such matters of the type
customarily covered by “cold comfort” letters as the managing Underwriter may reasonably request, and reasonably
satisfactory to a majority-in-interest of the participating Holders;
3.1.12 on
the date the Registrable Securities are delivered for sale pursuant to such Registration, obtain an opinion, dated such date, of counsel
representing the Company for the purposes of such Registration, addressed to the Holders, the placement agent or sales agent, if any,
and the Underwriters, if any, covering such legal matters with respect to the Registration in respect of which such opinion is being
given as the Holders, placement agent, sales agent, or Underwriter may reasonably request and as are customarily included in such opinions
and negative assurance letters, and reasonably satisfactory to a majority in interest of the participating Holders;
3.1.13 in
the event of any Underwritten Offering, enter into and perform its obligations under an underwriting agreement, in usual and customary
form, with the managing Underwriter of such offering;
3.1.14 make
available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12)
months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement
which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any successor
rule promulgated thereafter by the Commission);
3.1.15 if
the Registration involves the Registration of Registrable Securities involving gross proceeds in excess of $50,000,000, use its reasonable
efforts to make available senior executives of the Company to participate in customary “road show” presentations that may
be reasonably requested by the Underwriter in any Underwritten Offering; and
3.1.16 otherwise,
in good faith, cooperate reasonably with, and take such customary actions as may reasonably be requested by the Holders, in connection
with such Registration.
3.2 Registration
Expenses. The Registration Expenses of all Registrations shall be borne by the Company. It is acknowledged by the Holders that the
Holders shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’ commissions
and discounts, brokerage fees, Underwriter marketing costs and, other than as set forth in the definition of “Registration Expenses,”
all reasonable fees and expenses of any legal counsel representing the Holders.
3.3 Requirements
for Participation in Underwritten Offerings. No person may participate in any Underwritten Offering for equity securities of the Company
pursuant to a Registration initiated by the Company hereunder unless such person (i) agrees to sell such person’s securities
on the basis provided in any underwriting arrangements approved by the Company and (ii) completes and executes all customary questionnaires,
powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required
under the terms of such underwriting arrangements.
3.4 Suspension
of Sales; Adverse Disclosure. Upon receipt of written notice from the Company that a Registration Statement or Prospectus contains
a Misstatement, each of the Holders shall forthwith discontinue disposition of Registrable Securities until it has received copies of
a supplemented or amended Prospectus correcting the Misstatement (it being understood that the Company hereby covenants to prepare and
file such supplement or amendment as soon as practicable after the time of such notice), or until it is advised in writing by the Company
that the use of the Prospectus may be resumed. If the filing, initial effectiveness or continued use of a Registration Statement in respect
of any Registration at any time would require the Company to make an Adverse Disclosure or would require the inclusion in such Registration
Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control, the Company may,
upon giving prompt written notice of such action to the Holders, delay the filing or initial effectiveness of, or suspend use of, such
Registration Statement for the shortest period of time, but in no event more than thirty (30) days, determined in good faith by the Company
to be necessary for such purpose. In the event the Company exercises its rights under the preceding sentence, the Holders agree to suspend,
immediately upon their receipt of the notice referred to above, their use of the Prospectus relating to any Registration in connection
with any sale or offer to sell Registrable Securities. The Company shall immediately notify the Holders of the expiration of any period
during which it exercised its rights under this Section 3.4.
3.5 Reporting
Obligations. As long as any Holder shall own Registrable Securities, the Company, at all times while it shall be a reporting company
under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period)
all reports required to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of
the Exchange Act and to promptly furnish the Holders with true and complete copies of all such filings. The Company further covenants
that it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such
Holder to sell shares of the Common Stock held by such Holder without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission),
including providing any legal opinions. Upon the request of any Holder, the Company shall deliver to such Holder a written certification
of a duly authorized officer as to whether it has complied with such requirements.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
4.1 Indemnification.
4.1.1 The
Company agrees to indemnify, to the extent permitted by law, each Holder of Registrable Securities, its officers and directors and each
person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses
(including attorneys’ fees) caused by any untrue or alleged untrue statement of material fact contained in any Registration Statement,
Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Company by such Holder expressly for use therein. The Company shall indemnify
the Underwriters, their officers and directors and each person who controls such Underwriters (within the meaning of the Securities Act)
to the same extent as provided in the foregoing with respect to the indemnification of the Holder.
4.1.2 In
connection with any Registration Statement in which a Holder of Registrable Securities is participating, such Holder shall furnish to
the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration
Statement or Prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and agents and each
person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses
(including without limitation reasonable attorneys’ fees) resulting from any untrue statement of material fact contained in the
Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission of a material
fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any information or affidavit so furnished in writing by such Holder expressly for use therein; provided, however,
that the obligation to indemnify shall be several, not joint and several, among such Holders of Registrable Securities, and the liability
of each such Holder of Registrable Securities shall be in proportion to and limited to the net proceeds received by such Holder from the
sale of Registrable Securities pursuant to such Registration Statement. The Holders of Registrable Securities shall indemnify the Underwriters,
their officers, directors and each person who controls such Underwriters (within the meaning of the Securities Act) to the same extent
as provided in the foregoing with respect to indemnification of the Company.
4.1.3 Any
person entitled to indemnification herein shall (i) give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any person’s right to indemnification
hereunder to the extent such failure has not materially prejudiced the indemnifying party) and (ii) unless in such indemnified party’s
reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit
such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense
is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its
consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (plus local counsel) for all parties
indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict
of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying
party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot
be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such
settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified
party of a release from all liability in respect to such claim or litigation.
4.1.4 The
indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling person of such indemnified party and shall survive the transfer
of securities. The Company and each Holder of Registrable Securities participating in an offering also agrees to make such provisions
as are reasonably requested by any indemnified party for contribution to such party in the event the Company’s or such Holder’s
indemnification is unavailable for any reason.
4.1.5 If
the indemnification provided under Section 4.1 hereof from the indemnifying party is unavailable or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities and expenses referred to herein, then the
indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party
as a result of such losses, claims, damages, liabilities and expenses in such proportion as is appropriate to reflect the relative fault
of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the
indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates
to information supplied by, such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s
relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however,
that the liability of any Holder under this subsection 4.1.5 shall be limited to the amount of the net proceeds received
by such Holder in such offering giving rise to such liability. The amount paid or payable by a party as a result of the losses or other
liabilities referred to above shall be deemed to include, subject to the limitations set forth in subsections 4.1.1, 4.1.2 and 4.1.3 above,
any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The
parties hereto agree that it would not be just and equitable if contribution pursuant to this subsection 4.1.5 were determined
by pro rata allocation or by any other method of allocation, which does not take account of the equitable considerations referred to in
this subsection 4.1.5. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution pursuant to this subsection 4.1.5 from any person who was not guilty
of such fraudulent misrepresentation.
ARTICLE V
MISCELLANEOUS
5.1 Notices.
Any notice or communication under this Agreement must be in writing and given by (i) deposit in the United States mail, addressed
to the party to be notified, postage prepaid and registered or certified with return receipt requested, (ii) delivery in person or
by courier service providing evidence of delivery, or (iii) transmission by hand delivery, or facsimile. Each notice or communication
that is mailed, delivered, or transmitted in the manner described above shall be deemed sufficiently given, served, sent, and received,
in the case of mailed notices, on the third business day following the date on which it is mailed and, in the case of notices delivered
by courier service, hand delivery, or facsimile, at such time as it is delivered to the addressee (with the delivery receipt or the affidavit
of messenger) or at such time as delivery is refused by the addressee upon presentation. Any notice or communication under this Agreement
must be addressed, if to the Company, to: 419 Webster Street, Monterey, CA 93940, and, if to any Holder, at such Holder’s address
or contact information as set forth in the Company’s books and records. Any party may change its address for notice at any time
and from time to time by written notice to the other parties hereto, and such change of address shall become effective thirty (30) days
after delivery of such notice as provided in this Section 5.1.
5.2 Assignment;
No Third Party Beneficiaries.
5.2.1 This
Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or
in part.
5.2.2 Prior
to the expiration of the Founder Shares Lock-up Period or the Private Placement Lock-up Period, as the case may be, no Holder may
assign or delegate such Holder’s rights, duties or obligations under this Agreement, in whole or in part, except in connection
with a transfer of Registrable Securities by such Holder to a Permitted Transferee but only if such Permitted Transferee agrees to
become bound by the transfer restrictions set forth in this Agreement.
5.2.3 This
Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and its successors and
the permitted assigns of the Holders, which shall include Permitted Transferees.
5.2.4 This
Agreement shall not confer any rights or benefits on any persons that are not parties hereto, other than as expressly set forth in this
Agreement and Section 5.2 hereof.
5.2.5 No
assignment by any party hereto of such party’s rights, duties and obligations hereunder shall be binding upon or obligate the Company
unless and until the Company shall have received (i) written notice of such assignment as provided in Section 5.1 hereof
and (ii) the written agreement of the assignee, in a form reasonably satisfactory to the Company, to be bound by the terms and provisions
of this Agreement (which may be accomplished by an addendum or certificate of joinder to this Agreement). Any transfer or assignment made
other than as provided in this Section 5.2 shall be null and void.
5.3 Counterparts.
This Agreement may be executed in multiple counterparts (including facsimile or PDF counterparts), each of which shall be deemed an original,
and all of which together shall constitute the same instrument, but only one of which need be produced.
5.4 Governing
Law; Venue. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY
AGREE THAT (I) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO AGREEMENTS
AMONG NEW YORK RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF
SUCH JURISDICTION AND (II) THE VENUE FOR ANY ACTION TAKEN WITH RESPECT TO THIS AGREEMENT SHALL BE ANY STATE OR FEDERAL COURT IN NEW
YORK COUNTY IN THE STATE OF NEW YORK.
5.5 Amendments
and Modifications. Upon the written consent of the Company and the Holders of at least a majority in interest of the Registrable Securities
at the time in question, compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or
any of such provisions, covenants or conditions may be amended or modified; provided, however, that notwithstanding
the foregoing, any amendment hereto or waiver hereof that adversely affects one Holder, solely in its capacity as a holder of the shares
of capital stock of the Company, in a manner that is materially different from the other Holders (in such capacity) shall require the
consent of the Holder so affected. No course of dealing between any Holder or the Company and any other party hereto or any failure or
delay on the part of a Holder or the Company in exercising any rights or remedies under this Agreement shall operate as a waiver of any
rights or remedies of any Holder or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party
shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder by such party.
5.6 Other
Registration Rights. The Company represents and warrants that no person, other than a Holder of Registrable Securities, has any right
to require the Company to register any securities of the Company for sale or to include such securities of the Company in any Registration
filed by the Company for the sale of securities for its own account or for the account of any other person. Further, the Company represents
and warrants that this Agreement supersedes any other registration rights agreement or agreement with similar terms and conditions and
in the event of a conflict between any such agreement or agreements and this Agreement, the terms of this Agreement shall prevail.
5.7 Term.
This Agreement shall terminate upon the earlier of (i) the tenth anniversary of the date of this Agreement or (ii) the date
as of which (A) all of the Registrable Securities have been sold pursuant to a Registration Statement (but in no event prior to the
applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder (or any successor rule promulgated
thereafter by the Commission)) or (B) the Holders of all Registrable Securities are permitted to sell the Registrable Securities
under Rule 144 (or any similar provision) under the Securities Act without limitation on the amount of securities sold or the manner
of sale. The provisions of Section 3.5 and Article IV shall survive any termination.
[Signature
Page Follows]
IN WITNESS WHEREOF,
the undersigned have caused this Agreement to be executed as of the date first written above.
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COMPANY: |
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Monterey Capital Acquisition Corporation, a Delaware corporation |
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By: |
_________________________________________________________ |
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Name: Bala Padmakumar |
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Title: Chief Executive Officer |
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HOLDER: |
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Monterrey Acquisition Sponsor, LLC, a Delaware limited liability
company |
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By: |
_________________________________________________________ |
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Name: Bala Padmakumar |
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Title: Managing Member |
[Signature
Page to Registration Rights Agreement]
Exhibit 10.6
Monterey Capital Acquisition Corporation
32 Garrison Street, #50-407
Boston, Massachusetts, 02116
October 6, 2021
Monterey Capital Acquisition Corporation
32 Garrison Street, #50-407
Boston, Massachusetts, 02116
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RE: |
Securities Subscription Agreement |
Ladies and Gentlemen:
This agreement (the “Agreement”)
is entered into on October 6, 2021 by and between Monterrey Acquisition Sponsor, LLC, a Delaware limited liability company (the “Subscriber”
or “you”), and Monterey Capital Acquisition Corporation, a Delaware corporation (the “Company,”
“we” or “us”). Pursuant to the terms hereof, the Company hereby accepts the offer the Subscriber
has made to purchase 2,875,000 shares of Class B common stock, $0.0001 par value per share (the “Shares”), up
to 375,000 of which are subject to forfeiture by you if the underwriters of the initial public offering (“IPO”) of
units (“Units”) of the Company, do not fully exercise their over-allotment option (the “Over-allotment Option”).
The Company and the Subscriber’s agreements regarding such Shares are as follows:
1. Purchase of Securities.
1.1. Purchase of Shares.
For the sum of $25,000 (the “Purchase Price”), which the Company acknowledges receiving in cash, the Company hereby
issues the Shares to the Subscriber, and the Subscriber hereby purchases the Shares from the Company, subject to forfeiture, on the terms
and subject to the conditions set forth in this Agreement. Concurrently with the Subscriber’s
execution of this Agreement, the Company shall, at its option, deliver to the Subscriber a certificate registered in the Subscriber’s
name representing the shares (the “Original Certificate”), or effect such delivery in book-entry form.
2. Representations, Warranties and Agreements.
2.1. Subscriber’s
Representations, Warranties and Agreements. To induce the Company to issue the Shares to the Subscriber, the Subscriber hereby represents
and warrants to the Company and agrees with the Company as follows:
2.1.1. No Government
Recommendation or Approval. The Subscriber understands that no federal or state agency has passed upon or made any recommendation
or endorsement of the offering of the Shares.
2.1.2. No Conflicts.
The execution, delivery and performance of this Agreement and the consummation by the Subscriber of the transactions contemplated hereby
do not violate, conflict with or constitute a default under (i) the formation and governing documents of the Subscriber, (ii) any
agreement, indenture or instrument to which the Subscriber is a party or (iii) any law, statute, rule or regulation to which
the Subscriber is subject, or any agreement, order, judgment or decree to which the Subscriber is subject.
2.1.3. Organization
and Authority. The Subscriber is a Delaware limited liability company, validly existing and in good standing under the laws of the
State of Delaware and possesses all requisite power and authority necessary to carry out the transactions contemplated by this Agreement.
Upon execution and delivery by you, this Agreement is a legal, valid and binding agreement of Subscriber, enforceable against Subscriber
in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance
or similar laws affecting the enforcement of creditors’ rights generally and subject to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).
2.1.4. Experience,
Financial Capability and Suitability. Subscriber is: (i) sophisticated in financial matters and is able to evaluate the risks
and benefits of the investment in the Shares and (ii) able to bear the economic risk of its investment in the Shares for an indefinite
period of time because the Shares have not been registered under the Securities Act (as defined below) and therefore cannot be sold unless
subsequently registered under the Securities Act or an exemption from such registration is available. Subscriber is capable of evaluating
the merits and risks of its investment in the Company and has the capacity to protect its own interests. Subscriber must bear the economic
risk of this investment until the Shares are sold pursuant to: (i) an effective registration statement under the Securities Act or
(ii) an exemption from registration available with respect to such sale. Subscriber is able to bear the economic risks of an investment
in the Shares and to afford a complete loss of Subscriber’s investment in the Shares.
2.1.5. Access to
Information; Independent Investigation. Prior to the execution of this Agreement, the Subscriber has had the opportunity to ask questions
of and receive answers from representatives of the Company concerning an investment in the Company, as well as the finances, operations,
business and prospects of the Company, and the opportunity to obtain additional information to verify the accuracy of all information
so obtained. In determining whether to make this investment, Subscriber has relied solely on Subscriber’s own knowledge and understanding
of the Company and its business based upon Subscriber’s own due diligence investigation and the information furnished pursuant to
this paragraph. Subscriber understands that no person has been authorized to give any information or to make any representations which
were not furnished pursuant to this Section 2 and Subscriber has not relied on any other representations or information in making
its investment decision, whether written or oral, relating to the Company, its operations and/or its prospects.
2.1.6. Regulation
D Offering. Subscriber represents that it is an “accredited investor” as such term is defined in Rule 501(a) of
Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) and acknowledges the sale contemplated
hereby is being made in reliance on a private placement exemption to “accredited investors” within the meaning of Section 501(a) of
Regulation D under the Securities Act or similar exemptions under state law.
2.1.7. Investment
Purposes. The Subscriber is purchasing the Shares solely for investment purposes, for the Subscriber’s own account and not for
the account or benefit of any other person, and not with a view towards the distribution or dissemination thereof. The Subscriber did
not decide to enter into this Agreement as a result of any general solicitation or general advertising within the meaning of Rule 502
under the Securities Act.
