LETTER OF ESCROW INSTRUCTIONS PURSUANT TO RULE 419 UNDER THE SECURITIES ACT OF 1933
LETTER
OF
ESCROW INSTRUCTIONS PURSUANT TO RULE 419
UNDER
THE
SECURITIES ACT OF 1933
To:
Xxxxx
Securities Corp.
This
Letter of Escrow Instructions (the “Escrow Agreement”) to Xxxxx Securities
Corp., the ‘Escrow Agent’ shall become immediately and automatically become
operative and effective upon the successful completion of a public offering
(the
“Offering”) of certain securities of Sun Opportunity I Inc., a Nevada
corporation (the "Company") which is described more fully in the Company's
Form
SB-2 Registration Statement under the Securities Act of 1933 (Registration
No.
___-___________). The Company and the Escrow Agent are hereinafter collectively
referred to as the “Parties.” The Company and the Escrow Agent have previously
entered into an Escrow Agreement dated as of June ___, 2007 which relates to
the
creation, operation and termination of the Company’s public offering with Xxxxx
Securities Corp. (the "Subscription Escrow"). The terms and conditions of the
Subscription Escrow are incorporated herein by this reference.
| 1. |
ESCROW
PURPOSE:
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| 1.1 |
This
escrow is established by the Company. There are no other parties
for whom
funds will be held in escrow.
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| 1.2 |
The
purpose of this escrow is to receive, hold and ultimately distribute,
in
accordance with the terms of this
agreement:
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(a)
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The
cash proceeds ("Offering Proceeds") of the Company's registered public
offering of securities; and
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(b)
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The
stock certificates representing beneficial ownership of the securities
that will be sold to the public and issued as compensation as a result
of
the Company's registered public offering of
securities.
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1.3
|
This
Escrow Agreement constitutes an essential element of the Company's
proposed public offering of securities and is required by Securities
and
Exchange Commission Rule 419. The Parties shall, at all times, conduct
all
of their activities relating to the Rule 419 escrow created hereby
in
strict compliance with the letter and the spirit of Rule 419. In
the event
of any inconsistency between the terms of this Agreement and the
requirements of Rule 419, the requirements of Rule 419 shall have
priority.
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| 2. |
ESCROW
DEPOSITS:
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2.1
|
Upon
successful completion of the Company's offering, the Escrow Agent
for the
Subscription Escrow, will
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(a)
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Prepare
a detailed schedule that identifies each person who has purchased
shares
of the Company's Common Stock, states the number of shares purchased
by
each subscriber, and otherwise complies with the requirements of
12 CFR
330.1 of the Regulations of the Federal Deposit Insurance Corporation.;
and
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(b)
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Directly
transfer to the Rule 419 escrow created by this agreement all funds
then
on deposit in the Subscription Escrow, including any interest previously
earned thereon.
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2.2
|
As
soon as practicable after the successful completion of the Company's
offering, the Company will deliver, or cause to be delivered, to
the
Escrow Agent, Stock Certificates representing the ownership of the
300,000
shares of common stock that have been sold to the public in connection
with the Company's public offering of securities. All stock certificates
delivered to the Escrow Agent shall be registered in the name of
the owner
thereof and contain such other information as the Company and the
Escrow
Agent deem necessary or desirable to comply with the requirements
of
Securities and Exchange Commission Rule 419 and the Regulations of
the
Federal Deposit Insurance Corporation, or otherwise provide for the
efficient performance of the Escrow Agent's duties
hereunder.
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| 2.3 |
When
the Escrow Agent has received the subscription funds specified in
Section
2.1 and the stock certificates specified in Section 2.2, it shall
examine
the stock certificates delivered by the Company to confirm that the
information on the stock certificates agrees in all particulars with
the
information in the detailed schedule prepared by the subscription
the
Escrow Agent. In the event of any discrepancy between the records
of the
subscription the Escrow Agent and the records of the Company, the
records
of the subscription the Escrow Agent shall have
priority.
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2.4
|
The
Escrow Funds and all stock certificates delivered to the Escrow Agent
pursuant to Sections 2.2 and 2.5 shall be held and disposed of by
the
Escrow Agent in accordance with the following instructions and upon
the
terms and conditions hereinafter set
forth.
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| 3. |
INVESTMENT
OF ESCROW FUNDS:
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3.1
|
The
Escrow Funds may only be invested in (i) an obligation that constitutes
a
"deposit" as that term is defined in section 3(1) of the Federal
Deposit
Insurance Act, (ii) securities of an open-end investment company
registered under the Investment Company Act of 1940 that holds itself
our
as a money market fund meeting the conditions of paragraphs (c)(2),
(c)(3), and (c)(4) of Rule 2a-7 under the Investment Company Act,
or (iii)
securities that are direct obligations of, or obligations guaranteed
as to
principal or interest by, the United
States.
