Exhibit 10.3

 

October 14, 2015

 

Pacific Special Acquisition Corp.

855 Pudong South Road

The World Plaza, 27th Floor

Pudong, Shanghai

China 200120

 

EarlyBirdCapital, Inc.

275 Madison Avenue, 27th Floor

New York, New York 10016

 

Re:         Initial Public Offering

 

Gentlemen:

 

This letter is being delivered to you in accordance with the Underwriting
Agreement (the “Underwriting Agreement”) entered into by and between Pacific
Special Acquisition Corp., a British Virgin Islands Company (the “Company”), and
EarlyBirdCapital, Inc., as Representative (the “Representative”) of the several
Underwriters named in Schedule 1 thereto (the “Underwriters”), relating to an
underwritten initial public offering (the “IPO”) of the Company’s units (the
“Units”), each comprised of one ordinary share, no par value, of the Company
(the “Ordinary Shares”), one right (“Right”) to receive one-tenth of one
Ordinary Share upon consummation of the Company’s initial Business Combination
and one warrant (the “Warrant”) to purchase one-half of one Ordinary Share.
Certain capitalized terms used herein are defined in paragraph 16 hereof.

 

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

 

1.   If the Company solicits approval of its shareholders of a Business
Combination (as defined below), the undersigned will vote all Ordinary Shares
beneficially owned by him, her or it, whether acquired before, in or after the
IPO, in favor of such Business Combination.

 

2.    (a) In the event that the Company fails to consummate a Business
Combination within the time period set forth in the Company’s Amended and
Restated Memorandum and Articles of Association, as the same may be amended from
time to time, the undersigned shall take all reasonable steps to (i) cause the
Trust Fund to be liquidated and distributed to the holders of IPO Shares and
(ii) cause the Company to liquidate as soon as reasonably practicable.

 

(b) The undersigned hereby waives any and all right, title, interest or claim of
any kind in or to any distribution of the Trust Fund and any remaining net
assets of the Company as a result of such liquidation with respect to his, her
or its Insider Shares or Private Units (“Claim”) and hereby waives any Claim the
undersigned may have in the future as a result of, or arising out of, any
contracts or agreements with the Company and will not seek recourse against the
Trust Fund for any reason whatsoever. The undersigned acknowledges and agrees
that there will be no distribution from the Trust Fund with respect to any
Rights or Warrants, which will terminate on the Company’s liquidation.

 

(c) In the event of the liquidation of the Trust Fund, Mr. Jian Tu agrees to
indemnify and hold harmless the Company against any and all loss, liability,
claims, damage and expense whatsoever (including, but not limited to, any and
all legal or other expenses reasonably incurred in investigating, preparing or
defending against any litigation, whether pending or threatened, or any claim
whatsoever) which the Company may become subject as a result of any claim by any
vendor or other person who is owed money by the Company for services rendered or
products sold to or contracted for the Company, or by any target business with
which the Company has discussed entering into a transaction agreement, but only
to the extent necessary to ensure that such loss, liability, claim, damage or
expense does not reduce the amount of funds in the Trust Fund; provided that
such indemnity shall not apply if such vendor or prospective target business
executes an agreement waiving any claims against the Trust Fund.

 

 

 

3.    The undersigned will escrow all of his, her or its Insider Shares pursuant
to the terms of a Share Escrow Agreement which the Company will enter into with
the undersigned and an escrow agent acceptable to the Company.

 

4.     [Intentionally Omitted].

 

5.     In order to minimize potential conflicts of interest which may arise from
multiple affiliations, the undersigned directors and officers of the Company
agree to present to the Company for its consideration, prior to presentation to
any other person or entity, any suitable opportunity to acquire a target
business, until the earlier of the consummation by the Company of a Business
Combination or the liquidation of the Company, subject to any pre-existing
fiduciary and contractual obligations the undersigned directors and officers
might have.

 

6.    The undersigned acknowledges and agrees that prior to entering into a
Business Combination with a target business that is affiliated with any Insiders
of the Company or their affiliates, such transaction must be approved by a
majority of the Company’s disinterested independent directors and the Company
must obtain an opinion from an independent investment banking firm that such
Business Combination is fair to the Company’s unaffiliated shareholders from a
financial point of view.

