-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GimfD8+4uiO1WUIy8RSw7PzrCS2u/ZTxBsZzwkcxJXKYIVRLE6os6oIyoBCR/nyD pIFUF8YS8YRcPATURdzSMQ== 0001035704-03-000771.txt : 20031107 0001035704-03-000771.hdr.sgml : 20031107 20031107124437 ACCESSION NUMBER: 0001035704-03-000771 CONFORMED SUBMISSION TYPE: F-3 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 20031107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LJ INTERNATIONAL INC CENTRAL INDEX KEY: 0001046692 STANDARD INDUSTRIAL CLASSIFICATION: JEWELRY, PRECIOUS METAL [3911] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-110323 FILM NUMBER: 03984337 BUSINESS ADDRESS: STREET 1: UNIT #12 12/F BLOCK A FOCAL INDUSTRIAL STREET 2: CENTER 21 MAN LOK ST CITY: HUNG HOM KOWLOON HON STATE: K3 ZIP: 00000 MAIL ADDRESS: STREET 1: ANDREW N BERNSTEIN P C STREET 2: 5445 DTC PARKWAY SUITE 520 CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80111 F-3 1 d10301fv3.htm FORM F-3 fv3
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As filed with the Securities and Exchange Commission on November 7, 2003
Registration No. 333-_____



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM F-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933


LJ INTERNATIONAL INC.

(Exact name of Registrant as specified in its charter)

British Virgin Islands
(State or other jurisdiction
of incorporation or organization)

Not Applicable
(I.R.S. Employer Identification No.)


Unit #12, 12/F, Block A
Focal Industrial Centre
21 Man Lok Street
Hung Hom, Kowloon, Hong Kong
011-852-2764-3622

(Address, including zip code, and telephone number,
including area code, of Registrant’s principal executive offices)


Andrew N. Bernstein, Esq.
Andrew N. Bernstein, P.C.
5445 DTC Parkway, Suite 520
Greenwood Village, Colorado 80111
(303) 770-7131

(Name, address, including zip code and telephone number,
including area code, of agent for service)


Copies of all communications to:

Andrew N. Bernstein, Esq.
Andrew N. Bernstein, P.C.
5445 DTC Parkway, Suite 520
Greenwood Village, Colorado 80111
Telephone: (303) 770-7131
Facsimile: (303) 770-7332




 


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Approximate date of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [  ]

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X]

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [  ]

CALCULATION OF REGISTRATION FEE

                             
        Proposed   Proposed        
        maximum   maximum        
Title of each       offering   aggregate   Amount of
class of securities   Amount to be price per offering   registration
to be registered   registered (1)   share   price (3)   fee (3)(4)

 
 
 
 
Common Stock,                            
$.01 par value   918,200 shares(2)     (3 )   $ 2,504,620     $ 202.63  

     (1)  Pursuant to Rule 416, this Registration Statement covers any additional shares of Common Stock (“Shares”) which become issuable by reason of any stock dividend, stock split, recapitalization or any other similar transaction without receipt of consideration which results in an increase in the number of shares outstanding.

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     (2)  Represents the aggregate of:

    318,200 shares currently held by a selling shareholder; and
 
    600,000 shares of common stock issuable upon exercise of a warrant issued to an investor relations consultant of LJ International

     (3)  Estimated solely for the purpose of computing the amount of the registration fee under Rule 457(i) of the Securities Act of 1933, as amended, based on the sum of:

    the closing price of $4.10 per share of common stock on November 5, 2003 for the 318,200 issued and outstanding shares ($1,304,620); and
 
    the maximum amount of consideration to be received by the Registrant in connection with the exercise of the warrants ($1,200,000).

     (4)  The Registrant initially filed a Registration Statement on Form F-1 (Registration No. 333-90016) on June 7, 2002 (the “Form F-1”), to register certain offers and sales of its common stock as set forth in that Registration Statement. Subsequently, the Registrant withdrew the Form F-1 on August 18, 2003. The Registrant is filing this Registration Statement on Form F-3 to register the reoffer and resale of the securities indicated on this cover page. A registration fee of $969.38 was paid in connection with the filing of the Form F-1. Pursuant to Rule 457(p), the aggregate total dollar amount of the filing fee associated with the unsold common stock under the Form F-1 has not yet been offset by any other filing fees. The $969.38 filing fee which was previously paid is being offset by the $202.63 filing fee due for this Registration Statement, resulting in a remaining available offset balance of $766.75.

