May 23, 2007 Mr. Jack Li Perfectenergy International Limited Minhang District, Shanghai 201100 PRC Dear Mr. Li:
May
23,
2007
Xx.
Xxxx
Xx
Perfectenergy
International Limited
000
Xxxxxxx Xxxx, Xxxxxxxxx Xxxx
Minhang
District, Shanghai 201100
PRC
Dear
Xx.
Xx:
We
are
pleased to confirm the understanding and agreement under which Knight Capital
Markets, LLC (“KCM”)
and
Canaccord Xxxxx Inc. and Canaccord Xxxxx Ltd. (together with their affiliates,
control persons, directors, officers, employees and control persons, “CA”)
together (the “Placement Agents”) are engaged by Perfectenergy International
Limited, (the “Company”)
to act
as exclusive advisors and placement agents in connection with the private
placement of the Company's securities.
1. Engagement.
The
Company hereby engages the Placement Agents as its exclusive
advisor and placement agent in connection with the placement, on a “best
efforts” basis, of debt, equity or equity-related securities of the Company (the
“Securities”)
for
gross proceeds of not less than ten
million dollars ($10,000,000) (the
“Minimum
Offering”)
nor
more than thirty
million dollars ($30,000,000),
on
terms
mutually acceptable to the Placement Agents and the Company (the “Proposed
Offering”).
The
Placement Agents hereby accept the engagement as placement agents for the
Proposed Offering subject to, among other things, the satisfactory completion
of
the Placement Agent's due diligence investigation and the non-occurrence of
any
material adverse change in the business, prospects or financial condition of
the
Company, and on the terms more fully set forth in this Agreement. This Agreement
shall not give rise to any commitment by the Placement Agents or any other
entity to purchase any securities of the Company. The Placement Agents provide
no guarantee that the Proposed Offering or any other financing transaction
will
ever be completed or, if completed, as to the terms of the Proposed Offering
or
such other transaction. The Placement Agents shall serve as exclusive advisors
and placement agents for the Proposed Offering for a period of one
(1) year from
the
date of this Agreement (the “Exclusivity
Period”).
During
the Exclusivity Period, the Company will not sell or issue any securities (other
than in connection with the exercise of employee stock options outstanding
on
the date of this Agreement or other than in connection with the grant of
employee stock options to employees hired during the Exclusivity Period),
without the consent of the Placement Agents, which consent shall not be
unreasonably withheld, conditioned, or delayed.
2.
Services.
As
placement agents for the Proposed Offering, the Placement Agents shall,
to
the extent required or appropriate in connection with the Proposed Offering,
(a)
advise the Company on the structure and the terms of the Proposed Offering;
(b)
assist the Company in preparing the investment documents and/or private
placement memorandum used in the Proposed Offering;
(
c)
contact potential investors who might participate in the Proposed Offering,
coordinate follow-up activities with potential investors, and in general
supervise the investment consideration and placement process; and
(d)
assist the Company in negotiating the terms of the Proposed Offering.
1
3.
Compensation
and Expenses.
(a)
For
acting as advisor to the Company in connection with the Proposed Offering,
the
Placement Agents shall be entitled to receive, and the Company shall pay to
the
Placement Agents (or its designee(s)), the following (collectively, the
“Advisor's
Compensation”): The
Advisor's Compensation shall be allocated 100% to KCM.
(i)
an“Advisor's
Cash Fee” of
one
percent (1%)
of the
gross proceeds of the Proposed Offering (including any capital received upon
the
exercise, exchange, or conversion of derivative Securities that may be included
in the Proposed Offering), to be paid at the closing(s) of the Proposed Offering
(or, with respect to such derivative Securities, upon such exercises, exchanges,
or conversions); and
(ii)
an
“Advisor's
Warrant” to
purchase that number of shares of common stock of the Company equal to the
aggregate of (A) one
percent (1%)
of the
shares of common stock sold in the Proposed Offering at a per share exercise
price equal to the per share price of such shares in the Proposed Offering,
and
(B) to the extent the Securities are not common stock, one
percent (1%)
of the
shares of common stock acquirable upon exercise, exchange, or conversion of
such
Securities at a per share exercise price equal to the minimum per share price
payable by an investor in the Proposed Offering in order to acquire such share.
