Exhibit 10.6

 

BACKSTOP AND SUBSCRIPTION AGREEMENT

 

This Backstop and Subscription Agreement (this “Agreement”), made as of May 11,
2017 by and among Pacific Special Acquisition Corp., a British Virgin Islands
business company with limited liability (the “Company”), and Zhengqi
International Holding Limited, a company incorporated in the British Virgin
Islands (the “Subscriber”), is intended to set forth certain representations,
covenants and agreements among the Company and the Subscriber, with respect to
the acquisition by Subscriber of the Company’s ordinary shares of no par value
(the “Ordinary Shares”), for aggregate consideration of up to Twenty-Four
Million U.S. Dollars ($24,000,000), through such acquisitions as are described
in Sections 1(a)(iii) and (iv) hereof, which representations, covenants and
agreements are made in connection with the Company’s acquisition of Borqs
International Holding Corp, an exempted company incorporated under the laws of
the Cayman Islands with limited liability (“Borqs”), in accordance with that
certain Merger Agreement, dated as of December 27, 2016 (as amended, including
by Amendment No.1 thereto on or about the date hereof, the “Merger Agreement”),
by and among the Company, PAAC Merger Subsidiary Limited, Zhengqi International
Holding Limited in its capacity thereunder as the Purchaser Representative,
Zhengdong Zou in its capacity thereunder as the Seller Representative and, for
certain limited purposes thereunder, the Subscriber. Any capitalized term used
but not defined in this Agreement will have the meaning ascribed to such term in
the Merger Agreement.

 

1.             Transfer and Voting of Shares.

 

(a)       Subscriber covenants and agrees that until the earlier of (i) the
closing under the Merger Agreement (the “Merger Closing”) or (ii) the date on
which the Merger Agreement is terminated in accordance with its terms (the
“Termination Date”), it shall not, and shall ensure that each of its Affiliates
do not, Transfer any Ordinary Shares (other than Ordinary Shares held by the
Subscriber as of the date hereof, the proceeds of which were not deposited by
the Company into the Trust Account in connection with the IPO). For purposes
hereof, “Affiliate” shall mean affiliate as such term is defined in Rule 12b-2
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
“Transfer” shall mean any direct or indirect transfer, redemption, disposition
or monetization in any manner whatsoever, including through redemption election
or any derivative transactions.

 

(b)       Subscriber covenants and agrees that it shall, and shall cause each of
its Affiliates to, (i) vote all of the Ordinary Shares that it owns as of the
record date (the “Record Date”) for the Shareholder Meeting in favor of the
Merger and the other Shareholder Approval Matters at the Shareholder Meeting and
(ii) not exercise its redemption or conversion rights with respect to any
Ordinary Shares that it owns as of the Record Date in connection with the
Shareholder Meeting.

 

2.             Backstop.

 

(a)       Commencing on the date hereof and through 5:00 p.m. Eastern Time on
the last date on which it may purchase Ordinary Shares such that the settlement
of such purchase shall occur on or before the Record Date (the “Market
Deadline”), Subscriber shall (provided it is lawful to do so) have the right to
purchase up to Twenty-Four Million U.S. Dollars ($24,000,000) of Ordinary Shares
in the open market or in other privately negotiated transactions with third
parties. On the date immediately following the Market Deadline and promptly at
other times requested by the Company from time to time, Subscriber shall notify
the Company in writing of the number of Ordinary Shares so purchased (the “Open
Market Shares”) and the aggregate purchase price paid therefor by the
Subscriber.

 

 1 

 

 

(b)       Between the Market Deadline and the close of business on the third
Trading Day prior to the Shareholder Meeting (the “Private Purchase Deadline”),
if the Company reasonably believes in good faith that it will have less than
Twenty-Four Million U.S. Dollars ($24,000,000) in Closing Proceeds (as defined
below) after giving effect to any Open Market Shares previously purchased by the
Subscriber pursuant to Section 2(a) hereof, it will promptly notify the
Subscriber of the anticipated shortfall of Closing Proceeds below $24,000,000
(the “Expected Shortfall”), and Subscriber shall (provided it is lawful to do
so) use its commercially reasonable efforts to purchase an amount of Ordinary
Shares up to the Expected Shortfall in privately negotiated transactions with
third parties, including forward contracts (such shares, the “Private Purchase
Shares” and, together with the Open Market Shares, the “Market Shares”),
provided that: (i) such transactions settle no later than, and are conditioned
upon, the Merger Closing and (ii) Subscriber shall not be required to purchase
any Ordinary Shares at a price above $10.40 per share. Notwithstanding the
foregoing, Subscriber shall be permitted (provided it is lawful to do so) prior
to the Private Purchase Deadline to buy additional Ordinary Shares in such
private transactions in excess of the Expected Shortfall, up to a total of
$24,000,000 in total Market Shares. On the date immediately following the
Private Purchase Deadline, and at such other times as may be requested by the
Company from time to time, Subscriber shall (x) notify the Company in writing of
the number of Private Purchase Shares so purchased and the aggregate purchase
price paid therefor by Subscriber and (y) provide the Company, for all Private
Purchase Shares acquired, all documentary evidence reasonably requested by the
Company and its advisors (including its legal counsel) and its transfer agent
and proxy solicitor to confirm that: (i) the Subscriber purchased, or has
contracted to purchase, such shares, and (ii) the seller of such shares has
provided to the Subscriber a representation that (A) the seller voted such
shares in favor of the Merger and the other Shareholder Approval Matters and (B)
the seller of such shares did not exercise its redemption or conversion rights
for such shares in connection with the Shareholder Meeting or the Merger
Closing. Notwithstanding the foregoing, and for the avoidance of doubt, if the
Merger Agreement is terminated in accordance with its terms prior to the Merger
Closing, then the Subscriber’s obligations to purchase Ordinary Shares under
this Section 2(b) will immediately terminate and be extinguished. For purposes
of this Agreement, (i) “Closing Proceeds” means the sum of (A) the funds left in
the Trust Account as of the Merger Closing, after giving effect to any
redemptions or conversions by Public Stockholders, but before giving effect to
the payment of any Transaction Expenses, plus (B) the amount of funds from any
private placements of the Company’s capital stock (or binding commitments
therefor, other than the Subscriber’s obligations in the Backstop Offering)
occurring or to occur at or prior to the Merger Closing, and (ii) “Trading Day”
shall mean a day during which trading in the Ordinary Shares generally occurs on
the Nasdaq or, if the Ordinary Shares are not listed on the Nasdaq, on the
principal other national or regional securities exchange on which the Ordinary
Shares are then listed or, if the Ordinary Shares are not listed on a national
or regional securities exchange, on the principal other market on which the
Ordinary Shares are then listed or admitted for trading.