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3.2
|
All
interest earned with respect to the Escrow Funds shall be added to
the
principal thereof and treated as Escrow Funds for all purposes of
this
Agreement.
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3.3
|
The
Escrow Agent, in consultation with the Company, shall allocated the
Escrow
Funds in such a manner as will, in the judgment of the Escrow Agent,
maximize the annual return on the Escrow Funds, maximize the amount
that
is insured by the United States and/or guaranteed as to principal
and
interest by the United States, and minimize the potential for loss
of
principal through market
fluctuations.
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3.4
|
The
Escrow Funds shall not be invested in any securities that have a
scheduled
maturity of more than six months from the date of
acquisition.
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4.
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TERMINATION
AND DISBURSEMENTS:
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4.1
|
If
the Company has not negotiated a business combination, filed a
post-effective amendment to its registration statement, completed
a
reconfirmation offering meeting the requirements of Rule 419 and
closed on
the business combination agreement on or before ___________________
("Termination Date") the Escrow Agent
shall:
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(a)
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Promptly
forward a refund check to each person who purchased shares of the
Company's common stock for cash in connection with the original offering.
For purposes of this Agreement, all refunds shall be allocated among
the
purchasers of the Company's common stock on a per share basis and
the
Escrow Agent shall not be obligated to separately account for interest
earned on the subscription escrow. Instead, the Escrow Agent is
specifically authorized to determine the available balance in the
Escrow
Account and divide such balance by ++++++++ shares to calculate the
amount
of cash per share to be distributed to the purchasers. Refund checks
shall
be rounded up to the nearest whole cent and any overpayment resulting
from
such rounding shall be payable in cash by the
Company.
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(b)
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Promptly
return all stock certificates to the Company for cancellation. When
all
stock certificates and all Escrow Funds deposited with the Escrow
Agent
have been disbursed in accordance with the provisions of this Section
4.1,
the Rule 419 escrow will terminate.
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4.2
|
If
the Company negotiates a business combination, files a post-effective
amendment to its registration statement, completes a reconfirmation
offering meeting the requirements of Rule 419 and closes on the business
combination agreement on or before the Termination Date, the Company
shall
promptly deliver, or cause to be delivered, to the Escrow
Agent:
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(a)
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A
copy of the definitive prospectus included in its post-effective
amendment
and used in connection with the reconfirmation
offering;
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(b)
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A
schedule setting forth the identity of each person who purchased
shares of
the Company's common stock for cash in connection with the original
offering;
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(c)
|
A
schedule setting forth the identity of each person who received shares
of
the Company's common stock as compensation in connection with the
original
offering;
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(d)
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A
copy of each subscription reconfirmation agreement received from
a person
who purchased shares of the Company's common stock for cash in connection
with the original offering;
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(e)
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A
copy of each subscription reconfirmation agreement received from
a person
who received shares of the Company's common stock as compensation
in
connection with the original
offering;
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| (f) |
A
schedule setting forth the identity of each person who refused or
otherwise failed to execute a reconfirmation agreement within the
time
limits specified in Rule 419 and the definitive prospectus;
and
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| (g) |
A
Certificate signed by the President and Secretary of the Company
that all
conditions precedent to the termination of the Rule 419 escrow have
been
satisfied.
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| 4.3 |
Upon
receipt of the notice and documentation specified in Section 4.2,
the
Escrow Agent shall:
|
| (a) |
Promptly
forward a refund check to each person who purchased shares of the
Company's common stock for cash in connection with the original offering
and subsequently refused or otherwise failed to execute a reconfirmation
agreement within the time limits specified in Rule 419 and the definitive
prospectus. For purposes of this Agreement, all refund checks shall
be
rounded up to the nearest cent and any overpayment resulting from
such
rounding shall be deducted from the amount payable to the
Company;
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(b)
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Promptly
forward a stock certificate to each person who purchased shares of
the
Company's common stock for cash in connection with the original offering
and subsequently executed a reconfirmation
agreement;
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(c)
|
Promptly
forward a stock certificate to each person who received shares of
the
Company's common stock as compensation in connection with the original
offering and subsequently executed a reconfirmation
agreement;
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(d)
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Promptly
return all remaining stock certificates to the Company for cancellation;
and
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(e)
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Promptly
forward all remaining Escrow Funds to the Company. When all stock
certificates and all Escrow Funds deposited with the Escrow Agent
have
been disbursed in accordance with the provisions of this Section
4.3, the
Rule 419 escrow will terminate.
