SECURITIES ESCROW AGREEMENT
EXHIBIT
10.1
SECURITIES
ESCROW AGREEMENT, dated as
of
, 2008 (the “Agreement”), by and among CHINA FUNDAMENTAL ACQUISITION
CORPORATION, a company organized under the laws of the Cayman Islands (the
“Company”), RALCO CAPITAL LIMITED, RISING YEAR GROUP LIMITED, Q.Y. MA, TAN XXXX
XXX, XXXXXXXX CAPITAL, LLC, GLOBIS INTERNATIONAL INVESTMENTS LLC, GLOBIS
CAPITAL
PARTNERS L.P., GLOBIS OVERSEAS FUND LTD. and CHARDAN CAPITAL MARKETS, LLC
(collectively, the “Private Investors”) and CONTINENTAL STOCK TRANSFER &
TRUST COMPANY (the “Escrow Agent”).
WHEREAS,
the Company has entered into an Underwriting Agreement,
dated
, 2008 (“Underwriting Agreement”), with Chardan Capital Markets, LLC (“Chardan”)
acting as representative of the several underwriters (the “Underwriters”),
pursuant to which, among other matters, the Underwriters have agreed to purchase
3,750,000 units (not including the Underwriters’ overallotment option) (“Units”)
of the Company. Each Unit consists of one of the Company’s ordinary share,
$0.001 par value (each, an “Ordinary Share”), and one warrant (“Warrant”), each
Warrant to purchase one Ordinary Share, all as more fully described in the
Company’s final Prospectus,
dated
, 2008 (“Prospectus”) comprising part of the Company’s Registration Statement on
Form F-1 (File No.
333-
) under the Securities Act of 1933, as amended (together, the “Registration
Statement”), which was declared effective
on
, 2008 (the “Effective Date”);
WHEREAS,
certain of the Private Investors have entered into that certain warrant purchase
agreement, dated as of ______, 2008 (the “Warrant Purchase
Agreement”);
WHEREAS,
the Private Investors have agreed as a condition of the Underwriters’ obligation
to purchase the Units pursuant to the Underwriting Agreement to deposit all
of
their Placement Warrants (as defined in the Warrant Purchase Agreement),
Ordinary Shares (the “Escrow Shares”) and warrants exercisable for Ordinary
Shares initially issued in December 2007 or acquired in January 2008 (the
“Escrow Warrants”, and collectively with the Escrow Shares and the Placement
Warrants, the “Escrow Securities”), as set forth opposite their respective names
in Exhibit A attached hereto, in escrow as hereinafter provided;
and
WHEREAS,
the Company and the Private Investors desire that the Escrow Agent accept
the
Escrow Securities, in escrow, to be held and disbursed as hereinafter provided.
IT
IS
AGREED:
1.
Appointment of Escrow Agent. The Company and the Private Investors hereby
appoint the Escrow Agent to act in accordance with and subject to the terms
of
this Agreement and the Escrow Agent hereby accepts such appointment and agrees
to act in accordance with and subject to such terms.
1
2.
Deposit of Escrow Securities. On or before the Effective Date, each of the
Private Investors shall deliver to the Escrow Agent certificates representing
such Private Investor’s respective Escrow Shares, to be held and disbursed
subject to the terms and conditions of this Agreement. On or before the
Effective Date, each of the Private Investors purchasing Placement Warrants
shall deliver to the Escrow Agent certificates representing such Investor’s
respective Placement Warrants, to be held and disbursed subject to the terms
of
this Agreement. Each Private Investor acknowledges that the certificate(s)
representing his or her Escrow Securities are legended to reflect the deposit
of
such Escrow Securities under this Agreement.
3.