 

(c)       Immediately after the deadline for the Public Stockholders to elect to
redeem or convert their Ordinary Shares from funds in the Trust Account in
connection with the Merger Closing, the Company shall notify the Subscriber of
the updated Expected Shortfall anticipated at such time and after giving effect
to any Market Shares previously purchased (or committed to be purchased) by the
Subscriber pursuant to Sections 2(a) and 2(b) hereof (the “Final Shortfall”).
The Subscriber hereby irrevocably subscribes for and agrees, subject to the
substantially concurrent Merger Closing and the other terms and conditions set
forth herein, to purchase from the Company that number of Ordinary Shares
equivalent to the Final Shortfall at a purchase price of $10.40 per share (such
shares, the “Backstop Shares”), and the Company agrees to sell such Backstop
Shares to the Subscriber at such price per share (such offering, the “Backstop
Offering”); provided, that, if requested by the Subscriber, the Company shall
(provided it is lawful to do so) issue and sell to the Subscriber an additional
number of Backstop Shares in the Backstop Offering, up to a total of Twenty-Four
Million U.S. Dollars ($24,000,000) when aggregated with all amounts for Market
Shares and Backstop Shares (the “Backstop Cap”). For the avoidance of doubt, if
the Merger Agreement is terminated in accordance with its terms prior to the
Merger Closing, then the Subscriber’s obligations to purchase Backstop Shares
under this Section 2(c) will immediately terminate and be extinguished. Any such
purchase under this Section 2(c) shall be consummated substantially concurrent
with the Merger Closing. For the avoidance of doubt, in the event that no Market
Shares are acquired by the Subscriber pursuant to Sections 2(a) and 2(b) hereof,
the Subscriber’s obligations under this Section 2(c) shall nevertheless continue
to apply.

 

 2 

 

 

3.             Right to Guarantee Escrow Shares. In consideration for the
Subscriber’s obligations described in this Agreement, including Sections 1 and 2
hereof, in accordance with the Merger Agreement, at the Merger Closing, the
Guarantee Escrow Shares will be issued in the name of the Subscriber and
deposited in the Guarantee Escrow Account, to be held by the Escrow Agent in
accordance with the terms of the Merger Agreement and the Escrow Agreement for
the Guarantee Escrow Account, and the Subscriber shall be entitled to receive
the Backstop Guarantee Escrow Share Amount from the Guarantee Escrow Account
subject to, and in accordance with, the terms and conditions of the Merger
Agreement. The Company will, and will use its reasonable efforts to cause the
Seller Representative to, promptly provide any required notices to the Escrow
Agent to cause the timely release of the Backstop Guarantee Escrow Share Amount
in accordance with the Merger Agreement to the extent that the Subscriber is
entitled to such amounts in accordance with the Merger Agreement.

 

4.             Delivery of Subscription Amount; Acceptance of Subscriptions;
Delivery. The Subscriber understands and agrees that its subscription is made
subject to the following terms and conditions:

 

(a)       Contemporaneously with the execution and delivery of this Agreement,
the Subscriber shall execute and deliver to the Company the Investor
Questionnaire attached hereto as Exhibit A (the “Investor Questionnaire”) and,
in respect of the Backstop Offering pursuant to Section 2(c) hereof, upon notice
from the Company setting forth the reasonably anticipated date of the Merger
Closing, the Subscriber shall, no fewer than two (2) Business Days prior to such
anticipated date (the “Funding Date”), cause a wire transfer to be made for
payment for the Backstop Shares in immediately available funds in the aggregate
amount equal to $10.40 multiplied by the number of Backstop Shares to be
purchased by the Subscriber (the “Subscription Amount”) to the account(s)
designated in writing by the Company to the Subscriber prior to the Merger
Closing. In the event that the Subscriber enters into privately negotiated
transactions with third parties in accordance with Section 2(b) hereof
subsequent to the Funding Date but prior to the Merger Closing, unless otherwise
requested in writing by the Subscriber (but subject to the Backstop Cap), the
Subscription Amount shall be reduced by the dollar amount of such purchases and
such excess funds (not to exceed the Subscription Amount) shall be returned to
the Subscriber. The payments provided for in this Section 2(a) shall be
deposited in escrow with Continental Stock Transfer & Trust Company (or other
nationally recognized escrow agent with whom in all cases, whether with
Continental Stock Transfer & Trust Company or otherwise, the Company shall have
an escrow agreement in place for purposes hereof, which such agreement shall be
on reasonable and customary terms) pending the Company’s acceptance of the
subscription.

 

(b)       The subscription of the Subscriber for the Backstop Shares shall be
deemed to be accepted only (and shall not otherwise be accepted by the Company
except) when (i) the Company has confirmed in writing to the Subscriber that the
Company’s representations and warranties contained herein are, or shall be, true
and correct as of the date of the Company’s acceptance of such subscription and
(ii) the Merger Closing occurs substantially concurrent with the Company’s
acceptance of such subscription. If such acceptance does not occur on or prior
to the earlier of (x) the Merger Closing or (y) the Termination Date, the
Subscriber’s subscription shall automatically be deemed rejected (the
“Subscription Rejection”). The payment of the Subscription Amount will be
returned promptly, without interest, to the Subscriber if the subscription is
rejected in whole or in part or if the Backstop Offering is withdrawn or
canceled.

 

(c)       The representations and warranties of the Company and the Subscriber
set forth herein shall be true and correct as of the date that the Company
accepts the subscriptions set forth herein.

 

 3 

 

 

5.             Expenses. Each party hereto shall pay all of its own expenses in
connection with this Agreement and the transactions contemplated hereby.

 

6.             Registration Rights.

 

(a)       At the Merger Closing, the Company and the Subscriber shall enter into
a Registration Rights Agreement (the “Registration Rights Agreement”), pursuant
to which the Company will agree to (i) register the resale of the Backstop
Shares, any Guarantee Escrow Shares received by the Subscriber from the
applicable Escrow Account and not forfeited in accordance with the Merger
Agreement (the “Subscriber Earnout Shares”), and any Market Shares requested by
the Subscriber under the Securities Act of 1933, as amended (the “Securities
Act”), and the rules and regulations promulgated thereunder, and applicable
state securities laws, (ii) use reasonable best efforts to cause such
registration with respect to such Backstop Shares and such Market Shares to be
declared effective no later than one-hundred and twenty (120) days following the
Merger Closing (provided, that the Company shall have no obligation to register
the resale of any Subscriber Earnout Shares until they are actually received by
the Subscriber from the Escrow Account) and (iii) provide the Subscriber with
customary demand and piggyback registration rights. The Registration Rights
Agreement shall include such additional terms and conditions as are customary
and reasonably satisfactory to the Company and the Subscriber.

 

(b)       None of the Backstop Shares or Subscriber Earnout Shares may be
Transferred except pursuant to an effective registration statement or in a
transaction that is exempt from the registration requirements of the Securities
Act and applicable state securities laws.

 

(c)       Without limitation to the generality of the foregoing, the Subscriber
shall not execute any short sales or engage in other hedging transactions of any
kind with respect to any Ordinary Shares during the period from the date of the
Merger Closing through the date that is forty-five (45) consecutive days
thereafter. For the avoidance of doubt, the prohibition set forth in this
Section 6(c) shall not be applicable on or after the Termination Date.

