ESH Acquisition Corp. Commitments Disclosure

NOTE 6. COMMITMENTS AND CONTINGENCIES

 

Registration and Stockholder Rights

 

The holders of Founder Shares, Private Placement Warrants (and underlying securities) and Private Placement Warrants that may be issued upon conversion of Working Capital Loans (and any underlying securities) are entitled to registration rights pursuant to a registration rights agreement signed at the consummation of the IPO. These holders are entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

 

Underwriting Agreement

 

On June 16, 2023, the Company issued to I-Bankers 258,750 shares of Class A common stock and to Dawson James 28,750 shares of Class A common stock at the closing of the IPO (collectively, the “Representative Shares”). The Company determined the fair value of the 287,500 Representative Shares to be $2,239,466 (or $7.789 per share) using the Probability-Weighted Expected Return Method Model. The fair value of the shares granted to the underwriters utilized the following assumptions: (1) expected volatility of 5.7%, (2) risk-free interest rate of 5.15%, (3) expected life of 1.17 years, and (4) implied discount for lack of marketability of 1.4%. Accordingly, the fair value of $2,239,466 was accounted for as offering costs at the closing of the IPO.

 

The Representative Shares have been deemed compensation by Financial Industry Regulatory Authority (“FINRA”) and were therefore subject to a Lock-Up for a period of 180 days immediately following the commencement of sales in the IPO. Pursuant to FINRA Rule 5110(e)(1), these securities were not 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 commencement of sales in the IPO, nor were they permitted to be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the commencement of sales in the IPO, except to any underwriters and selected dealer participating in the offering and their bona fide officers or partners.

 

The underwriters were also entitled to an underwriting discount of $0.20 per unit, or $2.3 million in the aggregate, which was paid upon the closing of the IPO.

Initial Business Combination Marketing Agreement

 

The Company entered into the Marketing Agreement with the underwriters, I-Bankers and Dawson James to assist the Company in holding meetings with the stockholders to discuss the potential Initial Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with the Initial Business Combination, assist the Company in obtaining stockholder approval for the Initial Business Combination and assist the Company with its press releases and public filings in connection with the Initial Business Combination. Pursuant to the Initial Business Combination Marketing Agreement, the Company will pay I-Bankers and Dawson James, collectively, 3.5% of the gross proceeds of the IPO, or $4.03 million in the aggregate (the “Marketing Fee”). The Marketing Fee will become payable to I-Bankers and Dawson James from the amounts held in the Trust Account solely in the event that the Company completes an Initial Business Combination with a target introduced to the Company by I-Bankers.