Disbursement of the Escrow Securities. The Escrow Agent shall (i) hold the
Escrow Securities, excluding the Placement Warrants, until the earlier of
2 ½
years from the close of the Company’s initial public offering (“IPO”) or until
six months after the consummation of a business combination, as described
in the
Registration Statement (the “Business Combination”) and (ii) hold the Placement
Warrants until the earlier of 2 ½ years from the close of the Company’s IPO or
until the consummation of a Business Combination. The time that the Escrow
Securities are held in escrow pursuant to this Agreement is referred to herein
as the (“Escrow Period”). On the expiration of the applicable Escrow Period, the
Escrow Agent shall, upon written instructions from the Company, disburse
each of
the Private Investor’s Escrow Securities to such Private Investor; provided,
however,
that if
the Underwriters do not exercise their over-allotment option in full, up
to
140,625 of the Escrow Securities shall be released to the Company upon written
instruction from the Company; provided,
further,
that if
the Escrow Agent is notified by the Company pursuant to Section 6.7 hereof
that
the Company is being liquidated at any time during the Escrow Period, then
the
Escrow Agent shall promptly destroy the certificates representing the Escrow
Securities and, provided further, that if, after the Company consummates
a
Business Combination, it (or the surviving entity) subsequently consummates
a
liquidation, merger, stock exchange or other similar transaction which results
in all of its shareholders having the right to exchange their Ordinary Shares
or
warrants for cash, securities or other property, then the Escrow Agent will,
upon consummation of such transaction, release the Escrow Securities to the
Private Investors so that they can similarly participate. Upon written
instructions from the Company advising that (i) the extended period, as
described in the Registration Statement (the “Extended Period”) has been
approved, or (ii) a Business Combination has been consummated, and that public
stockholders holding in excess of 35% of the Ordinary Shares issued pursuant
to
the Registration Statement exercise the right to redeem their shares for
cash as
described in the Registration Statement, the Escrow Agent will release and
deliver to the Company for cancellation on a pro rata basis certificates
representing that number of Escrow Securities which results in the Private
Investors collectively owning no more then 20% of the Company’s outstanding
Ordinary Shares immediately prior to the consummation of the Business
Combination after giving effect to the redemption. Such instructions shall
be
set forth both the number of shares the Company is redeeming and the number
of
Escrow Securities to be delivered to the Company for cancellation. The Escrow
Agent shall have no further duties hereunder after the disbursement or
destruction of the Escrow Securities in accordance with this Section 3.
4. Rights
of
Private Investors in Escrow Securities.
4.1
Voting
Rights as a Shareholder.
Subject
to the terms of the Insider Letter described in Section 4.4 hereof and except
as
herein provided, the Private Investors shall retain all of their rights as
shareholders of the Company during the Escrow Period with respect to the
Escrow
Shares, including, without limitation, the right to vote such shares.
2
4.2
Dividends
and Other Distributions in Respect of the Escrow Shares.
During
the Escrow Period, all dividends payable in cash with respect to the Escrow
Shares shall be paid to the Private Investors, but all dividends payable
in
securities or other non-cash property (“Non-Cash Dividends”) shall be delivered
to the Escrow Agent to hold in accordance with the terms hereof. As used
herein,
the term “Escrow Shares” shall be deemed to include the Non-Cash Dividends
distributed thereon, if any.
4.3
Restrictions
on Transfer.
Except
as set forth in Section 3 during the Escrow Period, no sale, transfer or
other
disposition may be made of any or all of the Escrow Securities except (i)
to an
entity’s beneficiaries upon its liquidation, (ii) to relatives and trusts for
estate planning purposes, (iii) by virtue of the laws of descent and
distribution upon death, (iv) pursuant to a qualified domestic relations
order,
(v) to existing shareholders and persons affiliated with such persons, or
(vi)
by private sales with respect to up to 33% of the existing shareholders’
securities made at or prior to the consummation of a business combination
at
prices no greater than the price at which the securities were originally
purchased, in each case where the transferee agrees to the terms of this
Agreement; provided, however, that such permissive transfers may be implemented
only upon the respective transferee’s written agreement to be bound by the terms
and conditions of this Agreement and of the Insider Letter (as defined below)
signed by the Private Investor transferring the Escrow Shares. During the
Escrow
Period, the Private Investors shall not pledge or grant a security interest
in
the Escrow Securities or grant a security interest in their rights under
this
Agreement.
4.4
Insider
Letters.
Except
for Chardan, each of the Private Investors has executed a letter agreement
with
Chardan and the Company, dated of the Effective Date, and which is filed
as an
exhibit to the Registration Statement (each, an “Insider Letter”), respecting
the rights and obligations of such Investor in certain events, including
but not
limited to, the liquidation of the Company.
5. Concerning
the Escrow Agent.
5.1
Good
Faith Reliance.
The
Escrow Agent shall not be liable for any action taken or omitted by it in
good
faith and in the exercise of its own best judgment, and 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 Escrow Agent),
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 is
believed by the Escrow Agent to be genuine and to be signed or presented
by the
proper person or persons. The Escrow Agent shall not be bound by any notice
or
demand, or any waiver, modification, termination or rescission of this Agreement
unless evidenced by a writing delivered to the Escrow Agent signed by the
proper
party or parties and, if the duties or rights of the Escrow Agent are affected,
unless it shall have given its prior written consent thereto.