 

7.    Neither the undersigned, any member of the family of the undersigned, nor
any affiliate of the undersigned will be entitled to receive and will not accept
any compensation or other cash payment for services rendered prior to, or in
order to effectuate, the consummation of the Business Combination; provided that
the Company shall be allowed to (i) repay working capital loans made by the
undersigned or its affiliates to the Company in cash upon consummation of the
Business Combination or, at the undersigned’s discretion, with respect to up to
an aggregate of $500,000 of working capital loans from all lenders, by
converting such loans into Private Units at a price of $10.00 per Private Unit,
as more fully described in the Registration Statement, (ii) repay a non-interest
bearing loan in an aggregate amount of $300,000 and a non-interest bearing
advance in the amount of $90,917 made to the Company by Zhengqi International
Holding Limited (“ZIHL”) to cover the IPO expenses, (iii) pay $10,000 per month
to an affiliate of the Chairman of the Company for office space and related
services, (iv) reimburse the undersigned and any affiliate of the undersigned
for their out-of-pocket expenses incurred in connection with identifying,
investigating and consummating a Business Combination, and (v) pay to each of
the Company’s independent directors an annual retainer of $30,000 (to be
prorated for a partial term), payable in arrears commencing on the first
anniversary of the closing of the Company’s IPO and ending on the earlier of the
consummation of a Business Combination or a Company liquidation.

 

8.    Neither the undersigned, any member of the family of the undersigned, nor
any affiliate of the undersigned will be entitled to receive or accept a
finder’s fee or any other compensation in the event the undersigned, any member
of the family of the undersigned or any affiliate of the undersigned originates
a Business Combination.

 

9.    The undersigned officers and directors agree to be the officers and
directors of the Company until the earlier of the consummation by the Company of
a Business Combination or the liquidation of the Company. The undersigned
officers’ and directors’ biographical information previously furnished to the
Company and the Representative is true and accurate in all material respects,
does not omit any material information with respect to the officers’ and
directors’ biography and contains all of the information required to be
disclosed pursuant to Item 401 of Regulation S-K, promulgated under the
Securities Act of 1933. Each of the undersigned officers’ and directors’ FINRA
Questionnaire previously furnished to the Company and the Representative is true
and accurate in all material respects.

 

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10.   Each of the undersigned represents and warrants that:

 

  (a) He, she or it has never had a petition under the federal bankruptcy laws
or any state or foreign insolvency law been filed by or against (i) him, her or
it, or any partnership in which he, she or it was a general partner at or within
two years before the time of filing; or (ii) (to the extent the undersigned is
an individual) any corporation or business association of which he or she was an
executive officer at or within two years before the time of such filing;

  

  (b) He, she or it has never had a receiver, fiscal agent or similar officer
been appointed by a court for his or her business or property, or any such
partnership;         (c) He, she, or it has never been convicted of fraud in a
civil or criminal proceeding;         (d) He, she, or it has never been
convicted in a criminal proceeding or named the subject of a pending criminal
proceeding (excluding traffic violations and minor offenses);         (e) He,
she, or it has never been the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining or otherwise limiting him
from (i) acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction
merchant, any other person regulated by the Commodity Futures Trading Commission
(“CFTC”) or an associated person of any of the foregoing, or as an investment
adviser, underwriter, broker or dealer in securities, or as an affiliated
person, director or employee of any investment company, bank, savings and loan
association or insurance company, or from engaging in or continuing any conduct
or practice in connection with any such activity; or (ii) engaging in any type
of business practice; or (iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection with any
violation of federal or state securities or federal commodities laws;        
(f) He, she, or it has never been the subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated, of any federal or state
authority barring, suspending or otherwise limiting for more than 60 days hiss
right to engage in any activity described in 8(e)(i) above, or to be associated
with persons engaged in any such activity;         (g) He, she or it has never
been found by a court of competent jurisdiction in a civil action or by the SEC
to have violated any federal, state, or foreign securities law, where the
judgment in such civil action or finding by the SEC has not been subsequently
reversed, suspended or vacated;         (h) He, she or it has never been found
by a court of competent jurisdiction in a civil action or by the CFTC to have
violated any federal commodities law, where the judgment in such civil action or
finding by the CFTC has not been subsequently reversed, suspended or vacated;

  