     The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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     The information in this prospectus is not complete and may be changed. The selling securityholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 


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Subject to Completion, Dated November 7, 2003

Prospectus

LJ INTERNATIONAL INC.

918,200 SHARES
OF COMMON STOCK

The Issuer: We are a totally vertically integrated company that designs, brands, markets and distributes a complete range of fine jewelry. While we specialize in the semi-precious jewelry segment, we also offer high-end pieces set in yellow gold, white gold, platinum or sterling silver and adorned with semi-precious stones, diamonds, pearls and precious stones. We distribute mainly to fine jewelers, department stores, national jewelry chains and electronic and specialty retailers throughout North America and Western Europe. Our product lines incorporate all major categories sought by major retailers, including earrings, necklaces, pendants, rings and bracelets. We are located at:

 
Unit #12, 12/F, Block A
21 Man Lok Street
Hung Hom, Kowloon, Hong Kong
Telephone: 011-852-2764-3622

The Offering: All of the shares of common stock being offered in this prospectus have been or will be issued by LJ International to the shareholders who are offering them for sale. The selling shareholders can use this prospectus to sell all or part of the shares they receive through the exercise of their warrants.

Nasdaq National Market Trading Symbol: “JADE”. On November 5, 2003, the last sales price of the common stock was $4.10 per share.

Proceeds From This Offering: The shareholders selling the common stock in this offering will receive all of the proceeds from their sale, minus any commissions or expenses they incur, but we may receive up to $1,200,000 from the exercise, if any, of the warrants by one of the selling shareholders for cash. We will bear all of the costs and expenses of registering the shares under the federal and state securities laws. These total costs and expenses are estimated to be $20,000.

This investment involves a high degree of risk. You should purchase shares only if you can afford a complete loss. See “Risk Factors” beginning at page 8.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is November __, 2003.

 


WHERE YOU CAN FIND MORE INFORMATION
PROSPECTUS SUMMARY
RISK FACTORS
CAPITALIZATION AND INDEBTEDNESS
SELLING SHAREHOLDERS
USE OF PROCEEDS
DETERMINATION OF OFFERING PRICE
PLAN OF DISTRIBUTION
DESCRIPTION OF SECURITIES
LEGAL MATTERS
EXPERTS
EXPENSES OF THE ISSUE
SIGNATURES
EXHIBIT INDEX
EX-4.2 Strategic Advisory Services Agreement
EX-4.3 Form of Common Stock Purchase Warrant
EX-5.1 Opinion/Consent of Andrew N. Bernstein, PC
EX-23.1 Consent of Moores Rowland Mazars


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     You should only rely upon the information included in or incorporated by reference into this prospectus or in any prospectus supplement that is delivered to you. We have not authorized anyone to provide you with additional or different information. This document may be used only where it is legal to sell these securities. The information in this document is accurate only as of the date of this document, regardless of the time of the delivery of this prospectus or of any sale of our common stock.

TABLE OF CONTENTS

         
    Page
Where You Can Find More Information
    3  
Prospectus Summary
    5  
Risk Factors
    8  
Capitalization and Indebtedness
    13  
Selling Shareholders
    14  
Use of Proceeds
    15  
Determination of Offering Price
    15  
Plan of Distribution
    15  
Description of Securities
    17  
Legal Matters
    17  
Experts
    17  
Expenses of the Issue
    17  

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WHERE YOU CAN FIND MORE INFORMATION

     We file annual and current reports and other information with the U.S. Securities and Exchange Commission. You may read and copy any of our SEC filings at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for further information about its Public Reference Room. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov. Our Internet address is http://www.ljintl.com.

     We are subject to the informational requirements of the Exchange Act as they apply to a foreign private issuer and are required to file reports and other information with the Commission. As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements and annual reports to shareholders, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions set forth in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the Commission as frequently or as promptly as United States companies whose securities are registered under the Exchange Act.