A Placement Warrant shall be issued at the initial closing and at each
subsequent closing based on the number of Securities sold at each such closing.
The terms of the Placement Warrant shall be set forth in the form of Placement
Warrant provided to the Company prior to the first closing of the Proposed
Offering (but, at a minimum, the Placement Warrant shall be exercisable from
time to time, in whole or in part, during the
three (3) year period
commencing on the initial closing of the Proposed Offering, and shall contain
the right to be included in any registration statement that the Company
subsequently files with the SEC (commonly known as “piggy-back” registration
rights), anti-dilution and cashless exercise provisions satisfactory to the
Placement Agents and their counsel).
(b)
For
acting as placement agent in connection with the Proposed Offering, the
Placement Agents shall be entitled to receive, and the Company shall pay to
the
Placement Agents (or their designee(s)), the following (collectively, the
“Placement
Agent's Compensation”).
The
Placement Agent's Compensation shall be allocated 60% to CA and 40% to KCM.
(i)
a
“Placement
Agent's Cash Fee” of
seven
percent (7%)
of the
gross proceeds of the Proposed Offering (including any capital received upon
the
exercise, exchange, or conversion of derivative Securities that may be included
in the Proposed Offering), to be paid at the closing(s) of the Proposed Offering
(or, with respect to such derivative Securities, upon such exercises, exchanges,
or conversions);
(ii)
a
“Placement
Agent's Warrant” to
purchase that number of shares of common stock of the Company equal to the
aggregate of (A) six
percent (6%)
of the
shares of common stock sold in the Proposed Offering at a per share exercise
price equal to the per share price of such shares in the Proposed Offering,
and
(B) to the extent the Securities are not common stock, six
percent (6%)
of the
shares of common stock acquirable upon exercise, exchange, or conversion of
such
Securities at a per share exercise price equal to the minimum per share price
payable by an investor in the Proposed Offering in order to acquire such share.
A
Placement Warrant shall be issued at the initial closing and at each subsequent
closing based on the number of Securities sold at each such closing. The terms
of the Placement Warrant shall be set forth in the form of Placement Warrant
provided to the Company prior to the first closing of the Proposed Offering
(but, at a minimum, the Placement Warrant shall be exercisable from time to
time, in whole or in part, during the three (3) year period commencing on the
initial closing of the Proposed Offering, and shall contain the right to be
included in any registration statement that the Company subsequently files
with
the SEC (commonly known as “piggy-back” registration rights), anti-dilution and
cashless exercise provisions satisfactory to the Placement Agents and their
counsel); and
2
(iii)
a
check in the amount of thirty
thousand dollars ($30,000),
as
a
non-refundable non-accountable expense allowance to the Placement Agents, which
shall be delivered to the Placement Agents upon the Company receipt of any
funds
related to the merger agreement with Crestview Development Corp. and upon the
signing of this Agreement.
(c)
Whether or not the Proposed Offering is consummated, the Company shall reimburse
the Placement Agents for all of their “Approved Out-of-Pocket Costs and
Expenses” incurred in connection with the services hereunder, including, but not
limited to, fees and expenses of its legal counsel (including “blue sky” related
legal and filing fees as provided in Section 8 hereof) and other professional
advisors, travel expenses, data gathering and due diligence expenses, document
reproduction and shipping expenses, the expenses related to meals or other
expenses of meeting with potential investors or others, tombstone preparation
expenses, and other placement related expenses. The foregoing costs and expenses
will be paid by the Company to the Placement Agents promptly upon receipt by
the
Company of each invoice from the Placement Agents relating thereto setting
forth
in reasonable detail the items requiring reimbursement or payment, along with
reasonable proofs of the same.
4.
Tail.