2.1.8. Restrictions
on Transfer; Shell Company. Subscriber understands the Shares are being offered in a transaction not involving a public offering within
the meaning of the Securities Act. Subscriber understands the Shares will be “restricted securities” within the meaning of
Rule 144(a)(3) under the Securities Act, and Subscriber understands that the certificates or book-entries representing the Shares
will contain a legend in respect of such restrictions. If in the future the Subscriber decides to offer, resell, pledge or otherwise transfer
the Shares, such Shares may be offered, resold, pledged or otherwise transferred only pursuant to: (i) registration under the Securities
Act, or (ii) an available exemption from registration. Subscriber agrees that if any transfer of its Shares or any interest therein
is proposed to be made, as a condition precedent to any such transfer, Subscriber may be required to deliver to the Company an opinion
of counsel satisfactory to the Company. Absent registration or an exemption, the Subscriber agrees not to resell the Shares. Subscriber
further acknowledges that because the Company is a shell company, Rule 144 may not be available to the Subscriber for the resale
of the Shares until one year following consummation of the initial business combination of the Company, despite technical compliance with
the requirements of Rule 144 and the release or waiver of any contractual transfer restrictions.
2.1.9. No Governmental
Consents. No governmental, administrative or other third party consents or approvals are required, necessary or appropriate on the
part of Subscriber in connection with the transactions contemplated by this Agreement.
2.2. Company’s Representations,
Warranties and Agreements. To induce the Subscriber to purchase the Shares, the Company hereby represents and warrants to the Subscriber
and agrees with the Subscriber as follows:
2.2.1. Organization
and Corporate Power. The Company is a Delaware corporation and is qualified to do business in every jurisdiction in which the failure
to so qualify would reasonably be expected to have a material adverse effect on the financial condition, operating results or assets of
the Company. The Company possesses all requisite corporate power and authority necessary to carry out the transactions contemplated by
this Agreement.
2.2.2. No Conflicts.
The execution, delivery and performance of this Agreement and the consummation by the Company of the transactions contemplated hereby
do not violate, conflict with or constitute a default under (i) the Certificate of Incorporation or By Laws of the Company, (ii) any
agreement, indenture or instrument to which the Company is a party or (iii) any law, statute, rule or regulation to which the
Company is subject, or any agreement, order, judgment or decree to which the Company is subject.
2.2.3. Title to Securities.
Upon issuance in accordance with, and payment pursuant to, the terms hereof, the Shares will be duly and validly issued, fully paid and
nonassessable. Upon issuance in accordance with, and payment pursuant to, the terms hereof, the Subscriber will have or receive good title
to the Shares, free and clear of all liens, claims and encumbrances of any kind, other than (a) transfer restrictions hereunder and
other agreements to which the Shares may be subject which have been notified to the Subscriber in writing, (b) transfer restrictions
under federal and state securities laws, and (c) liens, claims or encumbrances imposed due to the actions of the Subscriber.
2.2.4. No Adverse
Actions. There are no actions, suits, investigations or proceedings pending, threatened against or affecting the Company which: (i) seek
to restrain, enjoin, prevent the consummation of or otherwise affect the transactions contemplated by this Agreement or (ii) question
the validity or legality of any transactions or seeks to recover damages or to obtain other relief in connection with any transactions.
3. Forfeiture of Shares.
3.1. Partial or No Exercise
of the Over-allotment Option. In the event the Over-allotment Option granted to the underwriters of the IPO is not exercised in full,
the Subscriber acknowledges and agrees that it (or, if applicable, it and any transferees of Shares) shall forfeit any and all rights
to such number of Shares (up to an aggregate of 375,000 Shares and pro rata based upon the percentage of the Over-allotment Option exercised)
such that immediately following such forfeiture, the Subscriber (and all other initial stockholders prior to the IPO, if any) will own
an aggregate number of Shares (not including any placement Units that are expected to be purchased at the closing of the IPO, Shares issuable
upon exercise of any warrants or any Common Stock purchased by Subscriber in the IPO or in the aftermarket) equal to 20% of the issued
and outstanding Shares immediately following the IPO.
3.2. Termination of Rights
as Stockholder. If any of the Shares are forfeited in accordance with this Section 3, then after such time the Subscriber (or
successor in interest), shall no longer have any rights as a holder of such forfeited Shares, and the Company shall take such action as
is appropriate to cancel such forfeited Shares.
3.3. Share Certificates.
In the event an adjustment to the Original Certificates, if any, is required pursuant to this
Section 3, then the Subscriber shall return such Original Certificates to the Company or its designated agent as soon as practicable
upon its receipt of notice from the Company advising Subscriber of such adjustment, following which a new certificate (the “New
Certificate”), if any, shall be issued in such amount representing the adjusted number of Shares held by the Subscriber. The
New Certificate, if any, shall be returned to the Subscriber as soon as practicable. Any such adjustment for any uncertificated securities
held by the Subscriber shall be made in book-entry form.
4. Waiver of Liquidation Distributions; Redemption
Rights. In connection with the Shares purchased pursuant to this Agreement, the Subscriber hereby waives any and all right, title,
interest or claim of any kind in or to any distributions by the Company from the trust account which will be established for the benefit
of the Company’s public stockholders and into which substantially all of the proceeds of the IPO will be deposited (the “Trust
Account”), in the event of a liquidation of the Company upon the Company’s failure to timely complete an initial business
combination. For purposes of clarity, in the event the Subscriber purchases Shares in the IPO or in the aftermarket, any additional Shares
so purchased shall be eligible to receive any liquidating distributions by the Company. However, in no event will the Subscriber have
the right to redeem any Shares into funds held in the Trust Account upon the successful completion of an initial business combination.
5. Restrictions on Transfer.
5.1. Securities Law Restrictions.
In addition to any restrictions to be contained in that certain letter agreement (commonly known as an “Insider Letter”)
to be dated as of the closing of the IPO by and between Subscriber and the Company, Subscriber agrees not to sell, transfer, pledge, hypothecate
or otherwise dispose of all or any part of the Shares unless, prior thereto (a) a registration statement on the appropriate form
under the Securities Act and applicable state securities laws with respect to the Shares proposed to be transferred shall then be effective
or (b) the Company has received an opinion from counsel reasonably satisfactory to the Company, that such registration is not required
because such transaction is exempt from registration under the Securities Act and the rules promulgated by the Securities and Exchange
Commission thereunder and with all applicable state securities laws.
5.2. Lock-up.
Subscriber acknowledges that the Securities will be subject to lock-up provisions (the “Lock-up”) contained in the
Insider Letter.
5.3. Restrictive Legends.
Any certificates representing the Shares shall have endorsed thereon legends substantially as follows:
“THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL, IS
AVAILABLE.”
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO A LOCKUP AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED DURING THE TERM OF THE LOCKUP.”
5.4. Additional Shares
or Substituted Securities. In the event of the declaration of a share dividend, the declaration of an extraordinary dividend payable
in a form other than Shares, a spin-off, a share split, an adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company’s outstanding Shares without receipt of consideration, any new, substituted or additional securities or other
property which are by reason of such transaction distributed with respect to any Shares subject to this Section 5 or into which such
Shares thereby become convertible shall immediately be subject to this Section 5 and Section 3. Appropriate adjustments to reflect
the distribution of such securities or property shall be made to the number and/or class of Shares subject to this Section 5 and
Section 3.
5.5. Registration Rights.
Subscriber acknowledges that the Shares are being purchased pursuant to an exemption from the registration requirements of the Securities
Act and will become freely tradable only after certain conditions are met or they are registered pursuant to a registration rights agreement
to be entered into with the Company prior to the closing of the IPO.
6. Other Agreements.
6.1. Further Assurances.
Subscriber agrees to execute such further instruments and to take such further action as may reasonably be necessary to carry out the
intent of this Agreement.
6.2. Notices. All
notices, statements or other documents which are required or contemplated by this Agreement shall be: (i) in writing and delivered
personally or sent by first class registered or certified mail, overnight courier service or facsimile or electronic transmission to the
address designated in writing, (ii) by facsimile to the number most recently provided to such party or such other address or fax
number as may be designated in writing by such party and (iii) by electronic mail, to the electronic mail address most recently provided
to such party or such other electronic mail address as may be designated in writing by such party. Any notice or other communication so
transmitted shall be deemed to have been given on the day of delivery, if delivered personally, on the business day following receipt
of written confirmation, if sent by facsimile or electronic transmission, one (1) business day after delivery to an overnight courier
service or five (5) days after mailing if sent by mail.
6.3. Entire Agreement.
This Agreement, together with the Insider Letter and the Registration Rights Agreement, each substantially in the form to be filed as
an exhibit to the Registration Statement on Form S-1 associated with the Company’s IPO, embodies the entire agreement and understanding
between the Subscriber and the Company with respect to the subject matter hereof and supersedes all prior oral or written agreements and
understandings relating to the subject matter hereof. No statement, representation, warranty, covenant or agreement of any kind not expressly
set forth in this Agreement shall affect, or be used to interpret, change or restrict, the express terms and provisions of this Agreement.
6.4. Modifications and
Amendments. The terms and provisions of this Agreement may be modified or amended only by written agreement executed by all parties
hereto.
6.5. Waivers and Consents.
The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by a written document executed
by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute
a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar. Each such waiver or consent
shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver
or consent.
6.6. Assignment. The
rights and obligations under this Agreement may not be assigned by either party hereto without the prior written consent of the other
party.
6.7. Benefit. All
statements, representations, warranties, covenants and agreements in this Agreement shall be binding on the parties hereto and shall inure
to the benefit of the respective successors and permitted assigns of each party hereto. Nothing in this Agreement shall be construed to
create any rights or obligations except among the parties hereto, and no person or entity shall be regarded as a third-party beneficiary
of this Agreement.
6.8. Governing Law.
This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws
of New York applicable to contracts wholly performed within the borders of such state, without giving effect to the conflict of law principles
thereof.
6.9. Severability.
In the event that any court of competent jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement
shall be unreasonable or unenforceable in any respect, then such provision shall be deemed limited to the extent that such court deems
it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any such
provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall nevertheless remain in full force
and effect.
6.10. No Waiver of Rights,
Powers and Remedies. No failure or delay by a party hereto in exercising any right, power or remedy under this Agreement, and no course
of dealing between the parties hereto, shall operate as a waiver of any such right, power or remedy of such party. No single or partial
exercise of any right, power or remedy under this Agreement by a party hereto, nor any abandonment or discontinuance of steps to enforce
any such right, power or remedy, shall preclude such party from any other or further exercise thereof or the exercise of any other right,
power or remedy hereunder. The election of any remedy by a party hereto shall not constitute a waiver of the right of such party to pursue
other available remedies. No notice to or demand on a party not expressly required under this Agreement shall entitle the party receiving
such notice or demand to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights
of the party giving such notice or demand to any other or further action in any circumstances without such notice or demand.
6.11. Survival of Representations
and Warranties. All representations and warranties made by the parties hereto in this Agreement or in any other agreement, certificate
or instrument provided for or contemplated hereby, shall survive the execution and delivery hereof and any investigations made by or on
behalf of the parties.
6.12. No Broker or Finder.
Each of the parties hereto represents and warrants to the other that no broker, finder or other financial consultant has acted on its
behalf in connection with this Agreement or the transactions contemplated hereby in such a way as to create any liability on the other.
Each of the parties hereto agrees to indemnify and save the other harmless from any claim or demand for commission or other compensation
by any broker, finder, financial consultant or similar agent claiming to have been employed by or on behalf of such party and to bear
the cost of legal expenses incurred in defending against any such claim.
6.13. Headings and Captions.
The headings and captions of the various subdivisions of this Agreement are for convenience of reference only and shall in no way modify
or affect the meaning or construction of any of the terms or provisions hereof.
6.14. Counterparts.
This Agreement may be executed in one or more counterparts, all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or any other form
of electronic delivery, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such signature page were an original thereof.
6.15. Construction.
The parties hereto have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent
or interpretation arises, this Agreement will be construed as if drafted jointly by the parties hereto and no presumption or burden of
proof will arise favoring or disfavoring any party hereto because of the authorship of any provision of this Agreement. The words “include,”
“includes,” and “including” will be deemed to be followed by “without limitation.”
Pronouns in masculine, feminine, and neuter genders will be construed to include any other gender, and words in the singular form will
be construed to include the plural and vice versa, unless the context otherwise requires. The words “this Agreement,”
“herein,” “hereof,” “hereby,” “hereunder,” and words of similar
import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The parties hereto intend
that each representation, warranty, and covenant contained herein will have independent significance. If any party hereto has breached
any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty
or covenant relating to the same subject matter (regardless of the relative levels of specificity) which such party hereto has not breached
will not detract from or mitigate the fact that such party hereto is in breach of the first representation, warranty, or covenant.
6.16. Mutual Drafting.
This Agreement is the joint product of the Subscriber and the Company and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of such parties and shall not be construed for or against any party hereto.
7. Voting and Tender of Shares. Subscriber
agrees to vote the Shares in favor of an initial business combination that the Company negotiates and submits for approval to the Company’s
stockholders and shall not seek redemption with respect to such Shares. Additionally, the Subscriber agrees not to tender any Shares in
connection with a tender offer presented to the Company’s stockholders in connection with an initial business combination negotiated
by the Company.
8. Indemnification. Each party shall
indemnify the other against any loss, cost or damages (including reasonable attorney’s fees and expenses) incurred as a result of
such party’s breach of any representation, warranty, covenant or agreement in this Agreement.
[Signature Page Follows]
If the foregoing accurately
sets forth our understanding and agreement, please sign the enclosed copy of this Agreement and return it to us.
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Very truly yours, |
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MONTEREY CAPITAL ACQUISITION CORPORATION |
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By: |
/s/ Bala Padmakumar |
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Name: Bala Padmakumar |
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Title: Chief Executive Officer |
| Accepted and agreed as of the date first written above. |
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| MONTERREY ACQUISITION SPONSOR, LLC |
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| By: |
/s/ Bala Padmakumar |
|
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Name: Bala Padmakumar |
|
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Title: Managing Member |
|
Exhibit 10.7
PRIVATE PLACEMENT WARRANTS PURCHASE AGREEMENT
THIS PRIVATE PLACEMENT WARRANTS PURCHASE AGREEMENT,
dated as of [_________], 2022 (as it may from time to time be amended, this “Agreement”), is entered into by and between
Monterey Capital Acquisition Corporation, a Delaware corporation (the “Company”) and Monterrey Acquisition Sponsor,
LLC, a Delaware limited liability company (the “Purchaser”).
WHEREAS:
The Company intends to consummate an initial public
offering of the Company’s units (the “Public Offering”), each unit consisting of one share of Class A common
stock of the Company, par value $0.0001 per share (each, a “Share”), one redeemable warrant and one right to receive
one-tenth (1/10) of one Share;
Each warrant entitles the holder to purchase one
Share at an exercise price of $11.50 per Share; and
The Purchaser has agreed to purchase an aggregate
of 3,200,000 warrants (or 3,500,000 warrants if the over-allotment option is exercised in full) at a price of $1.00 per warrant (the “Private
Placement Warrants”), each Private Placement Warrant entitling the holder to purchase one Share at an exercise price of $11.50
per Share.
NOW THEREFORE, in consideration of the mutual promises
contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby, intending legally to be bound, agree as follows:
AGREEMENT
Section 1. Authorization, Purchase and Sale; Terms of the Private
Placement Warrants.
A. Authorization of the Private Placement Warrants.
The Company has duly authorized the issuance and sale of the Private Placement Warrants to the Purchaser.
B. Purchase and Sale of the Private Placement
Warrants.
(i) Simultaneously with the consummation of
the Public Offering or on such earlier time and date as may be mutually agreed by the Purchaser and the Company (the “Initial
Closing Date”), the Company shall issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, an aggregate
of 3,200,000 Private Placement Warrants at a price of $1.00 per warrant for an aggregate purchase price of $3,200,000 (the “Purchase
Price”). Purchaser shall pay the Purchase Price by wire transfer of immediately available funds to the trust account (the “Trust
Account”) maintained by Continental Stock Transfer & Trust Company, acting as trustee (“Continental”),
at least one (1) business day prior to the date of effectiveness (the “Effective Date”) of the registration statement
relating to the Public Offering (the “Registration Statement”). On the Initial Closing Date, upon the payment by the
Purchaser of the Purchase Price, the Company, at its option, shall deliver a certificate evidencing the Private Placement Warrants purchased
on such date duly registered in the Purchaser’s name to the Purchaser or effect such delivery in book-entry form.
(ii) Simultaneously with the consummation of
the closing of the over-allotment option in connection with the Public Offering (the “Over-Allotment Option”) or on
such earlier time and date as may be mutually agreed by the Purchaser and the Company (each such date, an “Over-Allotment Closing
Date,” and each Over-Allotment Closing Date (if any) and the Initial Closing Date being sometimes referred to herein as a “Closing
Date”), Purchaser shall purchase up to an additional 300,000 Private Placement Warrants (the “Additional Warrants”),
in the same proportion as the amount of the option that is so exercised, and simultaneously with such purchase of Additional Warrants,
as payment in full for the Additional Warrants being purchased hereunder, and at least one (1) business day prior to the Over-Allotment
Closing Date, Purchaser shall pay $1.00 per Additional Warrant, up to an aggregate amount of $300,000 (the “Over-Allotment Purchase
Price”), by wire transfer of immediately available funds or by such other method as may be reasonably acceptable to the Company,
to the Trust Account. On the Over-Allotment Closing Date, upon the payment by the Purchaser of the Over-Allotment Purchase Price, the
Company, at its option, shall deliver a certificate evidencing the Additional Warrants purchased on such date duly registered in the Purchaser’s
name to the Purchaser or effect such delivery in book-entry form.