3
5.2
Indemnification.
The
Escrow Agent shall be indemnified and held harmless by the Company from and
against any expenses, including counsel fees and disbursements, or loss suffered
by the Escrow Agent in connection with any action, suit or other proceeding
involving any claim which in any way, directly or indirectly, arises out
of or
relates to this Agreement, the services of the Escrow Agent hereunder, or
the
Escrow Shares held by it hereunder, other than expenses or losses arising
from
the gross negligence or willful misconduct of the Escrow Agent. Promptly
after
the receipt by the Escrow Agent of notice of any demand or claim or the
commencement of any action, suit or proceeding, the Escrow Agent shall notify
the other parties hereto in writing. In the event of the receipt of such
notice,
the Escrow Agent, in its sole discretion, may commence an action in the nature
of interpleader in an appropriate court to determine ownership or disposition
of
the Escrow Shares or it may deposit the Escrow Shares with the clerk of any
appropriate court or it may retain the Escrow Shares pending receipt of a
final,
non-appealable order of a court having jurisdiction over all of the parties
hereto directing to whom and under what circumstances the Escrow Shares are
to
be disbursed and delivered. The provisions of this Section 5.2 shall survive
in
the event the Escrow Agent resigns or is discharged pursuant to Sections
5.5 or
5.6 below.
5.3
Compensation.
The
Escrow Agent shall be entitled to reasonable compensation from the Company
for
all services rendered by it hereunder. The Escrow Agent shall also be entitled
to reimbursement from the Company for all expenses paid or incurred by it
in the
administration of its duties hereunder including, but not limited to, all
counsel, advisors’ and agents’ fees and disbursements and all taxes or other
governmental charges.
5.4
Further
Assurances.
From
time to time on and after the date hereof, the Company and the Private Investors
shall deliver or cause to be delivered to the Escrow Agent such further
documents and instruments and shall do or cause to be done such further acts
as
the Escrow Agent shall reasonably request to carry out more effectively the
provisions and purposes of this Agreement, to evidence compliance herewith
or to
assure itself that it is protected in acting hereunder.
5.5
Resignation.
The
Escrow Agent may resign at any time and be discharged from its duties as
escrow
agent hereunder by its giving the other parties hereto written notice and
such
resignation shall become effective as hereinafter provided. Such resignation
shall become effective at such time that the Escrow Agent shall turn over
to a
successor escrow agent appointed by the Company and approved by Chardan,
the
Escrow Shares held hereunder. If no new escrow agent is so appointed within
the
60 day period following the giving of such notice of resignation, the Escrow
Agent may deposit the Escrow Shares with any court it reasonably deems
appropriate.
5.6
Discharge
of Escrow Agent.
The
Escrow Agent shall resign and be discharged from its duties as escrow agent
hereunder if so requested in writing at any time by the other parties hereto,
jointly, provided, however, that such resignation shall become effective
only
upon acceptance of appointment by a successor escrow agent as provided in
Section 5.5.
5.7
Liability.
Notwithstanding anything herein to the contrary, the Escrow Agent shall not
be
relieved from liability hereunder for its own gross negligence or its own
willful misconduct.
5.8
Waiver.
The
Escrow Agent hereby waives any and all 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 Escrow 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.
4
6. Miscellaneous.
6.1
Governing
Law.
This
Agreement shall for all purposes be deemed to be made under and shall be
construed in accordance with the laws of the State of New York. Each of the
parties 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. Each of the parties hereby waives
any
objection to such exclusive jurisdiction and that such courts represent an
inconvenient forum.
6.2
Third
Party Beneficiaries.
Each of
the Private Investors hereby acknowledges that the Underwriters are third
party
beneficiaries of this Agreement and this Agreement may not be modified or
changed without the prior written consent of Chardan.
6.3
Entire
Agreement.
This
Agreement contains the entire agreement of the parties hereto with respect
to
the subject matter hereof and, except as expressly provided herein, may not
be
changed or modified except by an instrument in writing signed by the party
to
the charged.
6.4
Headings.
The
headings contained in this Agreement are for reference purposes only and
shall
not affect in any way the meaning or interpretation thereof.
6.5
Binding
Effect.
This
Agreement shall be binding upon and inure to the benefit of the respective
parties hereto and their legal representatives, successors and assigns.
6.6
Notices.
