Document:

Exhibit 10.1

[Form of Letter Agreement for

SP Acq LLC, Steel Partners II, L.P. and SP Acquisition Holdings, Inc.]

, 2007

SP Acquisition Holdings, Inc.

590 Madison Avenue, 32nd Floor

New York, NY  10022

UBS Securities LLC

299 Park Avenue

New York, New York 10171-0026

Ladenburg Thalmann & Co. Inc.

153 East 53 Street, 49th Floor

New York, NY 10022

Re: Initial Public Offering of SP Acquisition Holdings, Inc.

Ladies and Gentlemen:

This letter is being delivered to you in accordance with the Underwriting Agreement (the “Underwriting Agreement”) entered into by and between SP Acquisition Holdings, Inc., a Delaware corporation (the “Company”), and UBS Securities LLC and Ladenburg Thalmann & Co., Inc. as the representatives (the “Representatives”) of the underwriters named in Schedule I thereto (the “Underwriters”), relating to an underwritten initial public offering (the “IPO”) of the Company’s units (the “Units”), each composed of one share of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and one warrant, which is exercisable for one share of Common Stock (the “Warrants”). Certain capitalized terms used herein are defined in paragraph 10 hereof.

In order to induce the Company and the Underwriters to enter into the Underwriting Agreement and to proceed with the IPO, and in recognition of the benefit that such IPO will confer upon the undersigned as a stockholder of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agrees with the Company as follows:

1.

In the event that the Company fails to consummate an Initial Business Combination within 24 months from the effective date (the “Effective Date”) of the registration statement on Form S-1 (File No. 333-142696) relating to the IPO (the “Registration Statement”), the undersigned will take all reasonable actions within its power to [(a)] cause the Trust Account to be liquidated and distributed to the holders of the IPO Shares as soon as reasonably practicable [and (b) cause the Company to liquidate as soon as reasonably practicable (the earliest date on which the conditions in clauses (a) and (b) are both satisfied being the “Liquidation Date”).  The 

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undersigned agrees that in connection with any cessation of corporate existence of the Company on [_______], 2009, it will cause the Company to adopt a plan of dissolution and distribution in accordance with Section 281(b) of the General Corporation Law of the State of Delaware or any successor provision thereto.]1 [The undersigned agrees that in connection with any cessation of corporate existence of the Company on [_______], 2009, it will not interfere with or obstruct in any way, the Company’s adoption of a plan of dissolution and distribution in accordance with Section 281(b) of the General Corporation Law of the State of Delaware or any successor provision thereto.]2

2.

(a)

Neither the undersigned nor any affiliate of the undersigned will be entitled to receive, and no such person will accept, any finder’s fee, reimbursement or cash payment from the Company for services rendered to the Company prior to or in connection with the consummation of an Initial Business Combination, other than (subject to the following sentence) (i) repayment of that certain Promissory Note in the amount of $250,000 made to the Company by Steel Partners, Ltd., to cover offering-related and organizational expenses; (ii) a payment of an aggregate of $10,000 per month to Steel Partners, Ltd., for office space, secretarial and administrative services; and (iii) reimbursement for any out-of-pocket expenses or advances related to: (i) the IPO, (ii) identifying, investigating and consummating an Initial Business Combination or (iii) other expenses or advances that the Company is permitted incur.  The undersigned acknowledges that the Company’s Audit Committee (or the Company’s Board of Directors in the case of a director who is a member of the Company’s Audit Committee) will review and approve all payments made to the undersigned, the Company’s officers and directors and the Company’s or their affiliates, other than the $10,000 per month payment described in the immediately preceding sentence.

(b)

Neither the undersigned, nor any affiliate of the undersigned, will accept a finder’s fee, consulting fee or any other compensation or fees from any person or other entity in connection with an Initial Business Combination, other than compensation or fees that may be received for any services provided following such Initial Business Combination.

(c)

The undersigned acknowledges and agrees that the Company will not consummate any Initial Business Combination which involves any entity in which any of its officers, directors or an entity in which the Steel Partners Group or its affiliates has a financial interest.

3.