C. Terms of the Private Placement Warrants.
(i) Each Private Placement Warrant shall have
the terms set forth in a Warrant Agreement to be entered into by the Company and Continental in connection with the Public Offering (the
“Warrant Agreement”). Such terms include the fact that the Private Placement Warrants shall not be transferable, assignable
or salable until after the completion of an initial business combination, subject to certain exceptions set forth in the Warrant Agreement.
(ii) On or prior to the Effective Date, the
Company and the Purchaser shall enter into a registration rights agreement (the “Registration Rights Agreement”) pursuant
to which the Company will grant certain registration rights to the Purchaser relating to the Private Placement Warrants and the Shares
underlying the Private Placement Warrants.
Section 2.
Representations and Warranties of the Company. As a material inducement to the Purchaser to enter into this Agreement and purchase
the Private Placement Warrants, the Company hereby represents and warrants to the Purchaser (which representations and warranties shall
survive the Closing Date) that:
A. Incorporation and Corporate Power. The
Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and is qualified
to do business in every jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect
on the financial condition, operating results or assets of the Company. The Company possesses all requisite corporate power and authority
necessary to carry out the transactions contemplated by this Agreement and the Warrant Agreement.
B. Authorization; No Breach.
(i) The execution, delivery and performance
of this Agreement and the Warrant Agreement have been duly authorized by the Company as of the Closing Date. This Agreement constitutes
the valid and binding obligation of the Company, enforceable in accordance with its terms. Upon issuance in accordance with, and payment
pursuant to, the terms of the Warrant Agreement and this Agreement, the Private Placement Warrants will constitute valid and binding obligations
of the Company, enforceable in accordance with their terms.
(ii) The execution and delivery by the Company
of this Agreement and the Warrant Agreement, the issuance and sale of the Private Placement Warrants, the issuance of the Shares upon
exercise of the Private Placement Warrants and the fulfillment, of and compliance with, the respective terms hereof and thereof by the
Company, do not and will not as of the Closing Date (a) conflict with or result in a breach of the terms, conditions or provisions
of, (b) constitute a default under, (c) result in the creation of any lien, security interest, charge or encumbrance upon the
Company’s share capital or assets under, (d) result in a violation of, or (e) require any authorization, consent, approval,
exemption or other action by or notice or declaration to, or filing with, any court or administrative or governmental body or agency pursuant
to the amended and restated certificate of incorporation of the Company (in effect on the date hereof or as may be amended prior to completion
of the contemplated Public Offering), or any material law, statute, rule or regulation to which the Company is subject, or any agreement,
order, judgment or decree to which the Company is subject, except for any filings required after the date hereof under federal or state
securities laws.
C. Title to Securities. Upon issuance in
accordance with, and payment pursuant to, the terms hereof, the Warrant Agreement, the Shares issuable upon exercise of the Private Placement
Warrants will be duly and validly issued as fully paid and nonassessable. On the date of issuance of the Private Placement Warrants, the
Shares issuable upon exercise of the Private Placement Warrants shall have been reserved for issuance. Upon issuance in accordance with,
and payment pursuant to, the terms hereof and the Warrant Agreement, the Purchaser will have good title to the Private Placement Warrants
and the Shares issuable upon exercise of such Private Placement Warrants, free and clear of all liens, claims and encumbrances of any
kind, other than (i) transfer restrictions hereunder and under the other agreements contemplated hereby, (ii) transfer restrictions
under federal and state securities laws, and (iii) liens, claims or encumbrances imposed due to the actions of the Purchaser.
D. Valid Issuance. The total number of shares
of all classes of capital stock which the Company has authority to issue is 111,000,000 shares of common stock (which consist of 100,000,000
shares of the Company’s Class A Common Stock and 10,000,000 shares of the Company’s Class B common stock, par value
$0.0001 per share (the “Class B Common Stock”)) and 1,000,000 shares of the Company’s preferred stock, par
value $0.0001 per share (the “Preferred Stock”). As of the date hereof, the Company has issued and outstanding no shares
of Class A Common Stock, 2,875,000 shares of Class B Common Stock (of which up to 375,000 shares are subject to forfeiture as
described in the Registration Statement) and no shares of Preferred Stock. All of the issued shares of capital stock of the Company have
been duly authorized, validly issued, and are fully paid and non-assessable.
E. Governmental Consents. No permit, consent,
approval or authorization of, or declaration to or filing with, any governmental authority is required in connection with the execution,
delivery and performance by the Company of this Agreement or the consummation by the Company of any other transactions contemplated hereby.
Section 3.
Representations and Warranties of the Purchaser. As a material inducement to the Company to enter into this Agreement and issue
and sell the Private Placement Warrants to the Purchaser, the Purchaser hereby represents and warrants to the Company (which representations
and warranties shall survive the Closing Date) that:
A. Organization and Requisite Authority.
The Purchaser possesses all requisite power and authority necessary to carry out the transactions contemplated by this Agreement.
B. Authorization; No Breach.
(i) This Agreement constitutes a valid and
binding obligation of the Purchaser, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws of general applicability relating to or affecting creditors’ rights and to general equitable
principles (whether considered in a proceeding in equity or law).
(ii) The execution and delivery by the Purchaser
of this Agreement and the fulfillment of and compliance with the terms hereof by the Purchaser does not and shall not as of the Closing
Date conflict with or result in a breach by the Purchaser of the terms, conditions or provisions of any agreement, instrument, order,
judgment or decree to which the Purchaser is subject.
C. Investment Representations.
(i) The Purchaser is acquiring the Private
Placement Warrants and, upon exercise of the Private Placement Warrants, the Shares issuable upon such exercise (collectively, the “Securities”),
for the Purchaser’s own account, for investment purposes only and not with a view towards, or for resale in connection with, any
public sale or distribution thereof.
(ii) The Purchaser is an “accredited
investor” as such term is defined in Rule 501(a)(3) of Regulation D under the Securities Act of 1933, as amended (the
“Securities Act”).
(iii) The Purchaser understands that the Securities
are being offered and will be sold to it in reliance on specific exemptions from the registration requirements of the United States federal
and state securities laws and that the Company is relying upon the truth and accuracy of, and the Purchaser’s compliance with, the
representations and warranties of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility
of the Purchaser to acquire such Securities.
(iv) The Purchaser did not enter into this
Agreement as a result of any general solicitation or general advertising within the meaning of Rule 502(c) under the Securities
Act.
(v) The Purchaser has been furnished with all
materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Purchaser. The Purchaser has been afforded the opportunity to ask questions of the executive officers
and directors of the Company. The Purchaser understands that its investment in the Securities involves a high degree of risk and it has
sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to the
acquisition of the Securities.
(vi) The Purchaser understands that no United
States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement
of the Securities or the fairness or suitability of the investment in the Securities by the Purchaser nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
(vii) The Purchaser understands that: (a) the
Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for
sale, sold, assigned or transferred unless (1) subsequently registered thereunder or (2) sold in reliance on an exemption therefrom;
and (b) except as specifically set forth in the Registration Rights Agreement, neither the Company nor any other person is under
any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder. The Private Placement Warrants will bear a legend and appropriate “stop transfer” instructions
(or an appropriate notation if the warrants are issued in book entry form) relating to the foregoing. The Purchaser further understands
that the Securities and Exchange Commission (the “SEC”) has taken the position that promoters or affiliates of a blank
check company and their transferees, both before and after an initial business combination, are deemed to be “underwriters”
under the Securities Act when reselling the securities of a blank check company. Based on that position, Rule 144 adopted pursuant
to the Securities Act would not be available for resale transactions of the Securities until the one-year anniversary following consummation
of an initial business combination despite technical compliance with the requirements of such Rule.
(viii) The Purchaser has such knowledge and
experience in financial and business matters, knows of the high degree of risk associated with investments in the securities of companies
in the development stage such as the Company, is capable of evaluating the merits and risks of an investment in the Securities and is
able to bear the economic risk of an investment in the Securities in the amount contemplated hereunder for an indefinite period of time.
The Purchaser has adequate means of providing for its current financial needs and contingencies and will have no current or anticipated
future needs for liquidity which would be jeopardized by the investment in the Securities. The Purchaser can afford a complete loss of
its investment in the Securities.
Section 4.
Conditions of the Purchaser’s Obligations. The obligations of the Purchaser to purchase and pay for the Private Placement
Warrants are subject to the fulfillment, on or before the Closing Date, of each of the following conditions:
A. Representations and Warranties. The representations
and warranties of the Company contained in Section 2 shall be true and correct at and as of such Closing Date as though then made.
B. Performance. The Company shall have performed
and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied
with by it on or before such Closing Date.
C. No Injunction. No litigation, statute,
rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any
court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated
hereby, which prohibits the consummation of any of the transactions contemplated by this Agreement or the Warrant Agreement.
D. Warrant Agreement. The Company shall
have entered into the Warrant Agreement.
Section 5.
Conditions of the Company’s Obligations. The obligations of the Company to the Purchaser under this Agreement are subject
to the fulfillment, on or before the Closing Date, of each of the following conditions:
A. Representations and Warranties. The representations
and warranties of the Purchaser contained in Section 3 shall be true and correct at and as of such Closing Date as though then made.
B. Performance. The Purchaser shall have
performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or
complied with by the Purchaser on or before such Closing Date.
C. No Injunction. No litigation, statute,
rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any
court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated
hereby, which prohibits the consummation of any of the transactions contemplated by this Agreement or the Warrant Agreement.
D. Warrant Agreement. The Company shall
have entered into the Warrant Agreement.
Section 6.
Termination. This Agreement may be terminated at any time after August 31, 2022 upon the election by either the Company
or the Purchaser solely as to itself upon written notice to the other party if the closing of the Public Offering does not occur prior
to such date.
Section 7.
Survival of Representations and Warranties. All of the representations and warranties contained herein shall survive the Closing
Date.
Section 8.
Definitions. Terms used but not otherwise defined in this Agreement shall have the meaning assigned to such terms in the Registration
Statement.
Section 9. Miscellaneous.
A. Successors and Assigns. Except as otherwise
expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors of the parties hereto whether so expressed or not. Notwithstanding the foregoing
or anything to the contrary herein, the parties may not assign this Agreement without the prior written consent of the other party hereto,
other than assignments by the Purchaser to affiliates thereof.
B. Severability. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent
of such prohibition or invalidity, without invalidating the remainder of this Agreement.
C. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, none of which need contain the signatures of more than one party, but all such counterparts
taken together shall constitute one and the same agreement.
D. Descriptive Headings; Interpretation.
The descriptive headings of this Agreement are inserted for convenience only and do not constitute a substantive part of this Agreement.
The use of the word “including” in this Agreement shall be by way of example rather than by limitation.
E. Governing Law. This Agreement shall be
deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the internal
laws of the State of New York, without regard to the conflicts of laws principles thereof.
F. Amendments. This Agreement may not be
amended, modified or waived as to any particular provision, except by a written instrument executed by all parties hereto.
[Signature page follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the date first set forth above.
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COMPANY: |
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Monterey Capital Acquisition Corporation |
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By: |
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Name: Bala Padmakumar |
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Title: Chief Executive Officer |
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PURCHASER: |
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Monterrey Acquisition Sponsor, LLC |
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By: |
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Name: Bala Padmakumar |
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Title: Managing Member |
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[Signature page to Private Placement Warrants
Purchase Agreement]
Exhibit 10.8
INDEMNITY AGREEMENT
THIS
INDEMNITY AGREEMENT (this “Agreement”) is made as of [ ], 2022, by and between Monterey Capital
Acquisition Corporation, a Delaware corporation (the “Company”), and [ ] (“Indemnitee”).
RECITALS
WHEREAS,
highly competent persons have become more reluctant to serve publicly-held corporations as directors, officers or in other capacities
unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and
actions against them arising out of their service to and activities on behalf of such corporations;
WHEREAS,
the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified
individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving
the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread
practice among publicly traded corporations and other business enterprises, the Company believes that, given current market conditions
and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors,
officers and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming
litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise
itself. The Amended and Restated Certificate of Incorporation (the “Charter”) and Bylaws of the Company require
indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to applicable
provisions of the Delaware General Corporation Law, as amended (“DGCL”). The Charter, Bylaws and the DGCL expressly
provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered
into between the Company and members of the board of directors, officers and other persons with respect to indemnification, hold harmless,
exoneration, advancement and reimbursement rights;
WHEREAS,
the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;
WHEREAS,
the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of
the Company’s stockholders and that the Company should act to assure such persons that there will be increased certainty of such
protection in the future;
WHEREAS,
it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, hold harmless, exonerate and to
advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve
the Company free from undue concern that they will not be so protected against liabilities;
WHEREAS,
this Agreement is a supplement to and in furtherance of the Charter and Bylaws of the Company and any resolutions adopted pursuant thereto,
and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder;
WHEREAS, Indemnitee
may not be willing to serve as an officer or director, advisor or in another capacity without adequate protection, and the Company desires
Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf
of the Company on the condition that he be so indemnified; and
NOW,
THEREFORE, in consideration of the promises and the covenants contained herein and subject to the provisions of the letter
agreement dated as of [ ], 2022 between the Company and the Indemnitee pursuant to the Underwriting Agreement between the Company and
the Underwriters in connection with the Company’s initial public offering, the Company and Indemnitee do hereby covenant and agree
as follows:
TERMS AND CONDITIONS
1. SERVICES
TO THE COMPANY. Indemnitee will serve or continue to serve as an officer, director, advisor,
key employee or in any other capacity of the Company, as applicable, for so long as Indemnitee is duly elected, appointed or retained
or until Indemnitee tenders his resignation.
2. DEFINITIONS.
As used in this Agreement:
2.1. References
to “agent” shall mean any person who is or was a director, officer or employee of the Company or a subsidiary
of the Company or other person authorized by the Company to act for the Company, to include such person serving in such capacity as a
director, officer, employee, advisor, fiduciary or other official of another corporation, partnership, limited liability company, joint
venture, trust or other enterprise at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary
of the Company.
2.2. The
terms “Beneficial Owner” and “Beneficial Ownership” shall have the meanings set forth
in Rule 13d-3 promulgated under the Exchange Act (as defined below) as in effect on the date hereof.
2.3. A
“Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of
any of the following events:
2.3.1. Acquisition
of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial Owner, directly or indirectly, of securities of
the Company representing fifteen percent (15%) or more of the combined voting power of the Company’s then outstanding securities
entitled to vote generally in the election of directors, unless (1) the change in the relative Beneficial Ownership of the Company’s
securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote
generally in the election of directors, or (2) such acquisition was approved in advance by the Continuing Directors (as defined below)
and such acquisition would not constitute a Change in Control under part 2.3.3 of this definition;
2.3.2. Change
in Board of Directors. Individuals who, as of the date hereof, constitute the Board, and any new director whose election by the Board
or nomination for election by the Company’s stockholders was approved by a vote of at least two thirds of the directors then still
in office who were directors on the date hereof or whose election for nomination for election was previously so approved (collectively,
the “Continuing Directors”), cease for any reason to constitute at least a majority of the members of the Board;
2.3.3. Corporate
Transactions. The effective date of a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar
business combination, involving the Company and one or more businesses (a “Business Combination”), in each case,
unless, following such Business Combination: (1) all or substantially all of the individuals and entities who were the Beneficial
Owners of securities entitled to vote generally in the election of directors immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 51% of the combined voting power of the then outstanding securities of the Company entitled to
vote generally in the election of directors resulting from such Business Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through
one or more Subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination, of
the securities entitled to vote generally in the election of directors; (2) no Person (excluding any corporation resulting from such
Business Combination) is the Beneficial Owner, directly or indirectly, of 15% or more of the combined voting power of the then outstanding
securities entitled to vote generally in the election of directors of the surviving corporation except to the extent that such ownership
existed prior to the Business Combination; and (3) at least a majority of the Board of Directors of the corporation resulting from
such Business Combination were Continuing Directors at the time of the execution of the initial agreement, or of the action of the Board
of Directors, providing for such Business Combination.
2.3.4. Liquidation.
The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement or series of agreements for the
sale or disposition by the Company of all or substantially all of the Company’s assets, other than factoring the Company’s
current receivables or escrows due (or, if such approval is not required, the decision by the Board to proceed with such a liquidation,
sale, or disposition in one transaction or a series of related transactions); or
2.3.5. Other
Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined
below), whether or not the Company is then subject to such reporting requirement.
2.4. “Corporate
Status” describes the status of a person who is or was a director, officer, trustee, general partner, managing member, fiduciary,
employee or agent of the Company or of any other Enterprise (as defined below) which such person is or was serving at the request of the
Company.
2.5. “Disinterested
Director” shall mean a director of the Company who is not and was not a party to the Proceeding (as defined below) in respect
of which indemnification is sought by Indemnitee.
2.6. “Enterprise”
shall mean the Company and any other corporation, constituent corporation (including any constituent of a constituent) absorbed in a consolidation
or merger to which the Company (or any of its wholly owned subsidiaries) is a party, limited liability company, partnership, joint venture,
trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, officer,
trustee, general partner, managing member, fiduciary, employee or agent.
2.7. “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.