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| 4.4 |
In
the Company conducts a reconfirmation offering and the terms of such
offering are not accepted by the holders of the number of shares
specified
in the definitive prospectus included in the Company's post-effective
amendment, the Escrow Agent shall:
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(a)
|
Promptly
forward a refund check to each person who purchased shares of the
Company's common stock for cash in connection with the original offering.
For purposes of this Agreement, all refund checks shall be rounded
up to
the nearest cent and any overpayment resulting from such rounding
shall be
deducted from the amount payable to the
Company.
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(b)
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Promptly
return all stock certificates to the Company for cancellation. When
all
stock certificates and all Escrow Funds deposited with the Escrow
Agent
have been disbursed in accordance with the provisions of this Section
4.4,
the Rule 419 escrow will terminate.
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| 5. |
NO
MODIFICATION:
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| 5.1 |
After
the deposit of the Escrow Funds, these instructions shall not be
modified,
rescinded or amended.
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| 6. |
GENERAL
PROVISIONS:
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|
6.1
|
The
Parties understand and agree that the Escrow Agent is not a principal,
participant, or beneficiary of the underlying transaction that
necessitates this Agreement. The Escrow Agent shall be obligated
only for
the performance of such duties as are specifically set forth herein
and
may rely and shall be protected in acting or refraining from acting
on any
instrument believed by it to be genuine and to have been signed or
presented by the proper party or parties, their officers, representatives
or agents. The Escrow Agent shall not be liable for any action taken
or
omitted by it in good faith and believed by it to be authorized hereby,
nor for action taken or omitted by it in
accordance
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with
the
advice of its counsel. The Escrow Agent shall be responsible for holding,
investing and disbursing the Escrowed Assets pursuant to the Agreement, but
in
no event shall be liable for any exemplary or consequential damages in excess
of
the Escrow Agent's fee hereunder.
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6.2
|
Unless
otherwise provided herein, the Escrow Agent shall accept the Escrowed
Assets pursuant to the Agreement and invest such assets at the written
request of the Parties specifying with particularity or by accompanying
schedule the type and identity of the assets to be deposited. Acceptance
of the Escrowed Assets shall be communicated by the Escrow Agent
to
parties by account statement or otherwise in writing as soon as
practicable after receipt, and any discrepancies shall be noted to
Escrow
Agent by the parties in writing within forty-five (45) days of receiving
such communication. Failure to note any discrepancies shall be deemed
confirmation of the description of Escrowed Assets listed on the
report
regardless of any variations from the original schedule. Any request
to
invest assets shall be in writing or facsimile and specify the type
of
investment to be made, the maturity date, and the principal amount
to be
invested. The Escrow Agent shall not be liable for delay or failure
to
invest funds without written instructions or for losses on any investments
made by it pursuant to and in compliance with such
instructions.
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6.3
|
Should
any controversy arise between the undersigned with respect to this
Escrow
Agreement or with respect to the right to receive the Escrowed Assets,
the
Escrow Agent shall have the right to consult counsel and/or to institute
a
bill of interpleader in any court of competent jurisdiction to determine
the rights of the parties. In the event it is a party to any dispute,
the
Escrow Agent shall have the additional right to refer such controversy
to
binding arbitration. Should such actions be necessary, or should
the
Escrow Agent become involved in litigation in any manner whatsoever
on
account of this Escrow Agreement of the Escrowed Assets made hereunder,
the undersigned hereby bind and obligate themselves, their heirs
and legal
representatives to pay the Escrow Agent, in addition to any charge
made
hereunder for acting as Escrow Agent, reasonable attorney's fees
incurred
by Escrow Agent, and any other disbursements, expenses, losses, costs
and
damages in connection with and resulting from such
actions.
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| 6.4 |
The
Escrow Agent shall have no liability under, or duty to inquire beyond
the
terms and provisions of the Agreement, and it is agreed that its
duties
are purely ministerial in nature, and that the Escrow Agent shall
incur no
liability whatsoever except for willful misconduct or gross negligence
so
long as it has acted in good faith. The Escrow Agent shall not be
bound by
any modification, amendment, termination, cancellation, rescission
or
supersession of this Escrow Agreement unless the same shall be in
writing
and signed by all of the other parties hereto and, if its duties
as Escrow
Agent hereunder are affected thereby, unless it shall have given
prior
written consent thereto.