Any
notice or other communication required or which may be given hereunder shall
be
in writing and either be delivered personally or by private national courier
service, or be mailed, certified or registered mail, return receipt requested,
postage prepaid, and shall be deemed given when so delivered personally or,
if
sent by private national courier service, on the next business day after
delivery to the courier, or, if mailed, two days after the date of mailing,
as
follows:
If
to the
Company, to:
Room
2301, World-Wide House
00
Xxx
Xxxxx Xxxx
Xxxxxxx,
Xxxx Xxxx
Attn:
Xxxx Xx Hao, Chief Executive Officer
Fax
No.:
000-0000-0000
If
to a
Private Investor, to his or her address set forth in Exhibit A.
and
if to
the Escrow Agent, to:
Continental
Stock Transfer & Trust Company
00
Xxxxxxx Xxxxx
Xxx
Xxxx,
XX 00000
Attn:
Xxxxxx Xxxxxx
Fax:
0-000-000-0000
5
A
copy of
any notice sent hereunder shall be sent to:
Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP
Izumi
Garden Tower 21st
Floor
0-0-0
Xxxxxxxx
Xxxxxx-xx,
Xxxxx 000-0000, Xxxxx
Attn:
Xxxxxx X. Xxxx, Esq.
Fax:
00-0-0000-0000
and
Chardan
Capital Markets, LLC
00
Xxxxx
Xxxxxx, Xxxxx 0000
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxx Xxxxxxx
Fax:
0-000-000-0000
and
Loeb
& Loeb LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxxxxx X. Xxxxxxxx, Esq.
Fax:
0-000-000-0000
The
parties may change the persons and addresses to which the notices or other
communications are to be sent by giving written notice to any such change
in the
manner provided herein for giving notice.
6.7
Liquidation
of Company.
The
Company shall give the Escrow Agent written notification of the liquidation
and
dissolution of the Company in the event that the Company fails to consummate
a
Business Combination within the time period(s) specified in the Prospectus.
6.8
Counterparts.
This
Agreement may be executed in several counterparts each one of which shall
constitute an original and may be delivered by facsimile transmission and
together shall constitute one instrument.
6
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
By:
______________________
Name:
Xxxx Xx Hao
Title:
Chief Executive Officer
PRIVATE
INVESTORS:
Ralco
Capital Limited
By:
______________________
Name:
Title:
Rising
Year Group
By:
______________________
Name:
Title:
Globis
International Investments LLC
By:
______________________
Name:
Title:
Globis
Capital Partners L.P.
By:
______________________
Name:
Title:
Globis
Overseas Fund Ltd.
By:
______________________
Name:
Title:
7
Xxxxxxxx
Capital, LLC
By:
______________________
Name:
Title:
______________________
Q.Y.
Ma
______________________
Tan
Xxxx
Xxx
Continental
Stock Transfer & Trust Company
By:
______________________
Name:
Title:
Chardan
Capital Markets, LLC
By:
______________________
Name:
Title:
8
ESCROW
SECURITIES DEPOSITED
BY
EACH
INVESTOR
EXHIBIT
A
|
Name
and Address of Private Investors
|
Number
of Escrow Shares
|
Number
of Escrow Warrants
|
Number
of Placement Warrants
|
|||
|
Ralco
Capital Limited
Room
2301, World-Wide House
00
Xxx Xxxxx Xxxx
Xxxxxxx,
Xxxx Xxxx
|
489,241
|
489,241
|
305,556
|
|||
|
Rising
Year Group Limited
Room
2301, World-Wide House
00
Xxx Xxxxx Xxxx
Xxxxxxx,
Xxxx Xxxx
|
487,385
|
487,385
|
305,556
|
|||
|
Xxxxxxxx
Capital, LLC
00
Xxxxxxxxxx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
|
45,000
|
45,000
|
555,555
|
|||
|
Q.Y.
Ma
Room
2301, World-Wide House
00
Xxx Xxxxx Xxxx
Xxxxxxx,
Xxxx Xxxx
|
5,750
|
5,750
|
---
|
|||
|
Tan
Xxxx Xxx
Room
2301, World-Wide Xxxxx
00
Xxx Xxxxx Xxxx
Xxxxxxx,
Xxxx Xxxx
|
5,750
|
5,750
|
---
|
|||
|
Globis
International Investments LLC
00
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX
|
22,500
|
22,500
|
277,778
|
|||
|
Globis
Capital Partners L.P.
00
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX
|
15,750
|
15,750
|
194,444
|
|||
|
Globis
Overseas Fund Ltd.
00
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX
|
6,750
|
6,750
|
83,333
|
|||
|
Chardan
Capital Markets, LLC
00
Xxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxx, Xxx Xxxx 00000
|
---
|
---
|
222,222
|
|||
9