2.8. “Expenses”
shall include all direct and indirect costs, fees and expenses of any type or nature whatsoever, including, without limitation, all attorneys’
fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, fees of private investigators
and professional advisors, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, fax transmission
charges, secretarial services and all other disbursements, obligations or expenses in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, being or preparing to be a witness in, settlement or appeal of, or otherwise participating in,
a Proceeding (as defined below), including reasonable compensation for time spent by the Indemnitee for which he or she is not otherwise
compensated by the Company or any third party. Expenses also shall include Expenses incurred in connection with any appeal resulting from
any Proceeding (as defined below), including without limitation the principal, premium, security for, and other costs relating to any
cost bond, supersedeas bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement by
Indemnitee or the amount of judgments or fines against Indemnitee.
2.9. “Independent
Counsel” shall mean a law firm or a member of a law firm with significant experience in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to
either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar
indemnification agreements); or (ii) any other party to the Proceeding (as defined below) giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee
in an action to determine Indemnitee’s rights under this Agreement.
2.10. References
to “fines” shall include any excise tax assessed on Indemnitee with respect to any employee benefit plan; references
to “serving at the request of the Company” shall include any service as a director, officer, employee, agent or fiduciary
of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to
an employee benefit plan, its participants or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the best interests of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed
to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.
2.11. “Delaware
Court” shall mean the Court of Chancery of the State of Delaware.
2.12. The
term “Person” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act
as in effect on the date hereof; provided, however, that “Person” shall exclude: (i) the Company; (ii) any Subsidiaries
(as defined below) of the Company; (iii) any employment benefit plan of the Company or of a Subsidiary (as defined below) of the
Company or of any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions
as their ownership of stock of the Company; and (iv) any trustee or other fiduciary holding securities under an employee benefit
plan of the Company or of a Subsidiary (as defined below) of the Company or of a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their ownership of stock of the Company.
2.13. The
term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, mediation, alternate
dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding,
whether brought in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims),
criminal, administrative, or investigative or related nature, in which Indemnitee was, is, will or might be involved as a party or otherwise
by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action (or failure to act) taken
by him or of any action (or failure to act) on his part while acting as a director or officer of the Company, or by reason of the fact
that he is or was serving at the request of the Company as a director, officer, trustee, general partner, managing member, fiduciary,
employee or agent of any other Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is
incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Agreement.
2.14. The
term “Subsidiary,” with respect to any Person, shall mean any corporation or other entity of which a majority
of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by that Person.
3. INDEMNITY
IN THIRD-PARTY PROCEEDINGS. To the fullest extent permitted by applicable law, the Company shall
indemnify, hold harmless and exonerate Indemnitee in accordance with the provisions of this Section 3 if Indemnitee
was, is, or is threatened to be made, a party to or a participant (as a witness or otherwise) in any Proceeding, other than a Proceeding
by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall
be indemnified, held harmless and exonerated against all Expenses, judgments, liabilities, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines,
penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Company and, in the case of a criminal Proceeding, had no reasonable cause to believe that his conduct was
unlawful.
4. INDEMNITY
IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. To the fullest extent permitted by applicable
law, the Company shall indemnify, hold harmless and exonerate Indemnitee in accordance with the provisions of this Section 4 if
Indemnitee was, is, or is threatened to be made, a party to or a participant (as a witness or otherwise) in any Proceeding by or in the
right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified,
held harmless and exonerated against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Company. No indemnification, hold harmless or exoneration for Expenses shall be made under this Section 4 in
respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company,
unless and only to the extent that any court in which the Proceeding was brought or the Delaware Court shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnification, to be held harmless or to exoneration.
5. INDEMNIFICATION
FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provisions
of this Agreement except for Section 27, to the extent that Indemnitee is a party to (or a participant in) and is successful,
on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall,
to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses actually and
reasonably incurred by him in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall, to the fullest
extent permitted by applicable law, indemnify, hold harmless and exonerate Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim, issue or matter. If the Indemnitee is not wholly successful
in such Proceeding, the Company also shall, to the fullest extent permitted by applicable law, indemnify, hold harmless and exonerate
Indemnitee against all Expenses reasonably incurred in connection with a claim, issue or matter related to any claim, issue, or matter
on which the Indemnitee was successful. For purposes of this Section 5 and without limitation, the termination of
any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as
to such claim, issue or matter.
6. INDEMNIFICATION
FOR EXPENSES OF A WITNESS. Notwithstanding any other provision of this Agreement except for Section 27,
to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he
shall, to the fullest extent permitted by applicable law, be indemnified, held harmless and exonerated against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith.
7. ADDITIONAL
INDEMNIFICATION, HOLD HARMLESS AND EXONERATION RIGHTS. Notwithstanding any limitation in Sections 3, 4,
or 5, except for Section 27, the Company shall, to the fullest extent permitted by applicable law, indemnify,
hold harmless and exonerate Indemnitee if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding
by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines, penalties and amounts paid
in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses,
judgments, fines, penalties and amounts paid in settlement) actually and reasonably incurred by Indemnitee in connection with the Proceeding.
No indemnification, hold harmless or exoneration rights shall be available under this Section 7 on account of Indemnitee’s
conduct which constitutes a breach of Indemnitee’s duty of loyalty to the Company or its stockholders or is an act or omission not
in good faith or which involves intentional misconduct or a knowing violation of the law.
8. CONTRIBUTION
IN THE EVENT OF JOINT LIABILITY.
8.1. To
the fullest extent permissible under applicable law, if the indemnification, hold harmless and/or exoneration rights provided for in this
Agreement are unavailable to Indemnitee in whole or in part for any reason whatsoever, the Company, in lieu of indemnifying, holding harmless
or exonerating Indemnitee, shall pay, in the first instance, the entire amount incurred by Indemnitee, whether for judgments, liabilities,
fines, penalties, amounts paid or to be paid in settlement and/or for Expenses, in connection with any Proceeding without requiring Indemnitee
to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have at any time against
Indemnitee.
8.2. The
Company shall not, without Indemnitee’s consent, enter into any settlement of any Proceeding in which the Company is jointly liable
with Indemnitee (or would be if joined in such Proceeding) unless such settlement provides for a full and final release of all claims
asserted against Indemnitee and no admission of guilt by, or injunctive relief against, Indemnitee, is included.
8.3. The
Company hereby agrees to fully indemnify, hold harmless and exonerate Indemnitee from any claims for contribution which may be brought
by officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee.
9. EXCLUSIONS.
Notwithstanding any provision in this Agreement except for Section 27, the Company shall not be obligated under this
Agreement to make any indemnification, hold harmless or exoneration payment in connection with any claim made against Indemnitee:
(a) for
which payment has actually been received by or on behalf of Indemnitee under any insurance policy or other indemnity provision, except
with respect to any excess beyond the amount actually received under any insurance policy, contract, agreement, other indemnity provision
or otherwise;
(b) for
an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the
meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law; or
(c) except
as otherwise provided in Sections 14.5 and 14.6 hereof, prior to a Change in Control, in connection
with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding)
initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized
the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, hold harmless
or exoneration payment, in its sole discretion, pursuant to the powers vested in the Company under applicable law.
10. ADVANCES
OF EXPENSES; DEFENSE OF CLAIM.
10.1. Notwithstanding
any provision of this Agreement to the contrary except for Section 27, and to the fullest extent not prohibited by applicable
law, the Company shall pay the Expenses incurred by Indemnitee (or reasonably expected by Indemnitee to be incurred by Indemnitee within
three months) in connection with any Proceeding within ten (10) days after the receipt by the Company of a statement or statements
requesting such advances from time to time, prior to the final disposition of any Proceeding. Advances shall be unsecured and interest
free. Advances shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s
ultimate entitlement to be indemnified, held harmless or exonerated under the other provisions of this Agreement. Advances shall include
any and all reasonable Expenses incurred pursuing a Proceeding to enforce this right of advancement, including Expenses incurred preparing
and forwarding statements to the Company to support the advances claimed. If required by applicable law or the Charter or the Bylaws of
the Company, such payments of Expenses in advance of the final disposition of the Proceeding shall be made only upon the Company’s
receipt of an undertaking, by or on behalf of the Indemnitee, to repay the advance to the extent that it is ultimately determined that
Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Charter, the Bylaws of the Company,
applicable law or otherwise. This Section 10.1 shall not apply to any claim made by Indemnitee for which an indemnification,
hold harmless or exoneration payment is excluded pursuant to Section 9.
10.2. The
Company will be entitled to participate in the Proceeding at its own expense.
10.3. The
Company shall not settle any action, claim or Proceeding (in whole or in part) which would impose any Expense, judgment, fine, penalty
or limitation on the Indemnitee without the Indemnitee’s prior written consent.
11. PROCEDURE
FOR NOTIFICATION AND APPLICATION FOR INDEMNIFICATION.
11.1. Indemnitee
agrees to notify promptly the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information
or other document relating to any Proceeding or matter which may be subject to indemnification, hold harmless or exoneration rights, or
advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation
which it may have to the Indemnitee under this Agreement, or otherwise.
11.2. Indemnitee
may deliver to the Company a written application to indemnify, hold harmless or exonerate Indemnitee in accordance with this Agreement.
Such application(s) may be delivered from time to time and at such time(s) as Indemnitee deems appropriate in his or her sole
discretion. Following such a written application for indemnification by Indemnitee, the Indemnitee’s entitlement to indemnification
shall be determined according to Section 12.1 of this Agreement.
12. PROCEDURE
UPON APPLICATION FOR INDEMNIFICATION.
12.1. A
determination, if required by applicable law, with respect to Indemnitee’s entitlement to indemnification shall be made in the specific
case by one of the following methods, which shall be at the election of Indemnitee: (i) by a majority vote of the Disinterested Directors,
even though less than a quorum of the Board; (ii) by Independent Counsel in a written opinion to the Board, a copy of which shall
be delivered to Indemnitee; or (iii) by vote of the stockholders. The Company promptly will advise Indemnitee in writing with respect
to any determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which
indemnification has been denied. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be
made within ten (10) days after such determination. Indemnitee shall reasonably cooperate with the person, persons or entity making
such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity
upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which
is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or Expenses (including attorneys’
fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be
borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.
12.2. In
the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 12.1 hereof,
the Independent Counsel shall be selected as provided in this Section 12.2. The Independent Counsel shall be selected
by Indemnitee (unless Indemnitee shall request that such selection be made by the Board), and Indemnitee shall give written notice to
the Company advising it of the identity of the Independent Counsel so selected and certifying that the Independent Counsel so selected
meets the requirements of “Independent Counsel” as defined in Section 2 of this Agreement. If the Independent
Counsel is selected by the Board, the Company shall give written notice to Indemnitee advising him of the identity of the Independent
Counsel so selected and certifying that the Independent Counsel so selected meets the requirements of “Independent Counsel”
as defined in Section 2 of this Agreement. In either event, Indemnitee or the Company, as the case may be,
may, within ten (10) days after such written notice of selection shall have been received, deliver to the Company or to Indemnitee,
as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that
the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of
this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection,
the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel
so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court of competent jurisdiction has
determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification
pursuant to Section 11.2 hereof, no Independent Counsel shall have been selected and not objected to, either the
Company or Indemnitee may petition the Delaware Court for resolution of any objection which shall have been made by the Company or Indemnitee
to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Delaware
Court, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel
under Section 12.1 hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 14.1 of
this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
12.3. The
Company agrees to pay the reasonable fees and expenses of Independent Counsel and to fully indemnify and hold harmless such Independent
Counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant
hereto.
13. PRESUMPTIONS
AND EFFECT OF CERTAIN PROCEEDINGS.
13.1. In
making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination
shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification
in accordance with Section 11.2 of this Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither
the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement
of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable
standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct.
13.2. If
the person, persons or entity empowered or selected under Section 12 of this Agreement to determine whether Indemnitee
is entitled to indemnification shall not have made a determination within thirty (30) days after receipt by the Company of the request
therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled
to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary
to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a final
judicial determination that any or all such indemnification is expressly prohibited under applicable law; provided, however, that such
30-day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person, persons or entity
making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining
or evaluating of documentation and/or information relating thereto.
13.3. The
termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the
right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had
reasonable cause to believe that his conduct was unlawful.
13.4. For
purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action
is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee
by the directors or officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise, its
Board, any committee of the Board or any director, or on information or records given or reports made to the Enterprise, its Board, any
committee of the Board or any director, by an independent certified public accountant or by an appraiser or other expert selected by the
Enterprise, its Board, any committee of the Board or any director. The provisions of this Section 13.4 shall not
be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed or found to have met the
applicable standard of conduct set forth in this Agreement.
13.5. The
knowledge and/or actions, or failure to act, of any other director, officer, trustee, partner, managing member, fiduciary, agent or employee
of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.
14. REMEDIES
OF INDEMNITEE.
14.1. In
the event that (i) a determination is made pursuant to Section 12 of this Agreement that Indemnitee is not
entitled to indemnification under this Agreement, (ii) advancement of Expenses, to the fullest extent permitted by applicable law,
is not timely made pursuant to Section 10 of this Agreement, (iii) no determination of entitlement to indemnification
shall have been made pursuant to Section 12.1 of this Agreement within thirty (30) days after receipt by the
Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 5, 6, 7 or
the last sentence of Section 12.1 of this Agreement within ten (10) days after receipt by the Company of a
written request therefor, (v) a contribution payment is not made in a timely manner pursuant to Section 8 of
this Agreement, (vi) payment of indemnification pursuant to Section 3 or 4 of this Agreement
is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vii) payment
to Indemnitee pursuant to any hold harmless or exoneration rights under this Agreement or otherwise is not made within ten (10) days
after receipt by the Company of a written request therefor, Indemnitee shall be entitled to an adjudication by the Delaware Court
to such indemnification, hold harmless, exoneration, contribution or advancement rights. Alternatively, Indemnitee, at his option,
may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. Except as set forth herein, the provisions of Delaware law (without regard to its conflict of laws rules) shall
apply to any such arbitration. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.
14.2. In
the event that a determination shall have been made pursuant to Section 12.1 of this Agreement that Indemnitee is
not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 shall
be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that
adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 14, Indemnitee
shall be presumed to be entitled to be indemnified, held harmless, exonerated to receive advances of Expenses under this Agreement and
the Company shall have the burden of proving Indemnitee is not entitled to be indemnified, held harmless, exonerated and to receive advances
of Expenses, as the case may be, and the Company may not refer to or introduce into evidence any determination pursuant to Section 12.1 of
this Agreement adverse to Indemnitee for any purpose. If Indemnitee commences a judicial proceeding or arbitration pursuant to this Section 14, Indemnitee
shall not be required to reimburse the Company for any advances pursuant to Section 10 until a final determination
is made with respect to Indemnitee’s entitlement to indemnification (as to which all rights of appeal have been exhausted or lapsed).
14.3. If
a determination shall have been made pursuant to Section 12.1 of this Agreement that Indemnitee is entitled to indemnification,
the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 14,
absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s
statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification
under applicable law.
14.4. The
Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 14 that
the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this Agreement.
14.5. The
Company shall indemnify and hold harmless Indemnitee to the fullest extent permitted by law against all Expenses and, if requested by
Indemnitee, shall (within ten (10) days after the Company’s receipt of such written request) pay to Indemnitee, to the fullest
extent permitted by applicable law, such Expenses which are incurred by Indemnitee in connection with any judicial proceeding or arbitration
brought by Indemnitee (i) to enforce his rights under, or to recover damages for breach of, this Agreement or any other indemnification,
hold harmless, exoneration, advancement or contribution agreement or provision of the Charter, or the Company’s Bylaws now or hereafter
in effect; or (ii) for recovery or advances under any insurance policy maintained by any person for the benefit of Indemnitee, regardless
of the outcome and whether Indemnitee ultimately is determined to be entitled to such indemnification, hold harmless or exoneration right,
advancement, contribution or insurance recovery, as the case may be (unless such judicial proceeding or arbitration was not brought by
Indemnitee in good faith).
14.6. Interest
shall be paid by the Company to Indemnitee at the legal rate under Delaware law for amounts which the Company indemnifies, holds harmless
or exonerates, or is obliged to indemnify, hold harmless or exonerate for the period commencing with the date on which Indemnitee requests
indemnification, to be held harmless, exonerated, contribution, reimbursement or advancement of any Expenses and ending with the date
on which such payment is made to Indemnitee by the Company.
15. SECURITY.
Notwithstanding anything herein to the contrary except for Section 27, to the extent requested by the Indemnitee, the
Company may at any time and from time to time provide security to the Indemnitee for the Company’s obligations hereunder through
an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to the Indemnitee, may not be revoked
or released without the prior written consent of the Indemnitee.
16. NON-EXCLUSIVITY;
SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.
16.1. The
rights of Indemnitee as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time
be entitled under applicable law, the Charter, the Company’s Bylaws, any agreement, a vote of stockholders or a resolution of directors,
or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee
under this Agreement in respect of any Proceeding (regardless of when such Proceeding is first threatened, commenced or completed) arising
out of, or related to, any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal.
To the extent that a change in applicable law, whether by statute or judicial decision, permits greater indemnification, hold harmless
or exoneration rights or advancement of Expenses than would be afforded currently under the Charter, the Company’s Bylaws or this
Agreement, then this Agreement (without any further action by the parties hereto) shall automatically be deemed to be amended to require
that the Company indemnify Indemnitee to the fullest extent permitted by law. No right or remedy herein conferred is intended to be exclusive
of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder,
or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.