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6.5
|
The
Escrow Agent may at any time resign hereunder by giving written notice
of
its resignation to the other Parties, at their address set forth
herein,
at least ten (10) days prior to the date specified for such resignation
to
take effect, and upon the effective date of such resignation, the
Escrowed
Assets hereunder shall be delivered to such person as may be designated
in
writing by the appropriate parties executing this Escrow Agreement,
whereupon all the Escrow Agent's obligations hereunder shall cease
and
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terminate.
The Escrow Agent's sole responsibility until such termination shall be to keep
safely all Escrowed Assets and to deliver the same to a person designated by
the
appropriate parties executing this Escrow Agreement or in accordance with the
directions of a final order or judgment of a court of competent
jurisdiction.
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6.6
|
The
Parties agree to indemnify, defend and hold the Escrow Agent harmless
from
and against any and all loss, damage, tax, liability and expense
that may
be incurred by the Escrow Agent arising out of or in connection with
its
acceptance or appointments as Escrow Agent hereunder, including costs
and
expenses of defending itself against any claim or liability in connection
with its performance hereunder.
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6.7
|
The
Parties jointly and severally agree to pay to the Escrow Agent its
fees
for the services rendered pursuant to the provisions of this Escrow
Agreement and will reimburse the Escrow Agent for reasonable expenses,
including reasonable attorney's fees incurred in connection with
the
negotiations, drafting and performance of such
services.
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Except
as
otherwise noted, this fee covers account acceptance, set up and termination
expenses; plus usual and customary related administrative services such as
safekeeping, investment and payment of funds specified herein or in the exhibits
attached. Activities requiring excessive administrator time or out-of-pocket
expenses such as optional substitution of collateral or securities shall be
deemed extraordinary expenses for which related costs, transaction charges,
and
additional fees will be billed at the Escrow Agent's standard charges for such
items. A fee schedule has been provided to all parties to this
Escrow.
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6.8
|
The
Escrow Agent is hereby given a lien on all Escrowed Assets for all
indebtedness that may become owing to the Escrow Agent hereunder,
which
lien may be enforced by the Escrow Agent by setoff or appropriate
foreclosure proceedings.
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6.9
|
The
Parties warrant to the Escrow Agent that there are no Federal, State
or
local tax liability or filing requirements whatsoever concerning
the
Escrow Agent's actions contemplated hereunder and warrant and represent
to
the Escrow Agent that the Escrow Agent has no duty to withhold or
file any
report of any tax liability under any Federal of State income tax,
local
or State property tax, local or State sales or use taxes, or any
other tax
by any taxing authority. The parties hereto agree to jointly and
severally
indemnify the Escrow Agent fully for any tax liability, penalties
or
interest incurred by the Escrow Agent arising hereunder and agree
to pay
in full any such tax liability together with penalty and interest
if any
tax liability is ultimately assessed against the Escrow Agent for
any
reason as a result of its action hereunder (except for the Escrow
Agent's
individual income tax liability arising from its income
fees).
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6.10
|
The
Escrow Agent shall have no liability for loss arising from any cause
beyond its control, including, but not limited to, the following:
(a) the
act, failure or neglect of any agent or correspondent selected by
the
Escrow Agent or the Parties; (b) any delay, error, omission or default
connected with the remittance of funds; (c) any delay, error, omission
or
default of any mail, telegraph, cable or wireless agency or operator;
(d)
the acts or edicts of any government or governmental agency or other
group
or entity exercising governmental
powers.
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6.11
|
This
Escrow Agreement shall be governed by and construed in accordance
with the
internal laws of the State of New Jersey without reference to conflicts
of
laws. The Parties expressly waive such duties and liabilities, it
being
their intent to create solely an agency relationship and hold the
Escrow
Agent liable only in the event of its gross negligence or willful
misconduct.
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7.
|
NOTICES:
|
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7.1
|
All
notices, demands, requests or payments provided for or given pursuant
to
this Escrow must be in writing or facsimile. All such notices shall
be
deemed to have been properly given or served by personal delivery
or by
depositing the same in the United States mail with delivery confirmation
or national overnight delivery service addressed to the person entitled
to
receive such notice at the address set forth
below.
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To
the
Company
Sun
Opportunity I, Inc.
Xxxxxx
Xxxxx
CEO
0000
Xxxx
00xx Xxxxxx
Brooklyn,
New York 11210
To
Xxxxx
Securities Corp.
Two
Executive Drive
Fort
Xxx,
New Jersey 07024
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7.2
|
All
notices shall be effective when
received.
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Approved
and accepted by the Parties this ________ day of _______, 2007.
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Xxxxx
Securities Corp.
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By:
_____________________
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By:
________________________
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Xxxxxx
Xxxxx, CEO
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Xxxxx
Xxxxxxxx, President
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