If the Company seeks approval of its stockholders of an Initial Business Combination, the undersigned will:

(a)

vote all if its Founder’s Shares owned directly or indirectly by it either for or against an Initial Business Combination as determined in accordance with the Company’s Public Stockholders in connection with the vote on any Initial Business Combination; and

(b)

vote all shares of Common Stock that it may acquire in or following the IPO in favor of the Initial Business Combination.

 

1 This bracketed language only applies to SP Acq LLC.

2 This bracketed language only applies to Steel Partners II, L.P.

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4.

The undersigned hereby waives any and all right, title, interest or claim of any kind in or to any distributions of the Trust Account, or to any other amounts distributed in connection with a liquidating distribution of the Company, with respect to its Founder’s Shares (any “Claim”), and hereby waives any Claim the undersigned may have in the future as a result of, or arising out of, any contracts or agreements with the Company and will not seek recourse against the Trust Account for any reason whatsoever; provided that the foregoing shall not apply to any IPO Shares acquired by the undersigned. The undersigned hereby agrees that the Company shall be entitled to reimbursement from the undersigned for any distribution of the Trust Account or any other amounts distributed by the Company in connection with a liquidating distribution received by the undersigned with respect to its Founder’s Shares.

5.

In the case of the Company’s dissolution and liquidation, the undersigned understands that the Company expects that all costs and expenses associated with implementing the Company’s plan of distribution, as well as payments to any creditors, will be funded from amounts remaining out of the $100,000 of proceeds from the IPO held outside the Trust Account and from the $3.5 million in interest income on the balance of the Trust Account that will be released to the Company to fund its working capital requirements.  The undersigned further understands that if those funds are not sufficient to cover the costs and expenses associated with implementing the Company’s plan of distribution, to the extent that there is any interest accrued in the Trust Account not required to pay income taxes on interest income earned on the Trust Account balance, the Company may request that the Trustee release to it an additional amount of up to $75,000 of such accrued interest to pay those costs and expenses. Should there be no such accrued interest available or should the aforementioned funds still not be sufficient, the undersigned hereby agrees to reimburse the Company for its out-of-pocket costs associated with its dissolution and liquidation, excluding any special, indirect or consequential costs, such as litigation, pertaining to the dissolution and liquidation.  The undersigned hereby represents and warrants to the Company that it is an accredited investor as such term is defined in Regulation D under the Securities Act of 1933, as amended.

6.

The undersigned agrees to indemnify and hold harmless the Company against any and all losses, liabilities, claims, damages and expenses 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, or any claim whatsoever) (collectively, “Damages”) to which the Company may become subject, but only if, and to the extent (i) the claims reduce the amounts in the Trust Account available for payment to holders of the IPO Shares in the event of a liquidation of the Trust Account and (ii) the claims are made by (A) a vendor for services rendered, or products sold, to the Company, (B) by a third party with which the Company enters into a contractual relationship following consummation of the IPO, or (C) by a prospective target business arising out of any negotiations, contracts or agreements with the Company, provided that such indemnity shall not apply to any amounts claimed owed to a third party who executed a valid and legally enforceable waiver of any right, title, interest or claim of any kind in or to the Trust Account, or as to any claims under the Company’s obligation to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended.

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7.

The undersigned’s NASD questionnaire furnished to the Company and the Underwriters and attached hereto as Exhibit A is true and accurate in all respects. The undersigned represents and warrants that:

(a)

the undersigned 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; 

(b)

the undersigned has never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and the undersigned is not currently a defendant in any such criminal proceeding; and

(c)

the undersigned 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.

8.

The undersigned has full right and power, without violating any agreement by which it is bound, to enter into this letter agreement, and hereby consents to being named in the Registration Statement as a shareholder of the Company.

9.