     We have filed a registration statement on Form F-3 with the SEC that covers the resale of the common stock offered by this prospectus. This prospectus is a part of the registration statement, but the prospectus does not include all of the information included in the registration statement. You should refer to the registration statement for additional information about us and the common stock being offered in this prospectus. Statements that we make in this prospectus relating to any documents filed as an exhibit to the registration statement or any document incorporated by reference into the registration statement may not be complete and you should review the referenced document itself for a complete understanding of its terms.

     The SEC allows us to “incorporate by reference” the information we file with them, which means that we can disclose important information to you by referring you to those documents. The documents that have been incorporated by reference are an important part of the prospectus, and you should be sure to review that information in order to understand the nature of any investment by you in the common stock. In addition to previously filed documents that are incorporated by reference, documents that we file with the SEC after the date of this prospectus will automatically update and in some cases supersede the information in the registration statement. The documents that we have previously filed and that are incorporated by reference include the following SEC filings (File No. 0-29620):

  Our Annual Report on Form 20-F for the fiscal year ended December 31, 2002;
 
  Each of our Reports on Form 6-K filed since the date of filing of our Annual Report on Form 20-F for the fiscal year ended December 31, 2002;

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  Our proxy statement for our annual meeting of shareholders to be held on December 5, 2003; and
 
  The “Description of Securities” contained in our Registration Statement on Form 8-A filed February 20, 1998 together with all amendments and reports filed for the purpose of updating that description.

     All documents and reports filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this prospectus and prior to the date that this offering is terminated will automatically be incorporated by reference into this prospectus. Upon your oral or written request, we will provide you with copies of any of the documents incorporated by reference, at no charge to you; however, we will not deliver copies of any exhibits to those documents unless the exhibit itself is specifically incorporated by reference. If you would like a copy of any document, please write or call us at:

 
LJ International Inc.
Unit #12, 12/F, Block A
Focal Industrial Centre
21 Man Lok Street
Hung Hom, Kowloon, Hong Kong
Attention: Corporate Secretary
Telephone: 011-852-2764-3622
Facsimile: 011-852-2764-3783

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PROSPECTUS SUMMARY

     You should read the following summary together with the more detailed information included at other sections of this prospectus. In addition, you should carefully consider the factors described under “Risk Factors” at page 8 of this prospectus.

LJ International Inc.

     We are a totally vertically integrated company that designs, brands, markets and distributes a complete range of fine jewelry. While we specialize in the semi-precious jewelry segment, we also offer high-end pieces set in yellow gold, white gold, platinum or sterling silver and adorned with semi-precious stones, diamonds, pearls and precious stones. We distribute mainly to fine jewelers, department stores, national jewelry chains and electronic and specialty retailers throughout North America and Western Europe. Our product lines incorporate all major categories sought by major retailers, including earrings, necklaces, pendants, rings and bracelets.

     We believe that our vertically integrated structure provides significant advantages over our competitors. All profits from value added processes are captured internally, rather than shared with third party manufacturers. This results in very competitive pricing for the retailer and enhanced profits for us. Innovative processes in stone cutting and production further enhance our competitive position.

     We employ an international design team and all of our designs and merchandising strategies are proprietary. The exclusive and innovative concepts that we create offer brand potential. Our primary marketing focus has been in North America where we have sold directly to certain high volume customers that need specialized product development services, and through a marketing relationship with International Jewelry Connection (IJC) for those customers that need higher levels of service and training.

     We organize our marketing and distribution strategies by retail distribution channels. Concepts are developed for the specific needs of different market segments. We have identified the following as prime retail targets:

    fine jewelers;
 
    national jewelry chains;
 
    department stores;
 
    electronic retailers; and
 
    specialty retailers.

     For the fiscal year ended April 30, 2002 and the eight-month period ended December 31, 2002, approximately 73% and 77% of our sales were in North America.

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     Approximately 25% of our sales during the fiscal year ended December 31, 2002 was to our largest customer, QVC, Inc., and was not seasonal in nature. It has been our management’s experience that the remaining 75% of our total sales is seasonally sensitive and is greater during the quarter ending December 31 of each year.

     We were incorporated as an international business company under the International Business Companies Act of the British Virgin Islands on January 30, 1997.