16.2. The
DGCL, the Charter and the Company’s Bylaws permit the Company to purchase and maintain insurance or furnish similar protection or
make other arrangements including, but not limited to, providing a trust fund, letter of credit, or surety bond (“Indemnification
Arrangements”) on behalf of Indemnitee against any liability asserted against him or incurred by or on behalf of him or
in such capacity as a director, officer, employee or agent of the Company, or arising out of his status as such, whether or not the Company
would have the power to indemnify him against such liability under the provisions of this Agreement or under the DGCL, as it may then
be in effect. The purchase, establishment, and maintenance of any such Indemnification Arrangement shall not in any way limit or affect
the rights and obligations of the Company or of the Indemnitee under this Agreement except as expressly provided herein, and the execution
and delivery of this Agreement by the Company and the Indemnitee shall not in any way limit or affect the rights and obligations of the
Company or the other party or parties thereto under any such Indemnification Arrangement.
16.3. To
the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, trustees,
partners, managing members, fiduciaries, employees, or agents of the Company or of any other Enterprise which such person serves at the
request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum
extent of the coverage available for any such director, officer, trustee, partner, managing member, fiduciary, employee or agent under
such policy or policies. If, at the time the Company receives notice from any source of a Proceeding as to which Indemnitee is a party
or a participant (as a witness or otherwise), the Company has director and officer liability insurance in effect, the Company shall give
prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a
result of such Proceeding in accordance with the terms of such policies.
16.4. In
the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery
of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such
documents as are necessary to enable the Company to bring suit to enforce such rights.
16.5. The
Company’s obligation to indemnify, hold harmless, exonerate or advance Expenses hereunder to Indemnitee who is or was serving at
the request of the Company as a director, officer, trustee, partner, managing member, fiduciary, employee or agent of any other Enterprise
shall be reduced by any amount Indemnitee has actually received as indemnification, hold harmless or exoneration payments or advancement
of expenses from such Enterprise. Notwithstanding any other provision of this Agreement to the contrary except for Section 27, (i) Indemnitee
shall have no obligation to reduce, offset, allocate, pursue or apportion any indemnification, hold harmless, exoneration, advancement,
contribution or insurance coverage among multiple parties possessing such duties to Indemnitee prior to the Company’s satisfaction
and performance of all its obligations under this Agreement, and (ii) the Company shall perform fully its obligations under this
Agreement without regard to whether Indemnitee holds, may pursue or has pursued any indemnification, advancement, hold harmless, exoneration,
contribution or insurance coverage rights against any person or entity other than the Company.
17. DURATION
OF AGREEMENT. All agreements and obligations of the Company contained herein shall continue during
the period Indemnitee serves as a director or officer of the Company or as a director, officer, trustee, partner, managing member, fiduciary,
employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise which Indemnitee
serves at the request of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible Proceeding (including
any rights of appeal thereto and any Proceeding commenced by Indemnitee pursuant to Section 14 of this Agreement)
by reason of his Corporate Status, whether or not he is acting in any such capacity at the time any liability or expense is incurred for
which indemnification can be provided under this Agreement.
18. SEVERABILITY.
If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any
Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not
itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest
extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable
law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of
this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as
to give effect to the intent manifested thereby.
19. ENFORCEMENT
AND BINDING EFFECT.
19.1. The
Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order
to induce Indemnitee to serve as a director, officer or key employee of the Company, and the Company acknowledges that Indemnitee is relying
upon this Agreement in serving as a director, officer or key employee of the Company.
19.2. Without
limiting any of the rights of Indemnitee under the Charter or Bylaws of the Company as they may be amended from time to time, this Agreement
constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.
19.3. The
indemnification, hold harmless, exoneration and advancement of expenses rights provided by or granted pursuant to this Agreement shall
be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall
continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of any other Enterprise at
the Company’s request, and shall inure to the benefit of Indemnitee and his or her spouse, assigns, heirs, devisees, executors and
administrators and other legal representatives.
19.4. The
Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially
all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the
Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place.
19.5. The
Company and Indemnitee agree herein that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable
and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm. Accordingly, the parties hereto agree
that Indemnitee may enforce this Agreement by seeking, among other things, injunctive relief and/or specific performance hereof, without
any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee
shall not be precluded from seeking or obtaining any other relief to which he may be entitled. The Company and Indemnitee further agree
that Indemnitee shall be entitled to such specific performance and injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, without the necessity of posting bonds or other undertaking in connection therewith. The Company
acknowledges that in the absence of a waiver, a bond or undertaking may be required of Indemnitee by a Court of competent jurisdiction
and the Company hereby waives any such requirement of such a bond or undertaking.
20. MODIFICATION
AND WAIVER. No supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.
21. NOTICES.
All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly
given (i) if delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed,
or (ii) mailed by certified or registered mail with postage prepaid, on the third (3rd) business day after the date on which it is
so mailed:
(a) If
to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide
in writing to the Company.
(b) If
to the Company, to:
Monterey Capital Acquisition Corporation
419 Webster Street
Monterey, CA 93940
Attn: Bala Padmakumar
Chief Executive Officer
With a copy, which shall not constitute notice, to:
Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Thomas R. Burton, III, Esq.
Fax No.: (617) 542-2241
or to any other address as may have been
furnished to Indemnitee in writing by the Company.
22. APPLICABLE
LAW AND CONSENT TO JURISDICTION. This Agreement and the legal relations among the parties shall
be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws
rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 14.1 of this Agreement,
the Company and Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection
with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court in the United States of America
or any court in any other country; (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any
action or proceeding arising out of or in connection with this Agreement; (c) waive any objection to the laying of venue of any such
action or proceeding in the Delaware Court; and (d) waive, and agree not to plead or to make, any claim that any such action or proceeding
brought in the Delaware Court has been brought in an improper or inconvenient forum, or is subject (in whole or in part) to a jury trial.
23. IDENTICAL
COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall
for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart
signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
24. MISCELLANEOUS.
Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of the paragraphs
of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction
thereof.
25. PERIOD
OF LIMITATIONS. No legal action shall be brought and no cause of action shall be asserted by
or in the right of the Company against Indemnitee, Indemnitee’s spouse, heirs, executors or personal or legal representatives
after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall
be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however,
that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.
26. ADDITIONAL
ACTS. If for the validation of any of the provisions in this Agreement any act, resolution, approval
or other procedure is required, the Company undertakes to cause such act, resolution, approval or other procedure to be affected or adopted
in a manner that will enable the Company to fulfill its obligations under this Agreement.
27. WAIVER
OF CLAIMS TO TRUST ACCOUNT. Indemnitee hereby agrees that it does not have any right, title,
interest or claim of any kind (each, a “Claim”) in or to any monies in the trust account established in connection with the
Company’s initial public offering for the benefit of the Company and holders of shares issued in such offering, and hereby waives
any Claim it may have in the future as a result of, or arising out of, any services provided to the Company and will not seek recourse
against such trust account for any reason whatsoever.
[SIGNATURE PAGE FOLLOWS]
IN
WITNESS WHEREOF, the parties hereto have caused this Indemnity Agreement to be signed as of the day and year first above written.
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MONTEREY CAPITAL ACQUISITION CORPORATION |
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Name: Bala Padmakumar |
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Title: Chief Executive Officer |
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INDEMNITEE |
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Name: |
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Address: |
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Exhibit 10.9
Monterey Capital Acquisition Corporation
419 Webster Street
Monterey, CA 93940
[ ],
2022
Monterrey Acquisition Sponsor, LLC
419 Webster Street
Monterey, CA 93940
Attn: Bala Padmakumar
Re: Administrative
Support Agreement
Ladies and Gentlemen:
This letter agreement by and
between Monterey Capital Acquisition Corporation, a Delaware corporation (the “Company”), and Monterrey Acquisition
Sponsor, LLC (the “Sponsor”), dated as of the date hereof, will confirm our agreement that, commencing on the date the securities
of the Company are first listed on The Nasdaq Global Market (the “Listing Date”), pursuant to a Registration Statement
on Form S-1 and prospectus filed with the U.S. Securities and Exchange Commission (the “Registration Statement”)
and continuing until the earlier of the consummation by the Company of an initial business combination or the Company’s liquidation
(in each case as described in the Registration Statement) (such earlier date hereinafter referred to as the “Termination Date”):
(i) Sponsor
shall make available, or cause to be made available, to the Company, at 419 Webster Street, Monterey, CA 93940, (or any successor
location of Sponsor), certain office space, utilities and secretarial and administrative support as may be reasonably required by the
Company. In exchange therefor, the Company shall pay Sponsor the sum of $10,000 per month on the Listing Date and continuing monthly thereafter
until the Termination Date; and
(ii) Sponsor
hereby irrevocably waives any and all right, title, interest, causes of action and claims of any kind as a result of, or arising out of,
this letter agreement (each, a “Claim”) in or to, and any and all right to seek payment of any amounts due to it out
of, the trust account established for the benefit of the public stockholders of the Company and into which substantially all of the proceeds
of the Company’s initial public offering will be deposited (the “Trust Account”) as a result of, or arising out
of, this letter agreement, and hereby irrevocably waives any Claim it may have in the future, which Claim would reduce, encumber or otherwise
adversely affect the Trust Account or any monies or other assets in the Trust Account, and further agrees not to seek recourse, reimbursement,
payment or satisfaction of any Claim against the Trust Account or any monies or other assets in the Trust Account for any reason whatsoever.
This letter agreement constitutes
the entire agreement and understanding of the parties hereto in respect of its subject matter and supersedes all prior understandings,
agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter
hereof or the transactions contemplated hereby.
This letter agreement may
not be amended, modified or waived as to any particular provision, except by a written instrument executed by the parties hereto.
No party hereto may assign
either this letter agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other
party. Any purported assignment in violation of this paragraph shall be void and ineffectual and shall not operate to transfer or assign
any interest or title to the purported assignee.
This letter agreement constitutes
the entire relationship of the parties hereto, and this letter agreement and any litigation between the parties (whether grounded in contract,
tort, statute, law or equity) shall be governed by, construed in accordance with, and interpreted pursuant to the laws of the State of
New York, without giving effect to its choice of law principles.
[Signature Page Follows]
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Very truly yours, |
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MONTEREY CAPITAL ACQUISITION CORPORATION |
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By: |
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Name: Bala Padmakumar |
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Title: Chief Executive Officer |
| AGREED TO AND ACCEPTED BY: |
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| MONTERREY ACQUISITION SPONSOR, LLC |
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| By: |
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Name: Bala Padmakumar |
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Title: Chief Executive Officer |
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[Signature Page to Administrative Support
Agreement]
Exhibit 10.10
INVESTMENT AGREEMENT
This Investment Agreement
(this “Agreement”), dated as of March __, 2022, is by and among (i) Monterey Capital Acquisition Corporation,
a Delaware Corporation (the “SPAC”), (ii) Monterrey Acquisition Sponsor, LLC, a Delaware limited liability company,
(the “Sponsor”), and (iii) [●] (the “Investor”).
WHEREAS,
in connection with the initial public offering (the “IPO”) of units of the SPAC, the Investor has expressed an interest
in acquiring up to 990,000 units in the IPO (with each such unit comprised of one Class A common stock, par value $0.0001 per share,
of the SPAC (“Class A common stock”), one redeemable warrant entitling the holder thereof to purchase on share
of our Class A common stock (the “Warrants”), and one right to receive one-tenth (1/10) of one share of Class A
common stock upon consummation of SPAC’s initial business combination (the “Rights”), which shall not exceed
9.9% of the number of such units and/or the number of Class A Common stock underlying the units to be offered (excluding the over-allotment
option) (the “IPO Indication”), at a price of $10.00 per unit.
WHEREAS,
the parties wish to enter into this Agreement pursuant to which the Investor will purchase from the Sponsor Class B common stock,
par value $0.0001 per share, of the SPAC (the “Founder Shares”), which are convertible into Class A Common stock
pursuant to the terms set out in the Registration Statement (as defined herein), for the same value paid by the Sponsor, or approximately
$0.009 per Founder Share.
NOW,
THEREFORE, the parties hereby agree as follows:
| (a) | In connection with the IPO Indication, and subject to the satisfaction of the conditions set forth in Section 1(c),
the Sponsor hereby agrees to sell to the Investor 75,000 Founder Shares (such shares, the “Transferred Shares”) for
an aggregate purchase price of $675 ($0.009 per share) (the “Transfer Price”) on the date of the closing of the IPO,
and the Investor hereby agrees to purchase the Transferred Shares (the “Transfer”). Concurrently with the Transfer, in consideration
for the transfer of the Transferred Shares, the Investor shall pay the Transfer Price to the Sponsor in immediately available funds to
an account designated by the Sponsor in writing at least two Business Days prior to the Transfer. |
| (b) | Notwithstanding anything to the contrary herein, the Investor (and its affiliates or any other persons
with which it is acting in concert) shall not be entitled to convert (or cause to be converted) the Transferred Shares to Class A
Common stock, from and after the date of this Agreement, without the prior written consent of SPAC, to the extent such conversion would
result in such Investor becoming, directly or indirectly, the beneficial owner of more than 9.99% of the Class A Common stock for
the purposes of beneficial ownership under the Securities Exchange Act of 1934, as amended. Notwithstanding the foregoing, this Section 1(b) shall
not be applicable (and no prior written consent shall be required by the SPAC) in connection with conversions of the Transferred Shares
by the Investor that would not result in the Investor becoming the beneficial owner of more than 9.99% of the Class A Common stock. |
| (c) | Subject to (i) the fulfillment by the Investor (but only to the extent actually allocated to the
Investor by the underwriters) of the IPO Indication (which shall include the acquisition of 100% of the units of the SPAC allocated to
the Investor by the underwriters in the IPO, which number of allocated units shall not be greater than 9.9% of the units offered in the
IPO (exclusive of any units that may be issued pursuant to the underwriters’ over-allotment option) or greater than the IPO Indication)
and (ii) the Investor’s payment of the Transfer Price as contemplated by Section 1(a) of this Agreement,
the Transfer shall occur and be effective upon the closing of the IPO, automatically and without any action of any other party hereto.