 

7.             Representations, Warranties, Understandings, Risk
Acknowledgments, and Covenants of The Subscriber. The Subscriber hereby
represents, warrants and covenants to the Company as follows: 

 

(a)       The Subscriber is purchasing the Backstop Shares and acquiring the
Subscriber Earnout Shares, if any, for its own account, not as a nominee or
agent, for investment purposes and not with a view towards distribution or
resale within the meaning of the Securities Act (absent the registration of the
Backstop Shares and Subscriber Earnout Shares for resale under the Securities
Act or a valid exemption from registration). The Subscriber will not Transfer
such shares at any time in violation of the Securities Act or applicable state
securities laws. The Subscriber acknowledges that the Backstop Shares and
Subscriber Earnout Shares cannot be sold unless subsequently registered under
the Securities Act and applicable state securities laws or an exemption from
such registration is available.

 

(b)       The Subscriber understands that (i) the Backstop Shares and the
Subscriber Earnout Shares (A) have not been registered under the Securities Act
or any applicable state securities laws, (B) have been offered and will be sold
in reliance upon an exemption from the registration and prospectus delivery
requirements of the Securities Act, (C) will be issued in reliance upon
exemptions from the registration and prospectus delivery requirements of
applicable state securities laws which relate to private offerings and (D) may
be required to be held indefinitely because of the fact that the Backstop Shares
and Subscriber Earnout Shares have not been registered under the Securities Act
or applicable state securities laws, and (ii) the Subscriber must therefore be
capable of bearing the economic risk of its investment hereunder indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
and applicable state securities laws or is exempt therefrom. The Subscriber
further understands that such exemptions depend upon, among other things, the
bona fide nature of the investment intent of the Subscriber expressed herein.
Pursuant to the foregoing, the Subscriber acknowledges that until such time as
the resale of the Backstop Shares and Subscriber Earnout Shares has been
registered under the Securities Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to an exemption from registration,
the certificates representing any Backstop Shares and Subscriber Earnout Shares
acquired by the Subscriber shall bear a restrictive legend substantially as
follows (and a stop-transfer order may be placed against transfer of such
Backstop Shares and Subscriber Earnout Shares):

 

“THESE ORDINARY SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES
LAWS. NEITHER THESE ORDINARY SHARES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE
FOLLOWING:

 

 4 

 

 

BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE ACQUIRER:

 

1.REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A “QUALIFIED
INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT)
OR IS AN “ACCREDITED INVESTOR” AS DEFINED IN REGULATION D UNDER THE SECURITIES
ACT AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH
ACCOUNT, AND

 

2.AGREES FOR THE BENEFIT OF PACIFIC SPECIAL ACQUISITION CORP. (THE “COMPANY”)
THAT IT WILL NOT OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY OR ANY
BENEFICIAL INTEREST HEREIN PRIOR TO THE DATE THAT IS THE LATER OF (X) ONE YEAR
OR SUCH OTHER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT
OR ANY SUCCESSOR PROVISION THERETO AFTER THE LAST DATE OF THE ACQUISITION FROM
THE COMPANY OR AN AFFILIATE OF THE COMPANY, AND (Y) SUCH LATER DATE, IF ANY, AS
MAY BE REQUIRED BY APPLICABLE LAW, EXCEPT:

 

(A)TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, OR

 

(B)PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER
THE SECURITIES ACT, OR

 

(C)OUTSIDE THE UNITED STATES IN A TRANSACTION COMPLYING WITH THE REQUIREMENTS OF
REGULATION S UNDER THE SECURITIES ACT, OR

 

(D)TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT OR AN “ACCREDITED INVESTOR” AS DEFINED IN REGULATION D UNDER THE
SECURITIES ACT, OR

 

(E)PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.

 

 5 

 

 

PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH CLAUSE (2)(E)
ABOVE, THE COMPANY AND THE TRANSFER AGENT RESERVE THE RIGHT TO REQUIRE THE
DELIVERY OF SUCH CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED
IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE
WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION
IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.”

 

(c)       The Subscriber has knowledge, skill and experience in financial,
business and investment matters relating to an investment of this type and is
capable of evaluating the merits and risks of such investment and protecting the
Subscriber’s interest in connection with the acquisition of the Backstop Shares,
Subscriber Earnout Shares and the Market Shares (collectively, the “Shares”).
The Subscriber understands that the acquisition of the Shares is a speculative
investment and involves substantial risks and that the Subscriber could lose the
Subscriber’s entire investment. Further, the Subscriber has (i) carefully read
and considered the risks identified in the Disclosure Documents (as defined
below) and (ii) carefully considered the risks related to the Merger, the
Company, and Borqs and has taken full cognizance of and understands all of the
risks related to the Company, Borqs, the Merger, the Shares and the transactions
contemplated hereby, including the purchase of the Shares. Acknowledging the
very significant tax impact analysis and other analyses that is warranted in
determining the consequences to it of purchasing and owning the Shares, to the
extent deemed necessary by the Subscriber, the Subscriber has had the
opportunity to retain, at its own expense, and relied upon, appropriate
professional advice regarding the investment, tax and legal merits and
consequences of the foregoing, including purchasing and owning the Shares. The
Subscriber has the ability to bear the economic risks of the Subscriber’s
investment in the Company, including a complete loss of the investment, and the
Subscriber has no need for liquidity in such investment.

 

(d)       The Subscriber has been furnished by the Company all information (or
provided access to all information it reasonably requested) regarding the
business and financial condition of the Company and Borqs, the Company’s
expected plans for future business activities, and the merits and risks of an
investment in the Shares which the Subscriber has reasonably requested or
otherwise needs to evaluate the investment in the Shares.

 

(e)       The Subscriber acknowledges receipt of and has carefully reviewed and
understands the following items (collectively, the “Disclosure Documents”): (i)
the IPO Prospectus; (ii) each filing made by the Company with the SEC under the
Exchange Act following the filing of the IPO Prospectus through the date of this
Agreement, including the preliminary Proxy Statement; (iii) the Merger
Agreement, a copy of which has been made available to the Subscriber, as in
effect on the date of this Agreement, including Amendment No. 1 thereto; and
(iv) the proposed draft amendments to the preliminary Proxy Statement based on
the SECs comments, Amendment No. 1 to the Merger Agreement and this Agreement
and other recent events. The Subscriber understands the significant extent to
which certain of the disclosures contained in items (i) and (ii) above shall no
longer apply following the Merger Closing.

 

(f)       The Subscriber acknowledges that neither the Company nor any of its
Affiliates has made or makes any representation or warranty to the Subscriber in
respect of the Company or Borqs, the Merger or the other transactions
contemplated by the Merger Agreement, other than in the case of the Company, the
representations and warranties contained in this Agreement.

 

(g)       In making its investment decision to purchase the Shares, the
Subscriber is relying solely on investigations made by the Subscriber and the
Subscriber’s representatives. The offer to sell the Backstop Shares and issue
the Subscriber Earnout Shares was communicated to the Subscriber in such a
manner that the Subscriber was able to ask questions of and receive answers from
the management of the Company concerning the terms and conditions of the
proposed transaction and that at no time was the Subscriber presented with or
solicited by or through any advertisement, article, leaflet, public promotional
meeting, notice or other communication published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or meeting or any other form of general or public advertising or solicitation.