  (i) He, she or it has never been the subject of, or a party to, any federal,
state, or foreign judicial or administrative order, judgment, decree or finding,
not subsequently reversed, suspended or vacated, relating to an alleged
violation of (i) any federal ,state or foreign securities or commodities law or
regulation, (ii) any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or permanent
injunction, order of disgorgement or restitution, civil money penalty or
temporary or permanent cease-and desist order, or removal or prohibition order
or (iii) any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity;         (j) He, she or it has never been
the subject of, or party to, any sanction or order, not subsequently reversed,
suspended or vacated, or any self-regulatory organization, any registered
entity, or any equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a member;

 

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        (k) He, she or it has never been convicted of any felony or misdemeanor:
(i) in connection with the purchase or sale of any security; (ii) involving the
making of any false filing with the SEC; or (iii) arising out of the conduct of
the business of an underwriter, broker, dealer, municipal securities dealer,
investment advisor or paid solicitor of purchasers of securities;         (l)
He, she or it was never subject to a final order of a state or foreign
securities commission (or an agency of officer of a state performing like
functions); a state or foreign authority that supervises or examines banks,
savings associations, or credit unions; a state or foreign insurance commission
(or an agency or officer of a state performing like functions); an appropriate
federal or foreign banking agency; the Commodity Futures Trading Commission; or
the National Credit Union Administration that is based on a violation of any law
or regulation that prohibits fraudulent, manipulative, or deceptive conduct;    
    (m) He, she or it has never been subject to any order, judgment or decree of
any court of competent jurisdiction, that, at the time of such sale, restrained
or enjoined him from engaging or continuing to engage in any conduct or
practice: (i) in connection with the purchase or sale of any security; (ii)
involving the making of any false filing with the SEC or any foreign regulatory
agency with similar functions; or (iii) arising out of the conduct of the
business of an underwriter, broker, dealer, municipal securities dealer,
investment adviser or paid solicitor of purchasers of securities;

  

  (n) He, she or it has never been subject to any order of the SEC or any
foreign regulatory agency with similar functions that orders him to cease and
desist from committing or causing a future violation of: (i) any scienter-based
anti-fraud provision of the foreign or federal securities laws, including, but
not limited to, Section 17(a)(1) of the Securities Act, Section 10(b) of the
Exchange Act and Rule 10b-5 thereunder, and Section 206(1) of the Advisers Act
or any other rule or regulation thereunder; or (ii) Section 5 of the Securities
Act;         (o) He, she or it has never been named as an underwriter in any
registration statement or Regulation A offering statement filed with the SEC
that was the subject of a refusal order, stop order, or order suspending the
Regulation A exemption, or is, currently, the subject of an investigation or
proceeding to determine whether a stop order or suspension order should be
issued;         (p) He, she or it has never been subject to a United States
Postal Service false representation order, or is currently subject to a
temporary restraining order or preliminary injunction with respect to conduct
alleged by the United States Postal Service to constitute a scheme or device for
obtaining money or property through the mail by means of false representations;
        (q) He, she or it is not subject to a final order of a state securities
commission (or an agency of officer of a state performing like functions); a
state authority that supervises or examines banks, savings associations, or
credit unions; a state insurance commission (or an agency or officer of a state
performing like functions); an appropriate federal banking agency; the Commodity
Futures Trading Commission; or the National Credit Union Administration that
bars the undersigned from: (i) association with an entity regulated by such
commission, authority, agency or officer; (ii) engaging in the business of
securities, insurance or banking; or (iii) engaging in savings association or
credit union activities;         (r) He, she or it is not subject to an order of
the SEC entered pursuant to section 15(b) or 15B(c) of the Securities Exchange
Act of 1934 (the “Exchange Act”) or section 203(e) or 203(f) of the Investment
Advisers Act of 1940 (the “Advisers Act”) that: (i) suspends or revokes the
undersigned’s registration as a broker, dealer, municipal securities dealer or
investment adviser; (ii) places limitations on the activities, functions or
operations of, or imposes civil money penalties on, such person; or (iii) bars
the undersigned from being associated with any entity or from participating in
the offering of any penny stock; and

 

  (s) He, she or it has never been suspended or expelled from membership in, or
suspended or barred from association with a member of, a securities
self-regulatory organization (e.g., a registered national securities exchange or
a registered national or affiliated securities association) for any act or
omission to act constituting conduct inconsistent with just and equitable
principles of trade.

 

11.   The undersigned has full right and power, without violating any agreement
by which he, she or it is bound, to enter into this letter agreement and to hold
the current position/title in the Company (if applicable).