The parties intend that the purchase of the Transferred Shares contemplated by this Agreement be treated as a taxable sale and purchase
of the Transferred Shares that is governed by Section 1001 of the Internal Revenue Code of 1986, as amended, and agree not to take
any tax reporting position inconsistent with this agreed tax treatment. In the event the Investor is provided with an opportunity to participate
in an overallotment exercise or purchase more than 990,000 units in the IPO (9.9% of 10,000,000 units), it shall first be provided with
the opportunity to purchase additional Transferred Shares in a manner proportional to any increase above 990,000 units at $0.009 per additional
Transferred Share. The Transferred Shares shall not be reduced should the Investor be allocated less than the IPO Indication. |
| (d) | Notwithstanding anything to the contrary herein, the number of Transferred Shares shall not be subject
to share price or other vesting triggers, claw-back, cut-back, reduction, mandatory repurchase, redemption or forfeiture for any reason,
including but not limited to (i) transfer by the Investor of the Founder Shares to any person, (ii) downsizing of the IPO, (iii) failure
of the underwriters to exercise their overallotment option in whole or in part, (iv) concessions or “earn-out” triggers
made by the Sponsor or any other holder of Founder Shares in connection with the negotiation of a Business Combination (as defined below)
or otherwise, or (v) any other event or modification, without the Investor’s prior written consent. |
| (e) | The obligations of the Investor
hereunder are subject to there being no material change in the pricing of the IPO or in the structure, terms and conditions in the capital
structure of the SPAC from those set forth in the Registration Statement on Form S-1 filed with the United States Securities
and Exchange Commission on [_____], 2022, as amended from time to time (the “Registration Statement”). |
| (f) | In the event the IPO does not close by [_____], 2022, this Agreement shall terminate and be of no further
force and effect unless agreed in writing by the parties hereto. |
| 2. | Representations and Warranties of the SPAC. The SPAC hereby represents and warrants to the Investor,
as of the date hereof and as of the closing date of the IPO, as follows: |
| (a) | The SPAC is duly organized and in good standing under the laws of the State of Delaware and has full power
and authority to carry on its business as presently conducted and as proposed to be conducted and execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions contemplated hereby. |
| (b) | This Agreement has been duly and validly executed and delivered by the SPAC and constitutes a legal, valid
and binding obligation of the SPAC enforceable against the SPAC in accordance with its terms. |
| (c) | The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby
and the performance of its obligations hereunder will not conflict with, or result in any material violation of or default under, the
SPAC’s organizational documents, any agreement or other instrument to which the SPAC is a party or by which the SPAC is bound, or
any decree, order, statute, rule or regulation applicable to the SPAC or the Transferred Shares. |
| (d) | None of the information conveyed to the Investor in connection with the transactions contemplated by the
Agreement will constitute material non-public information of the SPAC upon the effectiveness of the Registration Statement. |
| (e) | No governmental, administrative or other third-party consents or approvals are required by or with respect
to the SPAC in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. |
| (f) | All information contained in the questionnaires (“Questionnaires”) completed by each
of the SPAC’s officers and directors and the Sponsor (collectively, the “Insiders”) and provided to the underwriters
and their counsel and the biographies of the Insiders contained in the Registration Statement and prospectus (to the extent a biography
is contained) is true and correct and the SPAC has not become aware of any information which would cause the information disclosed in
the Questionnaires completed by each Insider to become inaccurate, incorrect or incomplete. There is no action, suit, proceeding, inquiry,
arbitration, investigation, litigation or governmental proceeding pending, or to the SPAC’s knowledge, assuming reasonable inquiry,
threatened against or involving the SPAC or, to the SPAC’s knowledge, assuming reasonable inquiry, any Insider or any stockholder
or member of an Insider that has not been disclosed, that is required to be disclosed, in the Registration Statement, the prospectus or
the Questionnaires. |
| (g) | The Founder Shares, when issued to the Sponsor, were validly issued, fully paid and non-assessable, free
and clear of all liens or other restrictions (other than those arising under applicable securities laws or as otherwise disclosed in the
Registration Statement) and were not issued in violation of, or subject to, any preemptive or similar rights. |
| 3. | Representations and Warranties of the Sponsor. The Sponsor hereby represents and warrants and covenants
to the Investor, as of the date hereof and as of the closing date of the IPO, as follows: |
| (a) | The Sponsor is duly formed and validly existing as a limited liability company in good standing under
the laws of the State of Delaware and has full power and authority to execute and deliver this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. |
| (b) | This Agreement has been duly and validly executed and delivered by the Sponsor and constitutes a legal,
valid and binding obligation of the Sponsor enforceable against the Sponsor in accordance with its terms. |
| (c) | The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby
and the performance of its obligations hereunder will not conflict with, or result in any material violation of or default under, any
of the Sponsor’s organizational documents or any agreement or other instrument applicable to the Transferred Shares or to which
the Sponsor is a party or by which the Sponsor is bound, or any decree, order, statute, rule or regulation applicable to the Sponsor
or the Transferred Shares. |
| (d) | No governmental, administrative or other third-party consents or approvals are required by or with respect
to the Sponsor in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. |
| (e) | The terms, rights and conditions set forth in this Agreement are as favorable to the Investor as the terms,
rights and conditions granted to all other investors in connection with expressing an interest in the IPO or otherwise acquiring Founder
Shares in connection with the IPO (each such other investor, an “Anchor Investor”), provided that the Investor acknowledges
that Founders Shares have been offered to the Sponsor and to executive officers, advisors, directors and director nominees of the SPAC
in connection with their service and the Sponsor expressly reserves the right to issue membership interests in the Sponsor in its sole
discretion. In the case that another Anchor Investor is afforded more favorable terms than the Investor, the Sponsor shall promptly notify
the Investor of such more favorable terms, and the Investor shall have the right to elect to have such more favorable terms, so as to
be on the same terms, in which case the parties hereto shall promptly amend this Agreement to effect the same. For the avoidance of doubt,
if any other Anchor Investor has an ability to purchase proportionately more Founder Shares relative to its expression of interest in
the IPO than the Investor as set forth herein, then such other Anchor Investor shall be considered to have more favorable terms than the
Investor. |
| (f) | The Sponsor is the beneficial owner of the Transferred Shares. Except as described in this Agreement or
in the Registration Statement, there is no agreement, arrangement or understanding with any other person regarding the sale or transfer
of the Transferred Shares. Upon transfer of the Transferred Shares to the Investor in accordance with the terms hereof against payment
of the Transfer Price, the Investor will acquire ownership of the Transferred Shares, free and clear of all liens, pledges, security interests,
claims, options, proxies, voting agreements, charges or encumbrances of any kind affecting the Transferred Shares, other than any restrictions
on transfer that may be imposed by applicable securities laws. The sale by the Sponsor of the Founder Shares to the Investor will not
result in a violation of Section 5 under the Securities Act of 1933, as amended (the “Securities Act”). |
| 4. | Representations and Warranties of the Investor. The Investor hereby represents and warrants to
the SPAC and the Sponsor, as follows: |
| (a) | The Investor has full power and authority to execute and deliver this Agreement and to perform its obligations
hereunder. |
| (b) | This Agreement has been duly and validly executed and delivered by the Investor and constitutes a legal,
valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms. |
| (c) | The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby
and the performance of its obligations hereunder will not materially conflict with, or result in any material violation of or default
under, any of the Investor’s organizational documents, any agreement or other instrument to which the Investor is a party or by
which the Investor is bound, or any decree, order, statute, rule or regulation applicable to the Investor. |
| (d) | The Investor is (i) a “qualified institution buyer” as that term is defined under Rule 144A
of the Securities Act or (ii) an “accredited investor” as that term is defined in Regulation D under the Securities Act. |
| 5. | Additional Agreements and Acknowledgements of the Parties. |
| (a) | The Investor acknowledges that the SPAC was formed for the purpose of effecting a merger, share exchange,
asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (a “Business
Combination”). The Investor agrees with the SPAC that if the SPAC seeks shareholder approval of a proposed Business Combination,
then in connection with such proposed Business Combination, the Investor shall (i) vote all Founder Shares in favor of such proposed
Business Combination and (ii) not redeem any of such Founder Shares owned by it, in connection with such stockholder approval. Notwithstanding
the foregoing, nothing shall prevent the Investor from exercising its redemption rights and receiving distributions from the Trust Account
for any Class A Common stock it acquires in the IPO (including the IPO Indication) or in the open market in accordance with the terms
and conditions applicable to the Class A Common stock and the IPO described in the Registration Statement. Without written consent
of the SPAC, the Investor agrees with the SPAC not to transfer, assign or sell any Transferred Shares or the Class A Common stock,
issuable upon conversion of the Transferred Shares held by it, until the earlier to occur of: (A) six months after the completion
of a Business Combination and (B) subsequent to a Business Combination, (x) if the reported last sale price of the Class A
Common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and
the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination, or (y) the
date on which the SPAC completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of its
stockholders having the right to exchange their common stock for cash, securities or other property; provided however, that
the Investor shall be permitted to transfer, assign or sell all or a portion of the Transferred Shares to an affiliate of the Investor.
The Transferred Shares directly or indirectly owned by the Investor will not be subject to additional lock-ups than detailed in this Section 5(a) or
the Registration Statement. In addition, neither Sponsor nor any other holder of Founder Shares are being afforded more favorable lockup
terms than those detailed in this Section 5(a), and if the Sponsor or any other holder of Founder Shares is given an early release
or favorable modification of such lockup terms, whether in connection with the IPO, a proposed Business Combination or otherwise, the
parties hereto agree that the Investor will receive the same treatment. For the avoidance of doubt, this Section 5 shall not restrict
the Investor from transferring, assigning, redeeming or selling any Class A Common stock, warrants, rights or units acquired in the
IPO or in the open market. |
| (b) | Following the expiration of the transfer restrictions set forth in Section 5(a), if the Transferred
Shares are eligible to be sold without restriction under, and without the SPAC being in compliance with the current public information
requirements of, Rule 144 under the Securities Act, or if they have been registered for resale under the Securities Act, the SPAC
will use its commercially reasonable efforts to cause the SPAC’s transfer agent to remove any legend(s) to which the Transferred
Shares are subject, subject to compliance by the Investor with the reasonable and customary procedures for such removal required by the
SPAC or its transfer agent. In connection therewith, if required by the SPAC’s transfer agent, the SPAC will promptly cause an opinion
of counsel to the SPAC to be delivered to and maintained with its transfer agent, together with any other authorizations, certificates
and directions required by the transfer agent that authorize and direct the transfer agent to issue such Transferred Shares without any
such legend(s). |
| (c) | The Investor acknowledges that it is aware the SPAC will establish a trust account (the “Trust
Account”) for the benefit of its public shareholders upon the closing of the IPO. The Investor agrees with the SPAC that it
has no right, title, interest or claim of any kind in or to any monies held in the Trust Account as a result of any liquidation of the
SPAC with respect to the monies held in the Transferred Shares; provided that nothing herein shall limit the Investor’s
rights with respect to the monies held in the Trust Account or any claims thereon in respect of Class A Common stock purchased by
the Investor in the IPO or in the open market. With respect to the Transferred Shares, the waiver of claims on the monies held in the
Trust Account shall only apply to a liquidation of the Company prior to the consummation of its initial Business Combination, and not
thereafter. Notwithstanding anything to the contrary contained in this Section 5(c) or otherwise (i) nothing shall prevent
the Investor from redeeming any Class A Common stock (including shares included in units) it purchases in the IPO or in the open
market following the IPO (collectively, the “Purchased Public Unit Amount”) and (ii) the Investor does not waive
any right title, interest or claim against the Trust Account (including any distributions therefrom) arising as a result of, in connection
with or relating in any way to its purchase or ownership of the Purchased Public Unit Amount (including the IPO Indication and the Class A
Common stock and rights included therein and the Class A Common stock issuable upon exercise of such rights) or any other security
of the SPAC acquired in the open market (“Reserved Claims”) and is not prohibited from seeking recourse against the
Trust Account with respect to any Reserved Claims. |
| (d) | In connection with the IPO, the SPAC shall enter into a registration rights agreement (the “Registration
Rights Agreement”) in a form to be agreed by the Sponsor, the Investor and certain other parties thereto and filed as an exhibit
to the SPAC’s Registration Statement. The Registration Rights Agreement shall provide the Investor with registration rights with
respect to the Transferred Shares that are no less favorable to the Investor than the registration rights of the Sponsor set forth therein.
The Investor’s rights under the Registration Rights Agreement may not be subsequently terminated, amended, revised or otherwise
modified without the Investor’s prior written consent. |
| (e) | The SPAC shall use commercially reasonable efforts to provide to the Investor such information as it (or
its direct or indirect owners) may reasonably require to timely file and maintain a “qualified electing fund” election with
respect to the SPAC. |
| (a) | Any notice or communication under this Agreement shall be in writing and given by (i) deposit in
the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested,
(ii) recognized courier or overnight delivery service providing evidence of delivery, or (iii) transmission by hand delivery,
electronic mail or facsimile, if to the SPAC or the Sponsor, to: 419 Webster Street, Monterey, CA 93940, Attention: Bala Padmakumar, e-mail:
bala@padmakumar.com; and, if to the Investor, at the Investor’s address or contact information as set forth on the signature page attached
hereto. |
| (b) | This Agreement shall be governed by the internal laws (and not the law of conflicts) of the State of New
York. ANY AND ALL SUITS, LEGAL ACTIONS OR PROCEEDINGS ARISING OUT OF THIS AGREEMENT SHALL BE BROUGHT SOLELY IN A FEDERAL OR STATE COURT
IN THE BORROUGH OF MANHATTAN, NEW YORK, NEW YORK, AND EACH PARTY HEREBY SUBMITS TO AND ACCEPTS THE EXCLUSIVE JURISDICTION OF ANY SUCH
COURT FOR THE PURPOSE OF SUCH SUITS, LEGAL ACTIONS OR PROCEEDINGS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL
BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTY IN RESPECT OF ITS OBLIGATIONS HEREUNDER OR THE TRANSACTIONS
CONTEMPLATED HEREBY. |
| (c) | This Agreement may not be amended or modified without the prior written consent of the parties hereto.
No wavier of any provision of this Agreement shall be effective unless delivered in writing, signed by the waiving party. |
| (d) | The term "affiliate" or "affiliates" as used herein shall have the meaning ascribed
to such term in Rule 144 promulgated under the Securities Act. |
| (e) | The parties hereto agree that irreparable damage may occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall be entitled to seek specific performance of the terms
hereof, in addition to any other remedy at law or equity or otherwise. |
| (f) | The rights and obligations under this Agreement may not be assigned by any party hereto without the prior
written consent of the other parties. Notwithstanding the foregoing, the Investor may assign its rights and obligations under this Agreement
to one or more of its affiliates, to other investment funds or accounts managed or advised by the investment manager who acts on behalf
of the Investor or by an affiliate of such investment manager. |
| (g) | From time to time, at the reasonable request of any of the other parties hereto, each party hereto shall
execute and deliver such additional documents and instruments and take such further lawful action as may be reasonably necessary to consummate
and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. |
| (h) | Any term or provision of this Agreement which is invalid or unenforceable shall be ineffective to the
extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining rights of the person intended to
be benefited by such provision or any other provisions of this Agreement. |
| (i) | This Agreement may be executed in two or more counterparts, each of which shall constitute an original,
and all of which taken together shall constitute one and the same instrument. Any signature page delivered by a facsimile machine
or electronic mail shall be binding to the same extent as an original signature page. |
| (j) | No person or entity that is not a party hereto shall have any rights or obligations pursuant to this Agreement.
Notwithstanding anything to the contrary in this Agreement, Section 5(a), Section 5(b) and Section 5(c) shall
only be enforceable against the Investor by the SPAC on its own behalf. For the avoidance of doubt and in accordance with their terms,
Section 5(a), Section 5(b) and Section 5(c) are not enforceable by the Sponsor. |
| (k) | Except as may be required by law, regulation or applicable stock exchange listing requirements or judicial
or administrative order, each of the Sponsor and the SPAC hereby agrees not to disclose (orally or in writing or by any other means) the
name or identity of the Investor or any of the Investor’s affiliates that purchase Transferred Shares or any unit in the IPO (or
any other related identifying information), nor identify the Investor or any of the Investor’s affiliates as an investor in the
SPAC (including, without limitation, to any potential investors in the Sponsor or the SPAC or any potential Business Combination target),
in each case without the prior written consent of the Investor (which consent shall not be unreasonably withheld or delayed), subject
in any such case to the Investor’s right to review such disclosure of the Investor’s name and the SPAC’s and the Sponsor’s
obligation to incorporate the Investor’s reasonable comments thereto. |
| (l) | Except as may be required by law, regulation or applicable stock exchange listing requirements or judicial
or administrative order, unless and until the transactions contemplated hereby and the terms hereof have been publicly announced or otherwise
publicly disclosed by the Sponsor, the parties hereto shall keep confidential and shall not publicly disclose the existence or terms of
this Agreement provided, for the avoidance of doubt, that any and all such disclosures shall remain subject to the terms hereof,
including Section 6(k). Notwithstanding the foregoing, the Investor shall be permitted to disclose any information to its affiliates
and to its and their control persons, officers, directors, employees, advisors, direct or indirect owners, partners, agents and representatives,
in each case so long as such person or entity has been advised of its obligation to comply with the confidentiality provisions hereunder,
provided, the Investor shall be liable for any breach of such confidentiality obligations by any such person or entity. |
[Signature Pages Follow]
IN WITNESS WHEREOF, the undersigned
have executed this Agreement as of the date first written above.
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INVESTOR: |
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By: |
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Name: |
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Title: |
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Monterey capital acquisition corporation |
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By: |
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Name: Bala Padmakumar |
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Title: Chief Executive Officer |
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MONTERREY ACQUISITION SPONSOR, LLC |
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By: |
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Name: Bala Padmakumar |
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Title: Manager |
[Signature Page to Investor Agreement]
Exhibit 14
CODE OF ETHICS
1. Introduction
The Board of Directors of Monterey
Capital Acquisition Corporation, a Delaware corporation, has adopted this code of ethics (the “Code”), which is applicable
to all directors, officers and employees, to:
| · | promote
honest and ethical conduct, including the ethical handling of actual or apparent conflicts
of interest between personal and professional relationships; |
| · | promote
the full, fair, accurate, timely and understandable disclosure in reports and documents that
the Company files with, or submits to, the Securities and Exchange Commission (the “SEC”),
as well as in other public communications made by or on behalf of the Company; |
| · | promote
compliance with applicable governmental laws, rules and regulations; |
| · | require
prompt internal reporting of breaches of, and accountability for adherence to, this Code. |
This Code may be amended only by resolution of
the Company’s Board of Directors. In this Code, references to the “Company” mean Monterey Capital Acquisition Corporation,
and, in each appropriate context, its subsidiaries.
2. Honest,
Ethical and Fair Conduct
Each person owes a duty to the Company
to act with integrity. Integrity requires, among other things, being honest, fair and candid. Deceit, dishonesty and subordinating one’s
principles are inconsistent with integrity. Service to the Company never should be subordinated to personal gain and advantage.