The undersigned hereby acknowledges and agrees that in addition to the transfer restrictions set forth in (1) the Founder’s Securities Purchase Agreement, dated as of March 22, 2007 (the “Founder’s Securities Purchase Agreement”), by and between the Company and SP Acq LLC, (2) the Founder’s Units Purchase Agreement, dated as of March 30, 2007, (the “Founder’s Units Purchase Agreement”) by and among the Company, SP Acq LLC and Steel Partners II, L.P., (3) the Co-Investment Agreement, dated as of March 22, 2007, (the Co-Investment Agreement”) by and among the Company, SP Acq LLC and Steel Partners II, L.P., and (4) the Amended and Restated Warrant Agreement, dated as of August 7, 2007, (the “Warrant Agreement”) by and between the Company and Continental Stock Transfer & Trust Company, it will not (A) offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the undersigned or any affiliate of the undersigned or any person in privity with the undersigned or any affiliate of the undersigned), directly or indirectly, including the participation in the filing of a registration statement with the Securities and Exchange Commission in respect of, (B) 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, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder, with respect to or (C) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of, or any securities convertible into or exercisable or exchangeable for, or other rights to purchase, whether any such transaction is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, any Securities (as defined in the Founder’s Securities Purchase Agreement, the Founder’s Units Purchase Agreement and the Co-Investment Agreement), or publicly announce an intention to effect any such transaction, for a period of one year from the date the Company completes its initial 

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business combination; provided, however, that notwithstanding anything to the contrary in this paragraph 9, the undersigned may, at any time, (i) transfer such Securities to Permitted Transferees (as defined in the Warrant Agreement but subject to the terms of the Founder’s Units Purchase Agreement) as contemplated by the Founder’s Securities Purchase Agreement, Founder’s Units Purchase Agreement, Co-Investment Agreement and Warrant Agreement, as the case may be, (ii) transfer Additional Founder’s Warrants (as defined in the Founder’s Securities Purchase Agreement) and Shares underlying such Additional Founder’s Warrants after the Company completes its initial business combination, (iii) exercise Initial Founder’s Warrants (as defined in the Founder’s Securities Purchase Agreement), Additional Founder’s Warrants and Co-Investment Warrants (as defined in the Co-Investment Agreement) all as contemplated by the Warrant Agreement and (iv) issue additional membership interests in SP Acq LLC and (iv) add additional limited partners to Steel Partners II, L.P.

10.

As used herein, (i) “Initial Business Combination” shall mean the acquisition through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination, of one or more businesses or assets in connection with which the Company will require that a majority of the shares of Common Stock voted by the Public Stockholders are voted in favor of such acquisition and stockholders owning less than 30% of the IPO Shares exercise their conversion rights; (ii) “Founder’s Shares” shall mean an aggregate of 7,500,000 shares of Common Stock (and any shares received as dividends thereon) acquired prior to the IPO owned by (a) SP Acq LLC, which is controlled by Warren G. Lichtenstein, (b) certain Directors of the Company, and (c) Steel Partners II, L.P.;  (iii) “IPO Shares” shall mean the shares of Common Stock underlying the Units issued in the Company’s IPO (iv) “Public Stockholders” shall mean purchasers of Common Stock in the IPO or in the secondary market, including any of the Company’s officers or directors or their affiliates, including the undersigned, to the extent that they purchase or acquire Common Stock in the IPO or the secondary market; (v) “Steel Partners Group” shall mean collectively, Steel Partners, L.L.C., SP Acquisition Holdings, Inc., Steel Partners II, L.P., Steel Partners Offshore Fund, Ltd., Steel Partners, Ltd., Steel Partners (UK) Ltd. and all other entities that may be deemed to be wholly-controlled by Warren G. Lichtenstein; and (vi) “Trust Account” shall mean the trust account established under the Investment Management Trust Agreement, dated as of the date hereof, by and between the Company and Continental Stock Transfer & Trust Company, as Trustee.

The undersigned acknowledges and understands that the Company and the Underwriters will rely upon the agreements, representations and warranties set forth herein in proceeding with the IPO.  Nothing contained herein shall be deemed to render the Underwriters a representative of, or a fiduciary with respect to, the Company, its stockholders, or any creditor or vendor of the Company with respect to the subject matter hereof.

This letter agreement shall be binding on the undersigned and such person’s respective successors, heirs, personal representatives and assigns.  This letter agreement shall terminate on the earlier of (i) the consummation of an Initial Business Combination and (ii) the Liquidation Date; provided that such termination shall not relieve the undersigned from liability for any breach of this agreement prior to its termination and provided further that paragraph 6 of this agreement shall survive a termination.