 

 6 

 

 

(h)       The Subscriber acknowledges that it has been advised that:

 

(i)       The Backstop Shares and Subscriber Earnout Shares offered or issued or
issuable hereby have not been approved or disapproved by the SEC or any
applicable state securities commission nor has the SEC or any applicable state
securities commission passed upon the accuracy or adequacy of any
representations by the Company. Any representation to the contrary is a criminal
offense.

 

(ii)       In making an investment decision, the Subscriber must rely on its own
examination of the Company, the Merger, Borqs and the Backstop Offering,
including the merits and risks involved. The Shares have not been recommended by
any applicable federal or state securities commission or regulatory authority.
Furthermore, the foregoing authorities have not confirmed the accuracy or
determined the adequacy of any representation by the Company. Any representation
to the contrary is a criminal offense.

 

(iii)       The Backstop Shares and the Subscriber Earnout Shares will be
“restricted securities” within the meaning of Rule 144 under the Securities Act,
are subject to restrictions on transferability and resale and may not be
transferred or resold except as permitted under the Securities Act and
applicable state securities laws, pursuant to the applicable registration
requirements or exemption therefrom. The Subscriber is aware that the provisions
of Rule 144 are not currently available and, in the future, may not become
available for resale of any of the Backstop Shares and Subscriber Earnout Shares
and that the Company is an issuer subject to Rule 144(i) under the Securities
Act. The Subscriber is aware that it may be required to bear the financial risks
of this investment for an indefinite period of time.

 

(i)       The Subscriber agrees to furnish the Company with such other
information as the Company may reasonably request in order to verify the
accuracy of the information contained herein and agrees to notify the Company
immediately of any material change in the information provided herein that
occurs prior to the acceptance of this Agreement by the Company.

 

(j)       The Subscriber further represents and warrants that the Subscriber is
a “qualified institutional buyer” within the meaning of Rule 144A under the
Securities Act or an “accredited investor” within the meaning of Rule 501 of
Regulation D under the Securities Act, and Subscriber has executed the Investor
Questionnaire and shall provide to the Company an updated Investor Questionnaire
promptly following any change in circumstances at any time on or prior to the
Merger Closing.

 

(k)       As of the date of this Agreement, the Subscriber and its Affiliates do
not have, and during the thirty (30) day period prior to the date of this
Agreement the Subscriber and its Affiliates did not enter into, any “put
equivalent position” as such term is defined in Rule 16a-1 of under the Exchange
Act or short sale positions with respect to the securities of the Company. In
addition, the Subscriber shall comply with all applicable provisions of
Regulation M promulgated under the Securities Act.

 

(l)       If the Subscriber is a natural person, the Subscriber has reached the
age of majority in the state in which the Subscriber resides, has adequate means
of providing for the Subscriber’s current financial needs and contingencies, is
able to bear the substantial economic risks of an investment in the Shares for
an indefinite period of time, has no need for liquidity in such investment and,
at the present time, can afford a complete loss of such investment.

 

 7 

 

 

(m)       If the Subscriber is a partnership, corporation, trust, estate or
other entity (an “Entity”): (i) the Entity has the full legal right and power
and all authority and approval required (a) to execute and deliver, or authorize
execution and delivery of, this Agreement and all other instruments executed and
delivered by or on behalf of the Entity in connection with the acquisition of
the Shares, (b) to delegate authority pursuant to power of attorney and (c) to
acquire and hold such Shares; (ii) the signature of the party signing on behalf
of the Entity is binding upon the Entity; and (iii) the Entity has not been
formed for the specific purpose of acquiring the Shares, unless each beneficial
owner of such entity is a “qualified institutional buyer” within the meaning of
Rule 144A under the Securities Act or is qualified as an accredited investor
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act and has submitted information substantiating such individual
qualification.

 

(n)       If the Subscriber is a retirement plan or is investing on behalf of a
retirement plan, the Subscriber acknowledges that investment in the Shares poses
additional risks including the inability to use losses generated by an
investment in the Shares to offset taxable income.

 

(o)       This Agreement has been duly authorized, executed and delivered by the
Subscriber and constitutes a legal, valid and binding obligation of the
Subscriber enforceable against the Subscriber in accordance with its terms,
except as such enforceability may be limited by: (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws in effect that
limit creditors’ rights generally; (ii) equitable limitations on the
availability of specific remedies; (iii) principles of equity (regardless of
whether such enforcement is considered in a proceeding in law or in equity); and
(iv) to the extent rights to indemnification and contribution may be limited by
federal securities laws or the public policy underlying such laws.

 

(p)       The Subscriber understands and confirms that the Company will rely on
the representations and covenants of the Subscriber contained herein in
effecting the transactions contemplated by this Agreement and the other
Transaction Documents (as defined herein). All representations and warranties
provided to the Company by or on behalf of the Subscriber, taken as a whole, are
true and correct and do not contain any untrue statement of material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.

 

(q)       Neither the purchase of the Backstop Shares nor the acquisition of the
Subscriber Earnout Shares by the Subscriber will subject the Company to any of
the “Bad Actor” disqualifications described in Rule 506(d) under the Securities
Act.

 

(r)       Unless otherwise specified in the Investor Questionnaire, the
Subscriber is not a U.S. person (as defined in the Securities Act) and is
acquiring the Backstop Shares and Subscriber Earnout Shares in an offshore
transaction in accordance with the requirements of Regulation S under the
Securities Act.

 

 8 

 

 

8.             Representations and Warranties of the Company. The Company
represents and warrants to the Subscriber as follows:

 

(a)       Subject to obtaining all required approvals necessary in connection
with the performance of the Merger Agreement (including the approval of the
Company’s stockholders for the Merger Agreement and any approvals required for
the Extension, if applicable) and any required approvals pursuant to the
applicable rules of Nasdaq (together, the “Required Approvals”), the Company has
all requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement and the Merger Agreement
(collectively, the “Transaction Documents”), and to perform its obligations
under this Agreement and the other Transaction Document. Subject to obtaining
the Required Approvals, the execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly and validly authorized by all requisite corporate action, and no other
proceedings on the Company’s part are necessary to authorize the execution,
delivery or performance of this Agreement and the other Transaction Documents.
This Agreement and each of the other Transaction Documents have been duly
executed and delivered by the Company, and, assuming that this Agreement and the
Registration Rights Agreement constitute a valid and binding obligation of the
Subscriber, this Agreement and each of the other Transaction Documents will
constitute upon execution and delivery by the Company, a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by: (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws in
effect that limit creditors’ rights generally; (ii) equitable limitations on the
availability of specific remedies; (iii) principles of equity (regardless of
whether such enforcement is considered in a proceeding in Law or in equity); and
(iv) to the extent rights to indemnification and contribution may be limited by
federal securities laws or the public policy underlying such laws.

 

(b)       Subject to obtaining the Required Approvals, the execution, delivery
and performance of this Agreement and the other Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby will not (i) conflict with or result in a violation of any
provision of the Company’s Organizational Documents, (ii) violate or conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which with notice or lapse of time or both could become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, to which the Company is a party, or
(iii) result in a violation of any Law applicable to the Company or by which any
property or asset of the Company is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations in clauses (ii) or (iii) of this Section 8(b) as have not had or
would not reasonably be expect to have, individually or in the aggregate, a
material adverse effect on the business, properties, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries, taken
as a whole (“Material Adverse Effect”)). The Company is not in violation of its
Organizational Documents in any material respect.