 

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12.   The undersigned hereby waives his, her or its right to exercise redemption
rights with respect to any shares of the Ordinary Shares owned or to be owned by
he, she or it, directly or indirectly, whether purchased prior to the IPO, in
the IPO or in the aftermarket, and agrees that he, she or it will not seek
redemption with respect to or otherwise sell, such shares in connection with any
vote to approve a Business Combination with respect thereto.

 

13.   The undersigned hereby agrees to not propose, or vote in favor of, an
amendment to the Company’s Amended and Restated Memorandum and Articles of
Association with respect to the Company’s pre-Business Combination activities
prior to the consummation of a Business Combination that would affect the
substance or timing of the Company’s obligation to redeem 100% of the IPO Shares
if the Company does not complete a Business Combination within the time period
set forth in the Amended and Restated Memorandum and Articles of Association,
unless the Company provides its public shareholders with the opportunity to
redeem their IPO shares upon approval of any such amendment at a price per
share, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account including interest income (net of taxes payable and any amounts
released to the Company to fund working capital requirements), divided by the
number of then outstanding public shares.

  

14.  In the event that the Company does not consummate a Business Combination
and must liquidate and its remaining net assets are insufficient to complete
such liquidation, Mr. Jian Tu agrees to advance such funds necessary to complete
such liquidation and agrees not to seek repayment for such expenses.

 

15.   This letter agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without giving effect to
conflicts of law principles that would result in the application of the
substantive laws of another jurisdiction. The undersigned hereby (i) agrees that
any action, proceeding or claim against him arising out of or relating in any
way to this letter agreement (a “Proceeding”) shall be brought and enforced in
the courts of the State of New York of the United States of America for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive, (ii) waives any objection to such
exclusive jurisdiction and that such courts represent an inconvenient forum and
(iii) irrevocably agrees to appoint Ellenoff Grossman & Schole LLP as agent for
the service of process in the State of New York to receive, for the undersigned
and on his behalf, service of process in any Proceeding.

  

16.  As used herein, (i) a “Business Combination” shall mean a merger, share
exchange, asset acquisition, contractual arrangement, share purchase,
recapitalization, reorganization or other similar business combination with one
or more businesses or entities; (ii) “Insiders” shall mean all officers,
directors and shareholders of the Company immediately prior to the IPO; (iii)
“Insider Shares” shall mean all of the Ordinary Shares of the Company acquired
by an Insider prior to the IPO; (iv) “IPO Shares” shall mean the Ordinary Shares
issued in the Company’s IPO; (v) “Private Units” shall mean (x) the Units
purchased in the private placement taking place simultaneously with the
consummation of the Company’s IPO and (y) the additional Units that will be
purchased in a private placement upon the full or partial exercise of the
underwriters’ over-allotment option for the Company’s IPO; (vi) “Registration
Statement” means the registration statement on Form S-1 filed by the Company
with respect to the IPO and (vii) “Trust Fund” shall mean the trust fund into
which a portion of the net proceeds of the Company’s IPO will be deposited.

 

17.   Any notice, consent or request to be given in connection with any of the
terms or provisions of this letter agreement shall be in writing and shall be
sent by express mail or similar private courier service, by certified mail
(return receipt requested), by hand delivery or facsimile transmission.

 

18.  No party hereto may assign either this letter agreement or any of its
rights, interests, or obligations hereunder without the prior written consent of
the other party. Any purported assignment in violation of this paragraph shall
be void and ineffectual and shall not operate to transfer or assign any interest
or title to the purported assignee. This letter agreement shall be binding on
the parties hereto and any successors and assigns thereof.

 

19.  The undersigned acknowledges and understands that the Underwriters and the
Company will rely upon the agreements, representations and warranties set forth
herein in proceeding with the IPO.

 

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  Zhengqi International Holding Limited         By: /s/ Zhouhong Peng     Name:
Zhouhong Peng     Title: President         /s/ Jian Tu   Jian Tu       /s/
Zhouhong Peng    Zhouhong Peng       /s/ David Boris    David Boris       /s/
Yaqi Feng    Yaqi Feng       /s/ Guoxiong Luo    Guoxiong Luo       /s/ Jason
Zexian Shen   Jason Zexian Shen       /s/ Honghui Deng    Honghui Deng

 

 

[Signature Page to the Insider Letter]

 

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