In
addition to the Compensation payable to the Placement Agents in connection
with the Proposed Offering, the Placement Agents will be entitled to receive,
and the Company shall pay to the Placement Agents, compensation in connection
with any other financing transaction consummated by the Company during the
twelve (12) month period after the expiration of the Exclusivity Period, which
financing is not the subject of a separate engagement letter with the Placement
Agents and is provided by (a) investors or parties introduced to the Company
by
the Placement Agents during the Exclusivity Period, or investors or parties
with
whom discussions concerning the Company or the Proposed Offering take place
during the Exclusivity Period between or among the Placement Agents or the
Company on the one hand and such investor or party on the other; (b) investors
or parties introduced to the Company by an investor or party originally
introduced to the Company by the Placement Agents; or ( c) investors or parties
who seek the advice, counselor assistance of the Placement Agents in connection
with such transaction (any of the foregoing in (a) through (c) inclusive herein
referred to as a “Placement
Agent Investor”).
The
compensation payable to the Placement Agents under this Section 4 with respect
to such other financing transaction shall be determined in accordance with
Section 3 herein, (with each reference therein to “Proposed Offering” being
deemed to refer to such other financing transaction). Should the Company propose
to accept economic resources in a strategic transaction (i.e.,
not
one occurring on a daily, weekly, monthly or other similar regular basis in the
ordinary course of business) effected with a Placement Agent Investor, then
it
agrees to compensate the Placement Agents for such transaction as closely as
practical to what is called for herein for a transaction of comparable economic
value. Promptly following the Exclusivity Period, the Placements Agents will
provide the Company with written notice of all Placement Agent Investors with
which discussions regarding the Proposed Offering were held during the
Exclusivity Period.
5.
Cooperation.
The
Company shall cooperate with the Placement Agents in connection
with the performance of its due diligence related to its engagement hereunder
and shall make available to the Placement Agents the Company's management,
employees, directors, accountants, counsel and other outside advisors,
consultants, service providers, vendors and customers and such documents, books,
records, studies and other information as it shall reasonably request in this
respect. The Placement Agents' willingness to proceed with the proposed
transaction is subject to satisfactory results of its on-going due diligence.
3
6.
Negotiation;
PPM.
It is
contemplated that the Placements Agents shall negotiate the
terms
of the Proposed Offering with a limited number of investors which shall, if
the
Company approves, be memorialized in a stock purchase agreement containing
all
customary and necessary representations, warranties, disclosures and other
Company information. If, however, the Placement Agents decides in its sole
and
absolute discretion, to broaden its selling efforts to include solicitation
of
additional investors, the Proposed Offering shall commence immediately upon
the
Company's finalization, in conjunction with the Placement Agents, of a private
placement memorandum (the “PPM”),
subscription documents and other necessary materials. Such PPM and related
documentation (collectively, the “Offering
Materials”)
initially shall be drafted by the Company and include all customary and
necessary representations, warranties, disclosures and other Company information
and shall include audited financial statements of the Company. The Company
shall
represent and warrant in writing to the Placement Agents that all such
representations and warranties are true, complete and correct, and that the
Offering Materials do not contain any untrue statement of a material fact or
omit to state a material fact necessary to be stated therein in order to make
the information presented not misleading. The Company shall be responsible
for
amending or supplementing the Offering Materials as necessary to correct any
untrue statement of a material fact or any omission to state a material fact
necessary to make the statements therein not misleading. The Company will not
use any Offering Materials to which the Placement Agents reasonably object.
7.
Offering
to Prospective Investors: Compliance with Securities Laws.
The
Company reserves the right to reject an investment from any prospective
investor. The Company and the Placement Agents each agrees to conduct the
Proposed Offering in a manner intended to qualify for the exemption from the
registration requirements of Section 5 of the Securities Act of 1933, as amended
(the “Act”)
provided by Section 4(2) of the Act and/or Regulation D promulgated thereunder.
The Company agrees that the Proposed Offering is to be limited to “Accredited
Investors” as such defined is defined in Regulation D; therefore the Company and
the Placement Agents each agrees to limit offers to sell, and solicitations
of
offers to buy, Securities to persons reasonably believed by it to be “Accredited
Investors” as so defined. The Company and the Placement Agents each agrees to
conduct the Proposed Offering in a manner intended to comply with the
registration or qualification requirements, or available exemptions therefrom,
of applicable state “bluesky” laws and applicable securities laws of other
relevant jurisdictions. The Placement Agents will be responsible, at the expense
of the Company, for registering or qualifying the offer and sale of the
Securities under applicable state “blue sky” laws, or securing exemptions from
such registration or qualification requirements, and the Company will cooperate
with the Placement Agents in connection therewith. The Company will not, for
a
period of six months following the last closing date of the Proposed Offering,
offer for sale or sell any securities unless, in the opinion of counsel to
the
Company, reviewed by counsel to the Placement Agents, who advise the Placement
Agents that it may rely thereupon, such offering will not cause the issuance
of
the Securities in the Proposed Offering to be subject to the registration or
qualification requirements of applicable federal securities laws, state “blue
sky” laws or the securities laws of any other jurisdiction (by integration with
any other offering of securities or otherwise).