 

(c)       Except for (i) the applicable requirements of any applicable Antitrust
Laws, the federal securities Laws or any applicable state securities or “blue
sky” Laws and (ii) the filing of the Plan of Merger with the Registrar of
Companies of the Cayman Islands (and subject to obtaining the Required
Approvals), the Company is not required to submit any notice, report or other
filing with any Governmental Authority in connection with the execution,
delivery or performance by it of the Transaction Documents or the consummation
of the transactions contemplated by the Transaction Documents and no consent,
approval or authorization of any Governmental Authority or any other Person is
required to be obtained by the Company in connection with its execution,
delivery and performance of this Agreement and each of the other Transaction
Documents or the consummation of the transactions contemplated hereby and
thereby, (other than such consents, approvals or authorizations, the failure of
which to obtain, have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect).

 

(d)       The Company has timely filed all forms, reports and other documents
required to be filed by it with the SEC (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits to such documents)
incorporated by reference therein, being hereinafter referred to herein as the
“SEC Documents”) since the date of its IPO (the “IPO Date”), or has timely filed
for a valid extension of such time of filing and has filed any such SEC Document
prior to the expiration of any such extension. As of their respective dates, the
SEC Documents complied in all material respects in accordance with the
requirements of the Securities Act and the Exchange Act, as the case may be, and
the rules and regulations thereunder, and none of the SEC Documents, at the time
they were filed with the SEC (except to the extent that information contained in
any SEC Document has been superseded by a later timely filed SEC Document),
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.

 

 9 

 

 

(e)       Each of the financial statements (including, in each case, any notes
thereto) contained in the SEC Documents was prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”) applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) and each fairly presents, in all material respects, the financial
position, results of operations and cash flows of the Company as at the
respective dates thereof and for the respective periods indicated therein.

 

(f)       The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act).
Such disclosure controls and procedures: (i) are designed to ensure that
material information relating to the Company and its Subsidiaries is made known
to the Company’s chief executive officer and its chief financial officer by
others within those entities, particularly during the periods in which the
Company’s reports and filings under the Exchange Act are being prepared, (ii)
have been evaluated for effectiveness as of the end of the most recent quarterly
period reported to the SEC, and (iii) are effective to perform the functions for
which they were established. The Company is in compliance in all material
respects with the provisions of the Sarbanes-Oxley Act of 2002 and the rules and
regulations promulgated thereunder that are applicable to it.

 

(g)       As of the date hereof, there are no, and since the Company’s
formation, there have not been any Actions pending or, to the knowledge of the
Company, threatened in writing against the Company, including any such Actions
that (i) challenges the validity or enforceability of the Company’s obligations
under this Agreement or the other Transaction Documents or (ii) seeks to
prevent, delay or otherwise would reasonably be expected to adversely affect the
consummation by the Company of the transactions contemplated herein or therein.

 

(h)        Except as and to the extent set forth on the balance sheet of the
Company as of December 31, 2016, including the notes thereto, the Company has no
liability or obligation of a type required to be reflected in a balance sheet
prepared in accordance with GAAP or in the footnotes thereto, except for (i)
liabilities and obligations incurred since December 31, 2016 in the ordinary
course of business that are not, individually or in the aggregate, material to
the Company and none of which results from or arises out of any material breach
of or material default under any contract, material breach of warranty, tort,
material infringement or material violation of Law; (ii) liabilities and
obligations incurred in connection with the transactions contemplated by this
Agreement and other Transaction Documents; and (iii) liabilities and obligations
which have not had and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.

 

(i)       The Company will file with the SEC a Current Report on Form 8-K or
other periodic report under the Exchange Act disclosing the form of this
Agreement within four (4) Business Days after the date of this Agreement.

 

 10 

 

 

(j)       The Company understands and confirms that the Subscriber will rely on
the representations and covenants contained herein in effecting the transactions
contemplated by this Agreement.

 

9.             Understandings. The Subscriber understands, acknowledges and
agrees with the Company as follows:

 

(a)       The Subscriber hereby acknowledges and agrees that, subject to the
terms and conditions of this Agreement, the subscription hereunder is
irrevocable by the Subscriber, that, except as required by applicable Law, the
Subscriber is not entitled to cancel, terminate or revoke this Agreement or any
agreements of the Subscriber hereunder, and that this Agreement and such other
agreements shall survive the death or disability of the Subscriber and shall be
binding upon and inure to the benefit of the parties and their respective heirs,
executors, administrators, successors, legal representatives and permitted
assigns.

 

(b)       No federal or state agency has made any finding or determination as to
the accuracy or adequacy of the Disclosure Documents or as to the suitability of
this offering for investment nor any recommendation or endorsement of the
Shares.

 

(c)       The Backstop Offering is intended to be exempt from registration,
which is dependent upon the truth, completeness and accuracy of the statements
made by the Subscriber herein.

 

(d)       There is only a limited public market for the Ordinary Shares. There
can be no assurance that a Subscriber will be able to sell or dispose of the
Shares.

 

(e)       The representations and warranties of the Subscriber contained in this
Agreement and in any other writing delivered in connection with the transactions
contemplated hereby shall be true and correct in all respects on and as of the
date hereof and the date of the consummation of each offering of the Backstop
Shares and issuance of the Subscriber Earnout Shares as if made on and as of
such date and such representation and warranties and all agreements of the
Subscriber contained herein and in any other writing delivered in connection
with the transactions contemplated hereby.

 

10.           Survival. All representations, warranties and covenants contained
in this Agreement shall survive (i) the acceptance of this Agreement by the
Company and (ii) changes in the transactions, documents and instruments
described herein which are not material or which are to the benefit of the
Subscriber, in each case until the earlier of the (A) Merger Closing or (B)
Termination Date. The Subscriber acknowledges the meaning and legal consequences
of the representations, warranties and covenants contained herein and that the
Company has relied upon such representations, warranties and covenants in
determining the Subscriber’s qualification and suitability to purchase the
Shares.