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This letter agreement shall be governed by and interpreted and construed in accordance with the laws of the State of New York applicable to contracts formed and to be performed entirely within the State of New York, without regard to the conflicts of law provisions thereof to the extent such principles or rules would require or permit the application of the laws of another jurisdiction. 

No term or provision of this letter agreement may be amended, changed, waived, altered or modified except by written instrument executed and delivered by the party against whom such amendment, change, waiver, alteration or modification is to be enforced.

[Signature Page Follows]

6

			
	 
	SP ACQ LLC

	 
	 
	 

	 
	 
	 

	 
	By:

	 

	 
	Name:

Warren G. Lichtenstein

	 
	Title:

Managing Member

			
	 
	STEEL PARTNERS II, L.P.3

By: Steel Partners, L.L.C., its General Partner

	 
	 
	 

	 
	 
	 

	 
	By:

	 

	 
	Name:

Warren G. Lichtenstein

	 
	Title:

Managing Member

	 
	 

	 
	 

	 
	Accepted and agreed:

	 
	 

	 
	SP ACQUISITION HOLDINGS, INC.

	 
	 

	 
	 

	 
	By:

	 

	 
	Name:

	 
	Title:

 

3 Paragraphs 5 and 6 do not apply to Steel Partners II, L.P.

Exhibit A

[NASD Questionnaire Furnished to the Company and the Underwriters.]SP ACQUISITION HOLDINGS, INC.

FOUNDER’S UNITS AGREEMENT

THIS AGREEMENT (this “Agreement”), dated as of August 8, 2007, is entered into by and among SP Acquisition Holdings, Inc., a Delaware corporation (the “Company”), SP Acq LLC, a Delaware limited liability company (the “Initial Founder”), Steel Partners II, L.P., a Delaware limited partnership (“SP II”), Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S. Nicholas Walker (each a “Founder” and collectively, together with the
Initial Founder and SP II, the “Founders”).

WITNESSETH

WHEREAS, the Founders in aggregate hold 7,500,000 units (the “Units”) consisting of one share of the Company’s common stock, par value $0.001 per share (the “Shares”) and one warrant to purchase one share of common stock (the “Warrants”);

WHEREAS, the Company has filed a registration statement on Form S-1 (File No. 333-142696) (the “Registration Statement”) for its initial public offering of Units (the “IPO”);

WHEREAS, the Company may decide to increase or decrease the number of Units issued in the IPO;

WHEREAS, the Company and the Founders confirm their understanding that the Shares being sold to the public as part of the Units shall represent approximately 80% of the Company’s outstanding share capital following consummation of the IPO and any exercise of the underwriters’ overallotment option (such percentage, the “Public Float”) regardless of whether the number of Units issued in the IPO are increased or decreased; 

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 agree as follows:

Section 1. Adjustment for Over-Allotment Option Exercise.

(A) The Company hereby agrees with each of the Founders, that it will declare and pay to its stockholders a dividend of Units (the “Over-Allotment Adjustment Units”), so that the number of Units the Company sells to the public in the IPO including as a result of the exercise of the underwriters’ over-allotment option will maintain the Public Float.  Each of the Founders (other than the Initial Founder) hereby irrevocably assigns to the Initial Founder, all Over-Allotment Adjustment Units which it has the right to receive pursuant to such dividend.  Each of the Founders agrees to take any and all action reasonably requested by the Company or the Initial Founder necessary to effect such assignment; provided
that neither the Founders nor the Company shall make or receive any cash payment in respect of any such assignment.

(B) The Initial Founder agrees to deposit in escrow all of the Over-Allotment Adjustment Units it receives from the Company and from the other Founders together with any additional Units it receives pursuant to Section 2 below less the number of Units that it would have 

 

 

received pursuant to Section 2 below if the definition of Public Float did not include the exercise of the underwriters’ over-allotment option, all pursuant to an escrow agreement to be entered into among the Initial Founder and Continental Stock Transfer & Trust Company, as escrow agent (the “Escrow Agreement”).