8.
Indemnification.
The
Company shall indemnify and hold harmless the Placement Agents
in
accordance with the indemnification agreement (a copy of which is attached
hereto and is incorporate by reference herein), which shall be executed by
the
Company concurrently herewith.
4
9.
No
Brokers.
The
Company represents and warrants to the Placement Agents that there
are
no brokers, representatives or other persons, (other than any sub-agents engaged
by the Placement Agents), who have an interest in the compensation payable
to
the Placement Agents pursuant to the terms of this Agreement. The Placement
Agents agree to pay any sub-agents engaged by or retained by the Placement
Agents in connection with this Agreement and to hold the Company harmless
against any such claims.
10.
Successors
and Assigns: Binding Effect.
The
benefits of this Agreement shall, together with the separate indemnity
agreement, inure to the benefit of the respective successors and assigns of
the
parties hereto and of the indemnified parties hereunder and their successors
and
assigns and representatives, and the obligations and liabilities assumed in
this
Agreement by the parties hereto shall be binding upon their respective
successors and assigns. Neither the Company on the one hand, nor the Placement
Agents on the other hand, shall assign its interest in this Agreement without
the prior written consent of the other party, which consent shall not be
unreasonably withheld. The Company acknowledges that in rendering its services
hereunder, the Placement Agents will be using and relying on the information
provided to it by the Company and does not assume responsibility for the
accuracy or completeness of any such information.
11. Confidentiality.
(a)
Except as contemplated by the terms of this Agreement or as may be required
by
law or order of applicable regulatory authority (including the National
Association of Securities Dealers Regulation, Inc.), the Placement Agents shall
keep confidential and shall not disclose to any third party any confidential
or
proprietary information of the Company made available to it in connection with
its engagement hereunder. Any information that is confidential or proprietary
shall be identified as such to the Placement Agents by the Company, either
in
writing or orally (and then confirmed as such in writing), at the time such
information is disclosed by the Company to the Placement Agents. The Placement
Agents will use such confidential information only in connection with its
engagement hereunder; provided, however, such confidentiality obligation shall
not extend to (i) any information available to or in the possession of the
Placement Agents prior to the date of its disclosure to the Placement Agents
by
or on behalf of the Company, (ii) any information generally available to the
public, or (iii) any information which becomes available to the Placement Agents
on a non-confidential basis from a third party who is not bound by a
confidentiality obligation to the Company; and provided, further, such
confidential information may be disclosed to the Placement Agents' officers,
directors, employees, consultants, agents, advisors or representatives in
connection with the engagement hereunder provided that such persons are made
aware of the obligations under this Section 12.
(b)
Any
written or oral advice, analyses or reports provided by the Placement Agents
to
the Company in connection with its engagement hereunder are exclusively for
the
information of the Board of Directors and management of the Company (including
the Company's attorneys, accountants and other professional advisors) and may
not be disclosed (in any form whatsoever) to or relied upon by any other party
without the express prior written consent of the Placement Agents. Any
description of or reference to the Placement Agents in the Offering Materials
must be approved by the Placement Agents in writing prior to use, which approval
will not be unreasonably withheld.
5
12.
Closing
Matters.
The
Company will, at the closing of the Proposed Offering, provide
the Placement Agents with a copy of the same favorable opinion of its counsel
as
is furnished to the investors participating in such closing (if such an opinion
is provided as part of the transaction). In addition,
at the closing, the Company will provide the Placement Agents and participating
investors with certificates of officers of the Company and such other
representatives, warranties, undertakings, and other documents as the Placement
Agents or its counsel may reasonably request, in form and substance satisfactory
to the Placement Agents and its counsel. The essence of this requirement will
be
to confirm compliance with securities laws, to confirm information provided
to
investors, and to confirm that the terms of the Proposed Offering to which
investors subscribed remain as presented to them. Additionally, the Company
will
not instruct investors participating in any closing to remit investment funds
unless those investment funds are deposited by such investors into an escrow
account approved by the Placement Agents.