Each person must:
| · | act
with integrity, including being honest and candid while still maintaining the confidentiality
of the Company’s information where required or in the Company’s interests. |
| · | observe
all applicable governmental laws, rules and regulations. |
| · | comply
with the requirements of applicable accounting and auditing standards, as well as Company
policies, in order to maintain a high standard of accuracy and completeness in the Company’s
financial records and other business-related information and data. |
| · | adhere
to a high standard of business ethics and not seek a competitive advantage through unlawful
or unethical business practices. |
| · | deal
fairly with the Company’s customers, suppliers, competitors and employees. |
| · | refrain
from taking advantage of anyone through manipulation, concealment, abuse of privileged information,
misrepresentation of material facts or any other unfair-dealing practice. |
| · | protect
the assets of the Company and ensure their proper use. |
| · | refrain
from taking for themselves personally opportunities that are discovered through the use of
corporate assets or by using corporate assets, information or position for general personal
gain outside the scope of employment with the Company. |
| · | disclose
conflicts of interest and only enter into “related-party transactions” under
guidelines or resolutions approved by the Board of Directors (or the appropriate committee
of the Board). For purposes of this Code, “related-party transactions” are defined
as transactions in which (1) the aggregate amount involved will or may be expected to
exceed $120,000 in any calendar year, (2) the Company or any of its subsidiaries is
a participant, and (3) any (a) executive officer, director or nominee for election
as a director, (b) greater than 4% beneficial owner of the Company’s shares of
common stock, or (c) immediate family member, of the persons referred to in clauses
(a) and (b), has or will have a direct or indirect material interest (other than solely
as a result of being a director or a less than 10% beneficial owner of another entity). A
conflict of interest situation can arise when a person takes actions or has interests that
may make it difficult to perform his or her work objectively and effectively. Conflicts of
interest may also arise if a person, or a member of his or her family, receives improper
personal benefits as a result of his or her position. Anything that would be a conflict for
a person subject to this Code also will be a conflict if it is related to a member of his
or her family or a close relative. Examples of conflict of interest situations include, but
are not limited to, the following: |
| · | any
significant ownership interest in any supplier or customer; |
| · | any
consulting or employment relationship with any customer, supplier or competitor; |
| · | any
outside business activity that detracts from an individual’s ability to devote appropriate
time and attention to his or her responsibilities with the Company; |
| · | the
receipt of any money, non-nominal gifts or excessive entertainment from any company with
which the Company has current or prospective business dealings; |
| · | being
in the position of supervising, reviewing or having any influence on the job evaluation,
pay or benefit of any close relative; |
| · | selling
anything to the Company or buying anything from the Company, except on the same terms and
conditions as comparable officers or directors are permitted to so purchase or sell; and |
| · | any
other circumstance, event, relationship or situation in which the personal interest of a
person subject to this Code interferes – or even appears to interfere – with
the interests of the Company as a whole. |
3. Disclosure
The Company strives to ensure that
the contents of and the disclosures in the reports and documents that the Company files with the SEC and other public communications
shall be full, fair, accurate, timely and understandable in accordance with applicable disclosure standards, including standards of materiality,
where appropriate. Each person must:
| · | not
knowingly misrepresent, or cause others to misrepresent, facts about the Company to others,
whether within or outside the Company, including to the Company’s independent auditors,
governmental regulators, self-regulating organizations and other governmental officials,
as appropriate; and |
| · | in
relation to his or her area of responsibility, properly review and critically analyze proposed
disclosure for accuracy and completeness. |
In addition to the foregoing, the Chief
Executive Officer and Chief Financial Officer of the Company and each subsidiary of the Company (or persons performing similar functions),
and each other person that typically is involved in the financial reporting of the Company must familiarize himself or herself with the
disclosure requirements applicable to the Company as well as the business and financial operations of the Company.
Each person must promptly bring to
the attention of the Chairman of the Audit Committee of the Company’s Board of Directors (or the Chairman of the Company’s
Board of Directors if no Audit Committee exists) any information he or she may have concerning (a) significant deficiencies in the
design or operation of internal and/or disclosure controls which could adversely affect the Company’s ability to record, process,
summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have
a significant role in the Company’s financial reporting, disclosures or internal controls.
4. Compliance
It is the Company’s obligation
and policy to comply with all applicable governmental laws, rules and regulations. It is the personal responsibility of each person
to adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to accounting
and auditing matters.
5. Reporting
and Accountability
The Board of Directors or Audit Committee,
if one exists, of the Company is responsible for applying this Code to specific situations in which questions are presented to it and
has the authority to interpret this Code in any particular situation. Any person who becomes aware of any existing or potential
breach of this Code is required to notify the Chairman of the Board of Directors or Audit Committee promptly. Failure to do so is
itself a breach of this Code.
Specifically, each person must:
| · | notify
the Chairman promptly of any existing or potential violation of this Code; and |
| · | not
retaliate against any other person for reports of potential violations that are made in good
faith. |
The Company will follow the following
procedures in investigating and enforcing this Code and in reporting on the Code:
| · | The
Board of Directors or Audit Committee, if one exists, will take all appropriate action to
investigate any breaches reported to it. |
| · | If
the Audit Committee, if one exists, determines (by majority decision) that a breach has occurred,
it will inform the Board of Directors. |
| · | Upon
being notified that a breach has occurred, the Board (by majority decision) will take or
authorize such disciplinary or preventive action as it deems appropriate, after consultation
with the Audit Committee (if one exists) and/or General Counsel, up to and including dismissal
or, in the event of criminal or other serious violations of law, notification of the SEC
or other appropriate law enforcement authorities. |
No person following the above procedure
shall, as a result of following such procedure, be subject by the Company or any officer or employee thereof to discharge, demotion suspension,
threat, harassment or, in any manner, discrimination against such person in terms and conditions of employment.
6. Waivers
and Amendments
Any waiver (as defined below) or an
implicit waiver (as defined below) from a provision of this Code for the principal executive officer, principal financial officer, principal
accounting officer or controller, and persons performing similar functions or any amendment (as defined below) to this Code is required
to be disclosed in the Company’s Annual Report on Form 10-K or in a Current Report on Form 8-K filed with the SEC. A
“waiver” means the approval by the Company’s Board of Directors of a material departure from a provision of the Code.
An “implicit waiver” means the Company’s failure to take action within a reasonable period of time regarding a material
departure from a provision of the Code that has been made known to an executive officer of the Company. An “amendment” means
any amendment to this Code other than minor technical, administrative or other non-substantive amendments hereto.
All persons should note that it is not the
Company’s intention to grant or to permit waivers from the requirements of this Code. The Company expects full compliance with
this Code.
7. Other
Policies and Procedures
Any other policy or procedure set out
by the Company in writing or made generally known to employees, officers or directors of the Company prior to the date hereof or hereafter
are separate requirements and remain in full force and effect.
8. Inquiries
All inquiries and questions in relation
to this Code or its applicability to particular people or situations should be addressed to the Company’s Secretary.
Exhibit 23.1
Independent
Registered Public Accounting Firm’s Consent
We consent to the inclusion in this Registration
Statement of Monterey Capital Acquisition Corporation on Form S-1 of our report dated April 22, 2022, which includes an explanatory paragraph
as to the Company’s ability to continue as a going concern, with respect to our audit of the financial statements of Monterey Capital
Acquisition Corporation as of December 31, 2021 and for the period from September 23, 2021 (inception) through December 31, 2021, which
report appears in the Prospectus, which is part of this Registration Statement. We also consent to the reference to our Firm under the
heading “Experts” in such Prospectus.
/s/ Marcum llp
Marcum llp
New York, NY
April 22, 2022
Exhibit 99.1
MONTEREY CAPITAL ACQUISITION CORPORATION
AUDIT COMMITTEE CHARTER
I. Purpose
The Audit Committee (the
“Committee”) of the Board of Directors (the “Board”) of Monterey Capital Acquisition Corporation,
a Delaware corporation (the “Company”), shall provide assistance to the Board in fulfilling its legal and fiduciary
obligations to oversee:
| (a) | the integrity of the financial statements
and other financial information provided by the Company to its stockholders, the public,
any stock exchange and others; |
| (b) | the Company’s compliance with legal
and regulatory requirements; |
| (c) | the qualifications and independence of
the Company’s independent auditor; |
| (d) | the performance of the Company’s
internal audit function and its system of internal controls and independent auditor, and |
| (e) | such other matters as are assigned to
the Committee by the Board pursuant to this Charter or as mandated under applicable laws,
rules and regulations (including the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder, as amended (the “Exchange Act”)) as
well as listing standards of the Nasdaq Global Market (together, the “Applicable
Requirements”). |
Although the Committee has
the powers and responsibilities set forth in this Charter, the role of the Committee is oversight. The members of the Committee are not
full-time employees of the Company and may or may not be accountants or auditors by profession or experts in the fields of accounting
or auditing and, in any event, do not serve in such capacity. Consequently, it is not the duty of the Committee to conduct audits or
to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with Generally
Accepted Accounting Principles (“GAAP”) and other Applicable Requirements. These are the responsibilities of management
and the Company’s independent auditor.
II. Organization
The Committee shall consist
of three or more directors, each of whom shall satisfy the independence, financial literacy, and other qualifications required by the
Company’s corporate governance guidelines, Section 10A-3 of the Exchange Act and any other Applicable Requirements, subject
to any phase-in periods or cure periods permitted by Rule 10A-3(b)(1)(iv)(A) under the Exchange Act and other Applicable Requirements.
At least one member of the Committee shall be an “audit committee financial expert” (as defined by the SEC). Determinations
of independence, financial literacy, experience and expertise shall be made by the Board as the Board interprets such qualifications
in its business judgment.
No Committee member shall
simultaneously serve on the audit committees of more than two other public companies unless the Board determines that such simultaneous
service does not impair the ability of such member to effectively serve on the Committee and such determination is disclosed in accordance
with the Applicable Requirements.
Members of the Committee
shall be appointed by the Board on the recommendation of the Nominating and Governance Committee. Members of the Committee may be removed
at any time by action of the Board; provided, however, that if removing a member or members of the Committee would cause the Committee
to have fewer than three members, then the Board must, based upon the recommendation of the Nominating and Corporate Governance Committee,
at the same time appoint enough additional members to the Committee so that the Committee will have at least three qualified members.
The Committee’s chairperson shall be designated by the Board on the recommendation of the Nominating and Governance Committee or,
if not so designated, the members of the Committee shall elect a chairperson by a vote of the majority of the full Committee.
The Committee may form and
delegate authority to subcommittees from time to time as it sees fit, provided that the subcommittees are composed entirely of directors
who satisfy the applicable independence requirements of the Company’s corporate governance guidelines and the Applicable Requirements.
III. Meetings
The Committee shall meet
at least four times per year on a quarterly basis, or more frequently as required. Meetings shall be called by the chairperson of the
Committee or, if there is no chairperson, by a majority of the members of the Committee. Meetings may be held telephonically or by other
electronic means to the extent permitted by the Company’s organizational documents and applicable law. Committee actions may be
taken by unanimous written consent.
The Committee shall also
meet periodically with management, the chief internal auditor and the Company’s independent auditor in separate executive sessions
to discuss any matters that the Committee or each of these groups believe should be discussed privately.
The Committee shall maintain
minutes of its meetings and records relating to those meetings.
IV. Authority
and Responsibilities
In fulfilling its duties
and responsibilities hereunder, the Committee will be entitled to rely reasonably on (a) the integrity of those persons within the
Company and the professionals and experts (such as the Company’s independent auditor) from whom it receives information, (b) the
accuracy of the financial and other information provided to the Committee by such persons and (c) representations made by the Company’s
independent auditor as to any services provided by such firm to the Company.
To fulfill its responsibilities,
the Committee shall:
With respect to the engagement of the Company’s
independent and other auditors:
| 1. | Be directly responsible for (a) the appointment,
compensation, retention, (including termination), scope and oversight of the work of any
independent registered public accounting firm engaged by the Company (including for the purpose
of preparing or issuing an audit report or performing other audit, review or attestation
services or other work for the Company), and (b) the resolution of any disagreements
between management and any such firm regarding financial reporting. |
| 2. | Have the sole authority to review in advance,
and pre-approve (which may be pursuant to pre-approval policies and procedures) all audit
or non-audit services to be provided by the Company’s independent or other auditors
as permitted by Section 10A of the Exchange Act and to approve all related fees and
other terms of engagement. The Committee shall also review and approve disclosures required
to be included by the Company in periodic reports filed with the Securities and Exchange
Commission (the “SEC”) under Section 13(a) of the Exchange Act
with respect to audit and non-audit services. |
| 3. | At least annually, obtain and review a formal
written report from the Company’s independent auditor (a) describing such firm’s
internal quality control procedures, (b) describing any material issues raised by the
most recent internal quality control review, peer review or Public Company Accounting
Oversight Board (“PCAOB”) review or inspection of such firm, or by any
inquiry or investigation by governmental or professional authorities, within the preceding
five years, respecting one or more independent audits carried out by such firm, and any steps
taken to deal with any such issues, and (c) assessing such firm’s independence,
including delineating all relationships and engagements that may reasonably be thought to
bear on the independence of the auditor, including those between the auditor and the Company.
The Committee shall discuss this report with the Company’s independent auditor and
shall take appropriate action to ensure the independence of the independent auditor and to
address any other matters based on such report. |
| 4. | Confirm that the “lead partner,”
the “concurring partner” and the other “audit partner” rotation requirements
under the Applicable Requirements, including Regulation S-X have been complied with and set
clear policies for audit partner rotation in compliance with applicable laws and regulations. |
| 5. | Review all reports and communications required
to be submitted by the Company’s independent registered public accounting firm to the
Committee under Section 10A of the Securities Exchange Act and other Applicable Requirements.
Such reports should describe (i) the independent registered public accounting firm’s
internal quality-control procedures, (ii) any material issues raised by the most recent
internal quality-control review, or peer review, of the audit firm, or by any inquiry or
investigation by governmental or professional authorities within the preceding five years
respecting one or more independent audits carried out by the firm and any steps taken to
deal with such issues and (iii) all relationships between the independent registered
public accounting firm and the Company to assess the independent registered public accounting
firm’s independence. |
| 6. | At least annually, evaluate the performance
of the Company’s independent auditor, including the lead audit partner. In making its
evaluation, the Committee should take into account the opinions of management and the internal
audit group. |
| 7. | Review and discuss with the Company’s
independent auditor all relationships the auditor has with the Company and evaluate the auditor’s
continued independence. |
| 8. | Determine the Company’s hiring policies
regarding partners, employees and former partners and employees of the Company’s independent
auditor. |
With respect to the Company’s financial
statements and other financial reporting:
| 9. | Review and discuss the Company’s annual
audited and quarterly unaudited financial statements with management (including the Company’s
internal audit group) and the Company’s independent auditor, including disclosures
made in “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” to be included in the Company’s annual report on Form 10-K
or quarterly reports on Form 10-Q. |
| 10. | Recommend to the Board whether the Company’s
annual audited financial statements should be included in the Company’s annual report
for filing with the SEC and timely prepare the report required by the SEC to be included
in the Company’s annual proxy statement, if applicable, and any other reports of the
Committee required by any Applicable Requirement. |
| 11. | Review and discuss with management and the
Company’s independent auditor (a) major issues regarding, or significant changes
in, the Company’s accounting principles and financial statement presentations, (b) analyses
prepared by management or the Company’s independent auditor concerning significant
financial reporting issues and judgments made in connection with the preparation of the financial
statements, (c) the effect of regulatory and accounting initiatives, as well as off-balance
sheet structures, on the financial statements of the Company, and (d) the type and presentation
of information to be included in earnings press releases and any financial information and
earnings guidance provided to analysts and rating agencies. |
| 12. | Prior to the filing of any audited financial
statements with the SEC, review with management and the Company’s independent auditor
(a) all critical accounting policies and practices used by the Company, (b) all
alternative accounting treatments of financial information reported in GAAP related
to material items that have been discussed with management, including the ramifications of
the use of such alternative treatments and disclosures and the treatment preferred by the
Company’s independent auditor, (c) any reports or communications (and management’s
responses thereto) submitted to the Committee by the Company’s independent auditor
in accordance with PCAOB Auditing Standard No. 16, Communications with Audit
Committees, as amended or supplemented, and (d) any other material written communications
between the Company’s independent auditor and management. |
| 13. | Periodically review separately with each of
management, the Company’s independent auditor and the internal audit group (a) any
significant disagreement between management and the Company’s independent auditor or
the internal audit group in connection with the preparation of the financial statements,
(b) any audit problems or difficulties encountered during the course of the audit, including
any restrictions on the scope of work or access to required information, and (c) management’s
response to each. The Committee shall discuss with the independent auditor material issues
on which the national office of the independent auditor was consulted by the Company’s
audit team. |
| 14. | Periodically discuss with the Company’s
independent auditor, without management being present, (a) their judgment about the
quality, integrity and appropriateness of the Company’s accounting principles and financial
disclosure practices as applied in its financial reporting and (b) the completeness
and accuracy of the Company’s financial statements. |
| 15. | Review and discuss with management the Company’s
earnings press releases, including the use of non-GAAP financial measures and other “pro
forma” or “adjusted” presentations, as well as financial information and
earnings guidance provided to analysts and rating agencies. Such discussions may be general
(consisting of discussing the types of information to be disclosed and the types of presentations
to be made), and each earnings release or each instance in which the Company provides earnings
guidance need not be discussed in advance. |
| 16. | Review and discuss with management all material
off-balance sheet transactions, arrangements, obligations (including contingent obligations)
and other relationships of the Company with unconsolidated entities or other persons. |
| 17. | Review and approve the Company’s decision
to enter into swaps and other derivatives transactions that are exempt from exchange-execution
and clearing under “end-user exception” regulations established by the Commodity
Futures Trading Commission; and review and approve the Company’s policies governing
the Company’s use of swaps and other derivatives transactions subject to the end- user
exception. |
| 18. | Review and discuss with management and the
internal audit group the Company’s major financial risk exposures and management’s
risk assessment and risk management policies. |
With respect to the internal audit function
and internal controls:
| 19. | Review, based on the recommendation of the
Company’s independent auditor and the person responsible for the Company’s internal
audit group, the scope and plan of the work to be done by the internal audit group and the
responsibilities, budget, audit plan, activities, organizational structure and staffing
of the internal audit group as needed. |
| 20. | Receive reports from the internal audit group
on the status of significant findings and recommendations, and management’s responses. |
| 21. | Review on an annual basis the performance
of the internal audit group. |
| 22. | In consultation with the Company’s management,
independent auditor and the internal audit group, review the adequacy of the Company’s
internal controls, disclosure processes and its procedures designed to ensure compliance
with laws and regulations, and any special audit steps adopted in light of material control
deficiencies. |
| 23. | Review (a) the internal control report
prepared by management, including management’s assessment of the effectiveness of the
Company’s internal control over financial reporting and (b) the Company’s
independent auditor’s attestation, and report, on the assessment made by management,
in each case, as and when required by Section 404 of the Sarbanes-Oxley Act of 2002.