 

 11 

 

 

11.           Waiver Against Trust. Reference is made to the IPO Prospectus. The
Subscriber represents and warrants that it has read the IPO Prospectus and
understands that Company has established the Trust Account containing the
proceeds of the IPO (including interest accrued from time to time thereon) for
the benefit of the Public Stockholders and that, except as otherwise described
in the IPO Prospectus, the Company may disburse monies from the Trust Account
only: (a) to the Public Shareholders in the event they elect to redeem their
Ordinary Shares in connection with the consummation of its Business Combination,
(b) to the Public Shareholders if the Company fails to consummate a Business
Combination by August 21, 2017 or such earlier date as determined by the
Company’s directors (as extended from April 20, 2017), (c) to pay any taxes and
for working capital purposes from the interest accrued in the Trust Account, and
(d) to the Company after or concurrently with the consummation of its Business
Combination. For and in consideration of the Company entering into this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Subscriber hereby agrees on
behalf of itself and its Affiliates that, notwithstanding anything to the
contrary in this Agreement, neither the Subscriber nor its Affiliates does now
or shall at any time hereafter have any right, title, interest or claim of any
kind in or to any monies in the Trust Account or distributions therefrom, or
make any claim against the Trust Account (including any distributions
therefrom), regardless of whether such claim arises as a result of, in
connection with or relating in any way to, any proposed or actual business
relationship between the Company or its Representatives, on the one hand, and
the Subscriber or its Representatives, on the other hand, this Agreement or any
other matter, and regardless of whether such claim arises based on contract,
tort, equity or any other theory of legal liability (any and all such claims are
collectively referred to hereafter as the “Released Claims”). The Subscriber on
behalf of itself and its Affiliates hereby irrevocably waives any Released
Claims that the Subscriber or its Affiliates may have against the Trust Account
(including any distributions therefrom) now or in the future as a result of, or
arising out of, any negotiations, contracts or agreements with the Company or
its Representatives and will not seek recourse against the Trust Account
(including any distributions therefrom) for any reason whatsoever (including for
an alleged breach of this Agreement or any other agreement with the Company or
its Affiliates). The Subscriber agrees and acknowledges that such irrevocable
waiver is material to this Agreement and specifically relied upon by the Company
and its Affiliates to induce the Company to enter in this Agreement, and the
Subscriber further intends and understands such waiver to be valid, binding and
enforceable under applicable Law. To the extent the Subscriber or any of its
Affiliates commences any action or proceeding based upon, in connection with,
relating to or arising out of any matter relating to the Company or its
Representatives, which proceeding seeks, in whole or in part, monetary relief
against the Company or its Representatives, the Subscriber hereby acknowledges
and agrees its sole remedy shall be against funds held outside of the Trust
Account and that such claim shall not permit any the Subscriber or its
Affiliates (or any Person claiming on any of their behalves or in lieu of them)
to have any claim against the Trust Account (including any distributions
therefrom) or any amounts contained therein. In the event that the Subscriber or
any of its Affiliates commences Action based upon, in connection with, relating
to or arising out of any matter relating to the Company or its Representatives
which proceeding seeks, in whole or in part, relief against the Trust Account
(including any distributions therefrom) or the Public Shareholders, whether in
the form of money damages or injunctive relief, the Company and its
Representatives shall be entitled to recover from the Subscriber, its
Affiliates, and the Subscriber Shareholders, the associated legal fees and costs
in connection with any such Action, in the event the Company or its
Representatives, as applicable, prevails in such Action. Notwithstanding
anything to the contrary in this Section 11, the Released Claims shall not
include, and this Section 11 shall not otherwise affect, any rights of the
Subscriber or its Affiliates as a Public Stockholder of the Company to receive
distributions from the Trust Account in its capacity as a Public Stockholder.
This Section 11 shall survive termination of this Agreement for any reason.

 

 12 

 

 

12.       Notices. All notices, consents, waivers and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered (i) in person, (ii) by facsimile or other electronic means, with
affirmative confirmation of receipt, (iii) one Business Day after being sent, if
sent by reputable, nationally recognized overnight courier service or (iv) three
(3) Business Days after being mailed, if sent by registered or certified mail,
pre-paid and return receipt requested, in each case to the applicable party at
the following addresses (or at such other address for a party as shall be
specified by like notice):

 

 

If to the Company prior to the Merger Closing or to the Subscriber, to:

 

c/o Zhengqi International Holding Limited
855 Pudong South Road
The World Plaza, 27th Floor
Pudong, Shanghai 200120, China
Attn: Yaqi (Sophie) Feng, COO
Facsimile No.:    86-21-8012-9882
Telephone No:  86-21-8012-9878
Email:    fengyq@tpyzq.com

 

with a copy (which will not constitute notice) to:

 

Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas, 11th Floor
New York, New York 10105
Attn:   Douglas Ellenoff, Esq.
            Stuart Neuhauser, Esq.
Facsimile No.:      (212) 370-7889
Telephone No.:    (212) 370-1300
Email:   ellenoff@egsllp.com
              sneuhauser@egsllp.com

 

and

 

Borqs International Holding Corp.
Tower A, Building B23
Universal Business Park
No. 10 Jiuxiangqiao Road
Chaoyang District, Beijing 100015, China
Attn: Pat Chan, CEO
Facsimile No.:     86-10-5975-6363
Telephone No:   86-10-5975-6336
Email:    pat.chan@borqs.com

 

and

 

Fenwick & West LLP
801 California Street
Mountain View, CA 94041
Attn: Eva Wang
Facsimile No.:      (650) 938-5200
Telephone No.:   (650) 335-7878
Email: ewang@fenwick.com

 

 

If to the Company after the Merger Closing, to:

 

Borqs Technologies, Inc.
Tower A, Building B23
Universal Business Park
No. 10 Jiuxiangqiao Road
Chaoyang District, Beijing 100015
China
Attn: Pat Chan, CEO
Facsimile No.:    86-10-5975-6363
Telephone No:  86-10-5975-6336
Email: pat.chan@borqs.com

 

with a copy (which will not constitute notice) to:

 

Fenwick & West LLP
801 California Street
Mountain View, CA 94041
Attn:   Eva Wang
Facsimile No.:      (650) 938-5200
Telephone No.:   (650) 335-7878
Email:   ewang@fenwick.com

 

and

 

Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas, 11th Floor
New York, New York 10105
Attn: Douglas Ellenoff, Esq.
Stuart Neuhauser, Esq.
Facsimile No.:      (212) 370-7889
Telephone No.:   (212) 370-1300
Email:    ellenoff@egsllp.com
              sneuhauser@egsllp.com

 

 

 13 

 

 

13.           Notification of Changes. The Subscriber agrees and covenants to
notify the Company and Borqs immediately upon the occurrence of any event prior
to the Merger Closing that would cause any representation, warranty, covenant or
other statement contained in this Agreement to be false or incorrect in any
material respect or of any material change in any statement made herein
occurring prior to the Merger Closing. The Company agrees and covenants to
notify the Subscriber immediately upon the occurrence of any event prior to the
Merger Closing that would cause any representation, warranty, covenant or other
statement contained in this Agreement to be false or incorrect in any material
respect or of any material change in any statement made herein occurring prior
to the Merger Closing.

 

14.           Obligations Irrevocable. Subject to the terms and conditions
contained herein, the obligations of the Subscriber to make its subscription
provided for hereunder shall be irrevocable, except with the consent of the
Company and Borqs, until the Subscription Rejection.

 

15.           Amendments; Waiver. This Agreement may be amended, supplemented or
modified only by execution of a written instrument signed by the Company, the
Subscriber and Borqs. This Agreement may not be waived except by an instrument
in writing signed by the party against whom enforcement of waiver is sought
(and, with respect to any waiver by the Company, Borqs).