13.
Miscellaneous.
(a)
This
Agreement may not be amended or modified except in writing signed by
the
parties.
(b)
This
Agreement shall be deemed to have been made and delivered in New York, and
both
this Agreement and the transactions contemplated hereby shall be governed as
to
validity, interpretation, construction, effect and in all other respects by
the
internal laws of the State of New York. Each of the Placement Agents and the
Company (i) agrees that any legal suit, action or proceeding arising out of
or
relating to this Agreement and/or the transactions. contemplated hereby,
including without limitation, any such legal suit, action or proceeding against
any present or former officer, partner, employee or agent of the Placement
Agents, each of whom is intended to be a third-party beneficiary of the
agreement contained in this Section, shall be instituted exclusively in New
York
Supreme Court, County of New York, or in the United States District Court for
the Southern District of New York, (ii) waives any objection which it may have
or hereafter to the venue of any such suit, action or proceeding, and (iii)
irrevocably consents to the jurisdiction of the New York Supreme Court, County
of New York, and the United States District Court for the Southern District
of
New York in any such suit, action or proceeding. Each of the Placement Agents
and the Company further agrees to accept and acknowledge service of any and
all
process which may be served in any such suit, action or proceeding in the New
York Supreme Court, County of New York, or in the United States District Court
for the Southern District of New York, and agrees that (x) service of process
upon the Company mailed by certified mail to the Company's address on the first
page of this Agreement shall be deemed in every respect effective service of
process upon the Company in any such suit, action or proceeding, and (y) service
of process upon the Placement Agents mailed by certified mail to KCM's and
CA's
addresses as first set forth above shall be deemed in every respect effective
service process upon the Placement Agents in any such suit, action or
proceeding.
(c)
Notwithstanding anything herein to the contrary, the representations, warranties
and covenants set forth herein will remain in full force and effect regardless
of any investigation made by or on behalf of the Placements Agents or any other
entity or persons and, along with the compensation, reimbursement, future
services, indemnification, contribution and confidentiality provisions hereof,
shall survive this Agreement and the Placement Agents' engagement hereunder.
(d)
If
either Placement Agent incurs legal or other costs in collecting amounts due
to
it hereunder, such reasonable costs shall be reimbursed by the Company.
6
(e)
The
captions in this Agreement are used for convenience only and shall not be
considered in interpreting this Agreement.
(f)
This
Agreement may be executed in counterparts, all of which together shall
constitute one binding agreement between the Placement Agents and the Company.
Signatures on documents delivered by facsimile/telecopier shall be deemed
original signatures.
(g)
All
references herein to the date of this Agreement shall be deemed to mean the
date
on which this Agreement is countersigned by the Company as set forth below.
(h)
This
Agreement, together with the Exhibit hereto, contains the entire agreement
between the Company and the Placement Agents concerning the subject matter
hereof and supersedes any prior understanding or agreement with respect thereto.
Any waiver of any right or obligation hereunder must be in writing signed by
the
party against whom enforcement is sought.
(i)
Any
approvals or consents of the Placement Agents required hereunder shall require
the consent of each Placement Agent, which consent shall not be unreasonably
withheld or delayed. Any such consent may but need not be in writing.
[THE
REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]
7
If
the
terms of our engagement as set forth in this Agreement are satisfactory to
you,
kindly sign and date the enclosed copy of this Agreement and indemnification
agreement and return them to the undersigned, together with a check in the
amount of thirty
thousand dollars ($30,000) made
payable to Knight Capital Markets, LLC. If this Agreement is not executed by
the
Company within 10 days of the date hereof it shall cease to be a valid offer
by
the Placement Agents to act as the exclusive advisor and placement agent to
the
Company and it shall be deemed withdrawn.
Very
truly yours,
KNIGHT
CAPITAL MARKETS, LLC
By:
/s/
Xxxxx
Xxxxxx
Name:
Xxxxx Xxxxxx
Title:
Managing Director, Investment Banking Date:
______________________________________
CANACCORD
XXXXX INC.