Section 2. Initial Founder’s Units Adjustment.  Each of the Founders hereby agrees with the Company, and the Company hereby agrees with each of the Founders, that if the number of Units the Company offers to the public in the IPO is increased or decreased from the number shown in the Registration Statement filed with the Securities and Exchange Commission as of the date hereof, then the number of Units held by the Initial Founder immediately prior to consummation of the IPO will be adjusted in the same proportion as the increase or decrease in the Units offered in the IPO including the Units subject to the underwriters’ overallotment option in order to maintain the Public Float.  Such increase or decrease, if any, shall be effected by dividend or surrender and cancellation of certificates
evidencing such Initial Founder’s Units, or such other manner as elected by the Company in its sole discretion.  In furtherance of the foregoing, each of the Founders (other than the Initial Founder) hereby irrevocably assigns to the Initial Founder all Units it has the right to receive pursuant to any dividend declared and paid prior to the consummation of the IPO.  Each of the Founders agrees to take any and all action reasonably requested by the Company or the Initial Founder necessary to effect any adjustment pursuant to this Section 2; provided that neither the Founders nor the Company shall make or receive any cash payment in respect of any such adjustment.

Section 3. Further Agreements of the Founders.

(A) Each Founder severally and not jointly acknowledges and agrees that any additional Units it may acquire pursuant to Section 1 or Section 2 of this Agreement (A) shall be subject to the voting, waiver of liquidation, transfer restrictions and forfeiture conditions set forth in the Purchase Agreement, dated as of March 22, 2007 (in the case of the Initial Founder), the Founder’s Units Purchase Agreement, dated as of March 30, 2007 (in the case of SP II) and the Founder’s Units and Founder’s Additional Warrants Purchase Agreement, dated as of June __, 2007 (in the case of Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S. Nicholas Walker), and (B) shall bear the same legend as the Founder’s Units held on the date hereof.  In addition, in the event the underwriters’ over-allotment option is not exercised in whole or in part, any
Units deposited in escrow pursuant to Section 1(B) hereof shall be subject to the forfeiture provisions set forth in the Escrow Agreement.

(B) Each of the Initial Founder and SP II agrees that notwithstanding the definition of “Permitted Transferees” contained in the Purchase Agreement or SP II Purchase Agreement, as applicable, it shall not transfer any Founder’s Units, or any shares of common stock or warrants included in such Founder’s Units (including the shares of common stock underlying such warrants) to its respective limited partners or members in their capacity as such limited partners or members.  Notwithstanding the foregoing, in no event shall the restrictions contained in this Section 3B continue beyond one year after the Company completes its initial business combination.

 

 

Section 4. 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 and assigns 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.

(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 in counterparts, all of which taken together shall constitute one and the same Agreement.

(D) 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 said State. The parties agree that, all actions and proceedings arising out of this Agreement or any of the transactions contemplated hereby, shall be brought in the United States District Court for the Southern District of New York or in a New York State Court in the County of New York and that, in connection with any such action or proceeding, submit to the jurisdiction of, and venue in, such court. Each of the parties hereto also irrevocably waives all right to trial by jury in any action, proceeding or counterclaim arising out of this Agreement or the transactions contemplated hereby.

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.

 

	
                        SP ACQUISITION HOLDINGS, INC.
 	
                         
 	
      ANTHONY BERGAMO
 
	
                        By: 
 	
                          
 	
                         
 	
                         
 
	
                         
 	
      Warren G. Lichtenstein,
 Chairman of the Board of
 Directors, President and Chief
 Executive Officer
 	
       
 	
                         

                         

                        RONALD LABOW

	
                        SP ACQ LLC
 	
                         
 	 
	By: 
	 
	 
	 

	
                         
 	
                        Warren G. Lichtenstein,
 Managing Member
 	
                         
 	
                         
 	
                         
 

	
                        STEEL PARTNERS II, L.P.
 	
                         
 	
                        HOWARD M. LORBER
 
	
                        By: 
 	
                        Steel Partners, L.L.C.
 its General Partner
 	
                         
 	
                         
 
	
                        By: 
 	
                          
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                        Warren G. Lichtenstein,
 Managing Member
 	
                         
 	
                        LEONARD TOBOROFF
 
	 	 	 
	 

	 
	 
	 
	 
	 

	
                         
 	
                         
 	
                         
 	
                        

                        S. NICHOLAS WALKER

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