 

16.           Assignment. This Agreement shall not be assigned without the prior
written consent of the Company, the Subscriber and Borqs, and any assignment
without such consent shall be null and void ab initio. Notwithstanding the
foregoing, the Company and Borqs will not unreasonably withhold, delay or
condition their consent to transfer and assign all or a proportion of the
Subscriber’s obligations under this Agreement to an investor that is a
“qualified institutional buyer” within the meaning of Rule 144A under the
Securities Act or an institutional “accredited investor” within the meaning of
Rule 501 of Regulation D under the Securities Act and who otherwise is
reasonably expected to be capable of satisfying the Subscriber’s obligations
transferred to such assignee. Such assignee shall be entitled to receive a
proportionate share of the Guarantee Escrow Shares based on the portion of the
Subscriber’s obligations transferred to such assignee, as well as entitled to
receive the rights and obligations of the Subscriber under the Registration
Rights Agreement with respect to its Shares. Upon any such approved assignment
by the Subscriber, such assignee shall be deemed to be the “Subscriber” under
this Agreement (and the Registration Rights Agreement) with respect to the
rights and obligations under this Agreement (and the Registration Rights
Agreement) transferred to such assignee; provided, that each Subscriber shall be
severally, and not jointly, liable for any breach of this Agreement or the
Registration Rights Agreement. Notwithstanding the foregoing, in the event that
an assignee does not fulfill its purchase obligations hereunder, the original
Subscriber shall be secondarily responsible for fulfilling such purchase
obligations, and the original Subscriber shall (i) be permitted to enforce this
Agreement against such assignee on behalf of the Company, (ii) receive such
defaulting assignee’s rights under this Agreement (including its share of the
Guarantee Escrow Shares), and (iii) be entitled to seek any remedies against the
defaulting assignee for such default to which it or the Company may be entitled
under this Agreement, such assignment, at law or in equity.

 

17.           Binding Effect; Third Party Beneficiaries. Except as otherwise
provided herein, this Agreement shall be binding upon and inure to the benefit
of the parties and their heirs, successors and assigns, and the agreements,
representations, warranties and acknowledgments contained herein shall be deemed
to be made by and be binding upon such heirs, executors, administrators,
successors, legal representatives and assigns. This Agreement does not confer
any rights or remedies upon any person or entity other than the parties hereto
and their heirs, successors and permitted assigns, provided, however, that Borqs
is an intended third-party beneficiary of this Agreement, and the Company and
the Subscriber hereby acknowledge and agree that Borqs has the right to cause
the Company to enforce its rights and perform its obligations under this
Agreement including the right to cause the Company to make or not make any
election or otherwise exercise or not exercise a right hereunder.

 

 14 

 

 

18.           Governing Law; Jurisdiction; WAIVER OF JURY TRIAL. This Agreement
shall be governed by, construed and enforced in accordance with the Laws of the
State of Delaware without regard to the conflict of laws principles thereof. All
Actions arising out of or relating to this Agreement shall be heard and
determined exclusively in any state or federal court located in New York, New
York (or in any court in which appeal from such courts may be taken) (the
"Specified Courts"). Each party hereto (and Borqs to the extent of its third
party beneficiary rights) hereby (a) submits to the exclusive jurisdiction of
any Specified Court for the purpose of any Action arising out of or relating to
this Agreement and (b) irrevocably waives, and agrees not to assert by way of
motion, defense or otherwise, in any such Action, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the Action is
brought in an inconvenient forum, that the venue of the Action is improper, or
that this Agreement or the transactions contemplated hereby may not be enforced
in or by any Specified Court. Each party (and Borqs to the extent of its third
party beneficiary rights) agrees that a final judgment in any Action shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by Law. Each party irrevocably consents to the
service of the summons and complaint and any other process in any other Action
relating to the transactions contemplated by this Agreement, on behalf of
itself, or its property, by personal delivery of copies of such process to such
party at the applicable address set forth in Section 12. Nothing in this Section
18 shall affect the right of any party to serve legal process in any other
manner permitted by Law. EACH PARTY HERETO (AND BORQS TO THE EXTENT OF ITS THIRD
PARTY BENEFICIARY RIGHTS) HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

19.           Specific Performance. Each party acknowledges that the rights of
each party to consummate the transactions contemplated by this Agreement are
unique, recognizes and affirms that in the event of a breach of this Agreement
by any party, money damages may be inadequate and the non-breaching party (or
Borqs) may have not adequate remedy at law, and agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed by an applicable party in accordance with their specific terms or were
otherwise breached. Accordingly, each party (and Borqs as a third party
beneficiary) shall be entitled to seek an injunction or restraining order to
prevent breaches of this Agreement and to seek to enforce specifically the terms
and provisions hereof, without the requirement to post any bond or other
security or to prove that money damages would be inadequate, this being in
addition to any other right or remedy to which such party may be entitled under
this Agreement, at law or in equity.

 

20.           Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable in a jurisdiction, such provision shall
be modified or deleted, as to the jurisdiction involved, only to the extent
necessary to render the same valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired thereby nor shall the validity, legality or
enforceability of such provision be affected thereby in any other jurisdiction.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties will substitute for any invalid,
illegal or unenforceable provision a suitable and equitable provision that
carries out, so far as may be valid, legal and enforceable, the intent and
purpose of such invalid, illegal or unenforceable provision.

 

21.           Entire Agreement. This Agreement and the Registration Rights
Agreement, and to the extent incorporated herein, the Merger Agreement,
constitutes the entire agreement of the Subscriber and the Company relating to
the matters contained herein and therein, superseding all prior contracts or
agreements relating to such matters, whether oral or written. Notwithstanding
the foregoing, this Section 21 shall not affect any confidentiality obligations
of the Subscriber to the Company or Borqs pursuant to any confidentiality
agreements entered into by the Subscriber prior to the date hereof.

 

 15 

 

 

22.           Interpretation. The headings, titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting this Agreement. In this Agreement, unless the context otherwise
requires: (i) any pronoun used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns, pronouns
and verbs shall include the plural and vice versa; (ii) “including” (and with
correlative meaning “include”) means including without limiting the generality
of any description preceding or succeeding such term and shall be deemed in each
case to be followed by the words “without limitation”; (iii) the words “herein,”
“hereto,” and “hereby” and other words of similar import in this Agreement shall
be deemed in each case to refer to this Agreement as a whole and not to any
particular section or other subdivision of this Agreement; and (iv) the term
“Dollars” or “$” means United States dollars. The parties have participated
jointly in the negotiation and drafting of this Agreement. Consequently, in the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provision of this Agreement.

 

23.           Counsel. The Subscriber hereby acknowledges that the Company and
its counsel represent the interests of the Company and not those of the
Subscriber in any agreement (including this Agreement) to which the Company is a
party.

 

24.           Further Assurances. From time to time, at another party's request
and without further consideration (but at the requesting party's reasonable cost
and expense), each party shall execute and deliver such additional documents and
take all such further action as may be reasonably necessary to consummate the
transactions contemplated by this Agreement.

 

25.           Counterparts; Facsimile. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which together shall be deemed to be one and
the same agreement. A facsimile or other electronic transmission of this signed
Agreement shall be legal and binding on all parties hereto.