Discuss with management, the internal audit group and the independent auditor any changes
in internal control over financial reporting disclosed or considered for disclosure in the
Company’s periodic filings with the SEC. |
| 24. | Review with management and the Company’s
independent auditor any reports or disclosure submitted by management to the Committee as
contemplated by the certifications required under Section 302 of the Sarbanes-Oxley
Act of 2002. |
| 25. | Review with management any management letters
and the steps management intends to take to address the issues raised by those letters. |
With respect to the Company’s compliance
programs:
| 26. | Monitor compliance with the Company’s
Code of Conduct and Ethics, and oversee, review and discuss with management, at least annually,
the implementation and effectiveness of the Company’s compliance and ethics programs.
Review and take appropriate action with respect to any reports to the Committee from legal
counsel for the Company concerning any material violation of securities law or breach of
fiduciary duty or similar violation by the Company, its subsidiaries or any person acting
on their behalf. As appropriate, the Committee shall report and make recommendations to the
Board with respect to these matters. |
| 27. | Establish procedures for (a) the receipt,
retention and treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and (b) the confidential, anonymous submission
by employees of the Company or any subsidiary or affiliate of the Company whose financial
information is included in the Company’s financial statements of concerns regarding
questionable accounting or auditing matters. |
| 28. | Review and approve (a) any amendment
to or waiver from the Company’s code of ethics for the co-chief executive officers
and senior financial officers and (b) any public disclosure made regarding such change
or waiver and advise the Board with respect to the Company’s policies and procedures
regarding compliance with the Company’s Code of Business Conduct and Ethics. |
| 29. | Develop and recommend to the Board for approval
policies and procedures for the review, approval or ratification of related person transactions
required to be disclosed pursuant to Item 404 of Regulation S-K, as may be amended from time
to time, and any other applicable requirements (the “Related Person Transactions
Policy”). Review the Related Person Transactions Policy at least annually and recommend
to the Board for approval any changes to the Policy. Oversee the implementation of and compliance
with the Related Person Transactions Policy, including reviewing, approving or ratifying
related person transactions, as appropriate pursuant to the Related Person Transaction Policy. |
| 30. | Review with management, the independent registered
public accounting firm, and the Company’s legal advisors, as appropriate, any legal,
regulatory or compliance matters, including any correspondence with regulators or government
agencies and any employee complaints or published reports that raise material issues regarding
the Company’s financial statements or accounting policies and any significant changes
in accounting standards or rules promulgated by the Financial Accounting Standards Board,
the SEC or other regulatory authorities. |
With respect to the Committee’s other authorities and responsibilities:
| 31. | Review and assess annually its own performance
and the adequacy of this Charter and recommend to the Board any changes to this Charter deemed
appropriate by the Committee. |
| 32. | Report regularly to the Board. |
| 33. | Perform any other activities consistent with
this Charter, the Company’s organizational documents, as required under the Applicable
Requirements or as the Committee or the Board otherwise deems necessary or appropriate. |
V. Resources
The Committee shall have
the authority to retain or terminate, at its sole discretion, independent legal, accounting and other advisors, consultants or professionals
(collectively, “Advisors”) to assist the Committee in its responsibilities and shall be directly responsible for overseeing
the work of such Advisors. The chairperson of the Committee, at the request of any member of the Committee, may request any officer,
employee or advisor of the Company or the Company’s independent auditor to attend a meeting of the Committee or otherwise respond
to Committee requests.
The Committee shall have
the sole authority to determine the terms of engagement and the extent of funding necessary (and to be provided by the Company) for payment
of (a) compensation to the Company’s independent auditor engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company, (b) any compensation to any Advisors retained to advise the Committee
and (c) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
Exhibit 99.2
MONTEREY CAPITAL ACQUISITION CORPORATION
COMPENSATION COMMITTEE CHARTER
I. Purpose
The Compensation Committee (the “Committee”)
of the Board of Directors of Monterey Capital Acquisition Corporation, a Delaware corporation (the “Company”), shall
have responsibility for the compensation of the Company’s executive officers, including the Company’s Chief Executive Officer
(the “CEO”), and for incentive compensation, equity-based and pension plans as further provided in this Charter.
II. Organization
The Committee shall consist of two or more directors,
each of whom shall satisfy the applicable independence and other compensation committee membership requirements of the Nasdaq Global
Market (“Nasdaq”) and any other applicable regulatory requirements subject to any exceptions or cure periods that
are applicable pursuant to the foregoing requirements.
At least one member of the Committee shall have
experience in matters relating to executive compensation either as a professional or as a business executive. At least two members shall
qualify as (a) “outside directors” within the meaning of Section 162(m) of the U.S. Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated thereunder, including Treasury Regulations Section 1.162-27
(“Outside Directors”), and (b) “non-employee directors” within the meaning of Section 16 of
the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated
thereunder (“Non-Employee Directors”).
Members of the Committee shall be appointed by
the Board on the recommendation of a majority of the independent directors of the Company and may be removed by the Board at any time;
provided, however, that if removing a member or members of the Committee would cause the Committee to have fewer than three members,
then the Board must, based upon the recommendation of a majority of the independent directors of the Company, at the same time appoint
enough additional members to the Committee so that the Committee will have at least two members who qualify as (a) Outside Directors
and (b) Non-Employee Directors. The Committee’s chairperson shall be designated by the Board on the recommendation of a majority
of the independent directors of the Company or, if not so designated, the members of the Committee shall elect a chairperson by a vote
of the majority of the full Committee.
The Committee may form and delegate authority
to subcommittees from time to time as it sees fit, provided that the subcommittees are composed entirely of directors who satisfy the
applicable independence requirements of the Company’s corporate governance guidelines and the Nasdaq.
III. Meetings
The Committee shall meet as often as necessary
to carry out its responsibilities. Meetings shall be called by the chairperson of the Committee or, if there is no chairperson, by a
majority of the members of the Committee. Meetings may be held telephonically or by other electronic means to the extent permitted by
the Company’s organizational documents and applicable law. Committee actions may be taken by unanimous written consent.
IV. Authority
and Responsibilities
To fulfill its responsibilities, the Committee
shall:
| 1. | Review and make recommendations to the Board with respect to the Company’s
compensation strategy to ensure it is appropriate to attract, retain and motivate senior
management and other key employees. |
| 2. | Review and make recommendations to the Board with respect to the executive
compensation philosophy, policies and programs that in the Committee’s judgment support
the Company’s overall business strategy and review and discuss, at least annually,
the material risks associated with executive compensation structure, policies and programs
to determine whether such structure, policies and programs encourage excessive risk-taking
and to evaluate compensation policies and practices that could mitigate any such risk. |
| 3. | On an annual basis, review and approve corporate goals and objectives
relevant to the compensation of the Company’s CEO, evaluate the CEO’s performance
in light of those goals and objectives and determine and approve CEO compensation based on
this evaluation. In evaluating, determining and approving the long-term incentive component
of CEO compensation, the Committee may consider, among such other factors as it may deem
relevant, the Company’s performance, shareholder returns, the value of similar incentive
awards to executive officers at comparable companies, the value of similar awards given to
other executive officers of the Company, the results of the most recent shareholder advisory
vote on executive compensation required by Section 14A of the Exchange Act (the “Say-on-Pay
Vote”) and the awards given to the executive officer in past years. The CEO shall
not be present during voting or deliberations relating to his or her compensation. |
| 4. | On an annual basis, review and approve the compensation of the Company’s
other executive officers, evaluate the executive officers’ performance in light of
those goals and objectives and determine and make recommendations to the Board with respect
to executive officer compensation based on this evaluation. In evaluating and making recommendations
with respect to the long-term incentive component of executive officer compensation, the
Committee may consider, among such other factors as it may deem relevant, the Company’s
performance, shareholder returns, the value of similar incentive awards to executive officers
at comparable companies, the value of similar awards given to other executive officers of
the Company, the results of the most recent shareholder advisory vote on executive compensation
required by Section 14A of the Exchange Act (the “Say-on-Pay Vote”)
and the awards given to the executive officer in past years. No executive officer may be
present during voting or deliberations relating to his or her compensation. |
| 5. | Review and make recommendations to the Board with respect to the Company’s
incentive compensation, equity-based and pension plans, if any. With respect to each such
plan, the Committee shall have responsibility for: |
| (a) | implementing and administering the plan; |
| (b) | setting performance targets under all annual bonus and long-term incentive
compensation plans as appropriate and committing to writing any and all performance targets
for executive officers who may be “covered employees” under applicable laws and
regulations; |
| (c) | setting performance targets under all annual bonus and long-term incentive
compensation plans as appropriate and committing to writing any and all performance targets
for executive officers who may be “covered employees” under applicable laws and
regulations; |
| (d) | if called for by the plan, certifying that any and all performance targets
used for any performance-based equity compensation plans have been met before payment of
any executive bonus or compensation or exercise of any executive award granted under
any such plans; |
| (e) | approving all amendments to, and terminations of, all compensation plans
and any awards under such plans; |
| (f) | granting any awards under any performance-based annual bonus, long-
term incentive compensation and equity compensation plans to executive officers or current
employees with the potential to become a CEO or an executive officer, including stock options
and other equity rights (e.g., restricted stock and stock purchase rights); |
| (g) | approving which executive officers are entitled to awards under the
Company’s stock option plans; and |
| (h) | approving repurchases of securities from terminated employees. |
In reviewing the Company’s incentive compensation,
equity-based and pension plans, the Committee may consider the plan’s administrative costs, current plan features relative to any
proposed new features, the results of the most recent Say- on-Pay Vote and the performance of the plan’s internal and external
administrators if any duties have been delegated.
| 6. | Review and recommend to the Board for approval any employment agreement
or compensatory transaction with an executive officer of the Company involving compensation
in excess of $120,000 per year. |
| 7. | Establish and periodically review policies concerning perquisite benefits
and approve all special perquisites, special cash payments and other special compensation
and benefits arrangements for officers and employees of the Company. |
| 8. | Determine and recommend to the Board for approval the Company’s
policy with respect to change-of-control or “parachute” payments. In reviewing
the Company’s policy with respect to change of control or “parachute” payments,
the Committee may consider, among such other factors as it may deem relevant, the results
of the most recent Say-on-Pay Vote on “parachute” payments, if any. |
| 9. | Review and make recommendations to the Board with respect to executive
officer and director indemnification and insurance matters. |
| 10. | Review and recommend to the Board for approval the compensation of
directors for their service to the Board. Review, evaluate and recommend changes, if appropriate,
to the remuneration of directors. |
| 11. | Approve compensation awards, including individual awards, as may be
required to comply with applicable tax and state corporate laws. |
| 12. | Review the Company’s compensation disclosures in its annual
proxy statement and its Annual Report on Form 10-K filed with the SEC and assist management
in complying with proxy statement and annual report requirements. Review and discuss the
Company’s Compensation Discussion and Analysis (“CD&A”) with
management and based on such review and discussion, determine whether to recommend to the
Board that such compensation disclosures and CD&A be disclosed in the Company’s
Annual Report on Form 10-K or annual proxy statement filed with the SEC, as applicable. |
| 13. | Review and recommend to the Board for approval the frequency with
which the Company will conduct Say-on-Pay Votes, taking into account the results of the most
recent shareholder advisory vote on frequency of Say-on-Pay Votes required by Section 14A
of the Exchange Act, and review and recommend to the Board for approval the proposals regarding
the Say-on-Pay Vote and the frequency of the Say-on-Pay Vote to be included in the Company’s
proxy statement filed with the SEC. |
| 14. | Prepare any report required by applicable rules and regulations
or listing standards, including the report required by the SEC to be included in the Company’s
annual proxy statement, or, if the Company does not file a proxy statement, in the Company’s
Annual Report filed on Form 10-K with the SEC. |
| 15. | Review and assess the adequacy of this Charter annually and recommend
to the Board any changes deemed appropriate by the Committee. |
| 16. | Review its own performance annually. |
| 17. | Report regularly to the Board. |
| 18. | Perform any other activities consistent with this Charter, the Company’s
by-laws and governing law, as the Committee or the Board deems necessary or appropriate. |
V. Resources
The Committee shall have the authority to retain
or terminate, at its sole discretion, compensation consultants, independent legal counsel or other advisors (collectively, “Advisors”)
to assist the Committee in its responsibilities and shall be directly responsible for the appointment, compensation and oversight of
the work of such Advisors. Before retaining an Advisor (other than in-house legal counsel and any Advisor whose role is limited to consulting
on broad-based, non-discriminatory plans or providing information that is not customized in particular for the Company (as described
in Item 407(e)(3)(iii) of Regulation S-K)), the Committee shall consider the independence of such Advisor, including any independence
factors that it is required to consider by law or Nasdaq rules.
The chairperson of the Committee, at the request
of any member of the Committee, may request that any officer, employee or advisor of the Company attend a meeting of the Committee or
otherwise respond to Committee requests.
The Committee shall have the sole authority to
determine the terms of engagement and the extent of funding necessary (and to be provided by the Company) for payment of compensation
to any Advisors or other professionals retained to advise the Committee and ordinary administrative expenses of the Committee that are
necessary or appropriate in carrying out its duties.
Exhibit 107
EX-FILING FEES
Calculation of Filing Fee Tables
FORM S-1
(Form Type)
Monterey
Capital Acquisition Corporation
(Exact Name of Registrant as Specified in its Charter)
Table 1: Newly Registered and Carry Forward
Securities
| | |
Security Type | |
Security
Class
Title | |
| Fee
Calculation
or Carry
Forward Rule | |
| Amount
Registered | |
| Proposed
Maximum
Offering Price
Per Unit(1) | |
| Maximum
Aggregate
Offering Price(1) | |
| Fee Rate | |
| Amount
of
Registration Fee | |
| Carry
Forward
Form Type | |
| Carry
Forward
File Number | |
| Carry
Forward
Initial
effective date | |
| Filing
Fee
Previously Paid
In Connection
with Unsold
Securities
to be Carried
Forward | |
|
Newly Registered Securities |
| Fees to
Be Paid | |
Equity | |
Units,
each consisting of one share of Class A common stock, $0.0001 par value per share, one redeemable warrant and one right to receive
one-tenth of one share of Class A common stock(2) | |
| 457(o) | |
| 11,500,000 | |
$ | 10.00 | |
$ | 115,000,000 | |
| 0.0000927 | |
$ | 10,661 | |
| | |
| | |
| | |
| | |
| | |
Equity | |
Shares
of Class A common stock included as part of
the units(3) | |
| 457(g) | |
| 11,500,000 | |
| — | |
| — | |
| 0.0000927 | |
| — | (4) |
| | |
| | |
| | |
| | |
| | |
Equity | |
Redeemable
warrants included as part of the
units(3) | |
| 457(g) | |
| 11,500,000 | |
| — | |
| — | |
| 0.0000927 | |
| — | (4) |
| | |
| | |
| | |
| | |
| | |
Equity | |
Rights
included as part of the units(3) | |
| 457(g) | |
| 11,500,000 | |
| — | |
| — | |
| 0.0000927 | |
| — | (4) |
| | |
| | |
| | |
| | |
| | |
Equity | |
Shares
of Class A common stock underlying the Rights included as part of the units(3) | |
| 457(o) | |
| 1,150,000 | |
$ | 10.00 | |
$ | 11,500,000 | |
| 0.0000927 | |
$ | 1,067 | |
| | |
| | |
| | |
| | |
| | |
Equity | |
Representative’s shares
of Class A common stock | |
| 457(o) | |
| 172,500 | |
$ | 10.00 | |
$ | 1,725,000 | |
| 0.0000927 | |
$ | 160 | |
| | |
| | |
| | |
| | |
| Fees Previously Paid | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Carry Forward Securities |
Carry Forward
Securities | |
| |
|
| |
|
| |
|
|
| | |
| |
| |
| | |
| |
| | |
Total Offering Amounts | |
|
| |
|
|
$ | 128,225,000 | |
| |
| |
| | |
| |
| | |
Total Fees Previously Paid | |
|
| |
|
|
| — | |
| |
| |
| | |
| |
| | |
Total Fee Offsets |
|
| |
|
| |
|
|
| — | |
| |
| |
| | |
| |
| | |
Net Fee Due |
|
| |
|
|
$ | 11,888 | |
| |
| |
| | |
| |
| (1) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of
1933, as amended. |
| (2) | Includes 11,500,000 units, consisting of 11,500,000 shares of Class A common stock. 11,500,000 redeemable warrants, which may
be issued upon exercise of a 45-day option granted to the underwriters to cover over-allotments, if any, and 11,500,000 rights, with each
right entitling the holder to receive one-tenth of one share of Class A common stock upon the closing of the business combination. |
| (3) | Pursuant to Rule 416, there are also being registered an indeterminable number of additional securities as may be issued to prevent
dilution resulting from stock splits, stock dividends or similar transactions. |
| (4) | No fee pursuant to Rule 457(g). |