By:
/s/ Xxxxxxx X. Xxxxxx
Name:
Xxxxxxx X. Xxxxxx
Title:
Managing Director
Date:
_________________________________
ACCEPTED
AND AGREED
Perfectenergy
International Limited
By:
/s/
Xxxxxx
Xx
Name:
Xxxxxx Xx
Title:
CEO
Date:
May
31,
2007
8
July
13,
2007
Xx.
Xxxxxx Xxxx
Mr.
Xxxxx
Xxxxxxx
Xxxxxx
Capital Markets LLC
000
Xxxxxxxxxxxxxx Xxxx
Purchase,
NY 10577
Gentlemen,
This
letter shall serve as an amendment to the letter dated May 23, 2007 among
Canaccord Xxxxx Inc. (“CA”), Knight Capital Markets LLC (“KCM”) and
Perfectenergy International Limited (the “Letter”). Section 3 (b) of the Letter
shall be amended to read:
For
acting as placement agent in connection with the Proposed Offering, the
Placement Agents shall be entitled to receive, and the Company shall pay to
the
Placement Agents (or their designee(s)), the following (collectively the
“Placement Agent’s Compensation”). The Placement Agent’s Compensation shall be
allocated 72.5% to CA and 27.5% to KCM.
In
acknowledgement and acceptance of the aforementioned change in the Letter,
please sign in the space below.
Very
truly yours,
CANACCORD
XXXXX INC.
By:
/s/
Xxxxxxx X.
Xxxxxx
Name:
Xxxxxxx X. Xxxxxx
Title:
Managing Director
Date:
July
13,
2007
KNIGHT
CAPITAL MARKETS LLC
By:
/s/
Xxx
Xxxxxx
Name:
Xxx
Xxxxxx
Title:
Managing Director
Date:
July
19,
2007
9
AMENDMENT
TO ENGAGEMENT LETTER
Reference
is made to the engagement letter between Perfectenergy International Limited
(the “Signatory”),
Knight Capital Markets, LLC and Cannacord Xxxxx, Inc. (the “Placement
Agents”)
dated
May 23, 2007, as amended by letter agreement dated July 13, 2007 (the
“Engagement
Letter”).
WHEREAS,
Section 13 of the Engagement Letter provides that the Engagement Letter may
be
amended with the written consent of the Signatory and the Placement
Agents.
WHEREAS,
the Signatory and the Placement Agents desire to amend the Engagement and the
Placement Agents desire to amend the Engagement Letter to add Perfectenergy
International Limited (Nevada) (the “Public Company”) as a party thereto to
avoid any doubt as to the binding effect of the Engagement Letter on both the
Signatory and the Public Company.
NOW
THEREFORE, the parties hereto agree as follows:
1. The
definition of the term “Company” in the Engagement Letter is amended to mean
both the Signatory and the Public Company and it is agreed that both the
Signatory and the public Company are jointly and severally liable for all
obligations of the Company under the Engagement Letter.
2. For
the
avoidance of doubt, it is expressly agreed that the Securities to be offered
pursuant to paragraph 1 of the Engagement Letter are those of the Public
Company.
3. All
other
terms and conditions of the Engagement Letter shall remain unchanged by this
Amendment.
(SIGNATURE
PAGE FOLLOWS)
10
IN
WITNESS WHEREOF, the Signatory, the Public Company and the Placement Agents
have
caused their respective signatures to this Amendment to be duly executed as
of
the date first written above.
PERFECTENERGY
INTERNATIONAL LIMITED (BVI)
By:
/s/
Xxxx
Xx
Name:
Title:
PERFECTENERGY
INTERNATIONAL
LIMITED
(NEVADA)
By:
/s/
Xxxxxx
XxXxxxxx
Name:
Title:
CANACCORD
XXXXX, INC.
By:
/s/
Xxxxxxx X.
Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title:
Managing Director
KNIGHT
CAPITAL MARKETS, LLC
By:
/s/
Xxx “Xxxxx”
Xxxxxx
Name: Xxx “Xxxxx” Xxxxxx
Title: Managing Director
11