 

{Remainder of Page Intentionally Left Blank; Signature Page Follows}

 

 16 

 

 

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

 

 

The Company:         PACIFIC SPECIAL ACQUISITION CORP.         By: /s/ Yaqi
Feng                               Name: Yaqi Feng   Title: COO         The
Subscriber:         ZHENGQI INTERNATIONAL HOLDING LIMITED         By: /s/
Zhouhong Peng   Name: Zhouhong Peng   Title: Director

 

 

{Signature Page to Backstop and Subscription Agreement}

  

 

 

Exhibit A

Investor Questionnaire

 

THIS QUESTIONNAIRE MUST BE ANSWERED FULLY AND RETURNED ALONG WITH YOUR COMPLETED
SUBSCRIPTION AGREEMENT IN CONNECTION WITH YOUR PROSPECTIVE PURCHASE OF SHARES
FROM PACIFIC SPECIAL ACQUISITION CORP (THE “COMPANY”).

 

THE INFORMATION SUPPLIED IN THIS QUESTIONNAIRE WILL BE HELD IN STRICT
CONFIDENCE. NO INFORMATION WILL BE DISCLOSED EXCEPT TO THE EXTENT THAT SUCH
DISCLOSURE IS REQUIRED BY LAW OR REGULATION, OTHERWISE DEMANDED BY PROPER LEGAL
PROCESS OR IN LITIGATION INVOLVING THE COMPANY AND ITS CONTROLLING PERSONS.

 

Capitalized terms used herein without definition shall have the respective
meanings given such terms as set forth in the Backstop and Subscription
Agreement by and between Company and Zhengqi International Holding Limited, a
company incorporated in the British Virgin Islands (the “Agreement”).

 

(1)       The undersigned represents and warrants that he, she or it comes
within at least one category marked below, and that for any category marked, he,
she or it has truthfully set forth, where applicable, the factual basis or
reason the undersigned comes within that category. The undersigned agrees to
furnish any additional information which the Company reasonably deems necessary
in order to verify the answers set forth below.

 

Category A ___

The undersigned is an individual (not a partnership, corporation, etc.) whose
individual net worth, or joint net worth with his or her spouse, presently
exceeds $1,000,000.

 

Explanation. In calculating net worth, you include all of your assets (other
than your primary residence), whether liquid or illiquid, such as cash, stock,
securities, personal property and real estate based on the fair market value of
such property MINUS all debts and liabilities (except that a mortgage or other
debt secured by your primary residence, up to the estimated fair market value of
the primary residence at the time of the purchase of the Shares, shall not be
included as a liability, provided that if the amount of such indebtedness
outstanding at the time of the purchase of the Shares exceeds the amount
outstanding 60 days before such time, other than as a result of the acquisition
of your primary residence, the amount of such excess shall be included as a
liability. Further, the amount of any mortgage or other indebtedness secured by
your primary residence that exceeds the fair market value of the residence at
the time of the purchase of the Shares shall be included as a liability.

    Category B ___ The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of $200,000 in each of the two
most recent years, or joint income with his or her spouse in excess of $300,000
in each of those years (in each case including foreign income, tax exempt income
and full amount of capital gains and losses but excluding any income of other
family members and any unrealized capital appreciation) and has a reasonable
expectation of reaching the same income level in the current year.     Category
C ___ The undersigned is a director or executive officer of the Company which is
issuing and selling the Shares.

 

 1 

 

 

Category D ___

The undersigned is a bank, as defined in Section 3(a)(2) of the Securities Act
of 1933, as amended (the “Act”); a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Act, whether acting in its
individual or fiduciary capacity; any broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; any insurance company as
defined in Section 2(a)(13) of the Act; any investment company registered under
the Investment Company Act of 1940 or a business development company as defined
in Section 2(a)(48) of that Act; any Small Business Investment Company licensed
by the U.S. Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; any plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees, if such plan
has total assets in excess of $5,000,000; any employee benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974 if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of such act,
which is either a bank, savings and loan association, insurance company, or
registered investment advisor, or if the employee benefit plan has total assets
in excess of $5,000,000 or, if a self-directed plan, with investment decisions
made solely by persons that are accredited investors (describe entity).

___________________________________________________________________
___________________________________________________________________

 

Category E ___

The undersigned is a private business development company as defined in
Section 202(a) (22) of the Investment Advisors Act of 1940 (describe entity) 

___________________________________________________________________
___________________________________________________________________  

 

Category F ___

The undersigned is either a corporation, partnership, Massachusetts or similar
business trust, or any organization described in Section 501(c)(3) of the
Internal Revenue Code, in each case not formed for the specific purpose of
acquiring the Shares and with total assets in excess of $5,000,000. (describe
entity)

___________________________________________________________________
___________________________________________________________________

 

Category G ___

The undersigned is a trust with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Shares, where the purchase is directed
by a “sophisticated investor” as defined in Regulation 506(b)(2)(ii) under the
Act.

__________________________________________________________________
__________________________________________________________________ 

 

Category H ___

The undersigned is an entity (other than a trust) in which all of the equity
owners are “accredited investors” within one or more of the above categories. If
relying upon this Category alone, each equity owner must complete a separate
copy of this Investor Questionnaire. (describe entity)

___________________________________________________________________
___________________________________________________________________

 

  The undersigned agrees that the undersigned will notify the Company at any
time on or prior to the applicable closing in the event that the representations
and warranties in this Investor Questionnaire shall cease to be true, accurate
and complete.

 

 2 

 

 

(2)           Suitability (please answer each question) 

 

  (a) Are you familiar with the risk aspects and the non-liquidity of
investments such as the Shares for which you seek to acquire?

 

YES _____     NO _____

 

  (b) Do you understand that there is no guarantee of financial return on this
investment and that you run the risk of losing your entire investment?

 

YES _____     NO _____

 

(3)           Manner in which title is to be held: (circle one)

 

  (a) Individual Ownership   (b) Community Property   (c) Joint Tenant with
Right of Survivorship (both parties must sign)   (d) Partnership   (e) Tenants
in Common   (f) Company   (g) Trust   (h) Other

(4)           Are you a U.S. person (as defined in the Securities Act)?

 

YES _____     NO _____

 

 (5)           FINRA Affiliation.

 

Are you affiliated or associated with a member of FINRA (please check one):

 

YES _____     NO _____

 

If Yes, please describe: 

 

           

 

*If subscriber is a Registered Representative with a member of FINRA, have the
following acknowledgment signed by the appropriate party:

 

The undersigned FINRA firm acknowledges receipt of the notice required by the
Conduct Rules of FINRA.

  

        Name of NASD Member Firm           By:         Authorized Officer      
      Date:    

 

{Remainder of page intentionally left blank}

 

 3 

 

 

The undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in this Investor Questionnaire and such
answers have been provided under the assumption that the Company will rely on
them. The undersigned represents and warrants to the Company, as or on behalf of
the Subscriber, that the information in this Investor Questionnaire is true,
complete and accurate and may be relied upon by the Company. The Subscriber
understands that a false representation may constitute a violation of law, and
that any person or entity who suffers damage as a result of a false
representation may have a claim against the Subscriber for damages

  

Individual Signature:   Entity Signature:                 Signature   Entity
Name               By:   Name (Print)   Signature                   Date:    
Signatory Name (Print)                               Title                 Date:
 

 

 

4