The Offering

     
Securities Offered by the
Selling Shareholders
  918,200 shares of common stock. All of the common shares have been issued and/or are issuable upon exercise of warrants. A description of the terms of the warrants is included in this prospectus under “Selling Shareholders” at page 14.
     
Common Stock Outstanding as of October 17, 2003:   9,408,006 shares
     
Use of Proceeds   We will not receive any of the proceeds of sales of common stock by the selling shareholders but we may receive up to $1,200,000 from the exercise, if any, of the warrants by one of the selling shareholders for cash.
     
Risk Factors   The shares of common stock offered hereby involve a high degree of risk. See “Risk Factors” on page 8.
     
Nasdaq National Market Symbols   Common Stock - “JADE”
    Warrants - “JADEW”

The outstanding number of shares assumes that there has been no exercise of the following options and warrants to purchase shares of our common stock:

  1,679,000 common stock purchase warrants which are publicly traded and which we issued in our April 1998 initial public offering to purchase 1,679,000 shares of common stock at $5.75 per share through April 15, 2005 (as amended)
 
  146,000 stock purchase options to purchase 146,000 shares of common stock at $8.25 per share through April 15, 2005 (as amended), which we sold to the IPO underwriter and/or persons related to the underwriter

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  up to 3,168,000 shares which are reserved for issuance upon exercise of the 3,168,000 outstanding options under our 1998 Stock Compensation Plan
 
  up to 4,000,000 shares which are reserved for issuance upon grants of options under our 2003 Stock Compensation Plan (subject to shareholder approval at our December 5, 2003 Annual Shareholders Meeting)
 
  options to purchase 35,000 shares at $5.00 per share through July 30, 2004, which we granted to a former financial consultant on July 31, 1999, for services rendered in connection with public relations
 
  warrants to purchase 75,000 shares at $3.75 per share through November 30, 2004, and warrants to purchase 87,500 shares at $6.9375 per share through March 31, 2005, which we granted to two investors and a placement agent in connection with two tranches of our 3% Convertible Debentures on November 5, 1999, and March 22, 2000
 
  warrants to purchase shares which we granted to a former financial consultant on June 1, 2001, for services rendered in connection with corporate development as follows:

    80,000 shares at $3.43 per share exercisable through May 31, 2004; and
 
    80,000 shares at $4.57 per share exercisable through May 31, 2005.

  warrants to purchase 200,000 shares at $3.00 per share through August 15, 2006, which we granted to The Bauer Partnership, Inc. on August 16, 2001, in connection with a proposed debt placement which was never completed

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RISK FACTORS

     This offering involves a high degree of risk. You should carefully consider the risks and uncertainties described below and the other information in this prospectus before deciding whether to invest in shares of our common stock. If any of these risks occur, our business, results of operations and financial condition could be adversely affected. This could cause the trading price of our common stock to decline, and you might lose part or all of your investment.

We depend upon QVC, Inc. for a large portion of our sales and we cannot be certain that these sales will continue. If they do not, our revenues will likely decline.

     Although we sell to a large number of customers in a variety of markets, a substantial portion of our sales involves offerings to one volume customer, QVC, Inc. For the fiscal years ended April 30, 2002 and December 31, 2002, QVC, Inc. accounted for approximately 28% and 25% of our sales. Although we have maintained a good and longstanding relationship with this customer, we do not have any long-term contracts with QVC, Inc., who orders only on a “purchase order” basis. The loss of QVC, Inc. as a customer or a significant reduction in its orders would have a materially adverse effect.

We are controlled by one of our existing shareholders, whose interests may differ from other shareholders.

     Our largest shareholder beneficially owns or controls approximately 36.5% of our outstanding shares as of December 31, 2002. Accordingly, he has controlling influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all, or substantially all, of our assets, election of directors, and other significant corporate actions. He also has the power to prevent or cause a change in control. In addition, without the consent of this shareholder, we could be prevented from entering into transactions that could be beneficial to us. The interests of this shareholder may differ from the interests of the other shareholders.

We face significant competition from larger competitors.

     The making and distribution of jewelry is a highly competitive industry characterized by the diversity and sophistication of the product. We compete with major domestic and international companies with substantially greater financial, technical and marketing resources and personnel than us. There can be no assurance other jewelry makers will not similarly develop low-cost, high-volume production capability or an even better process, providing greater competition for us and materially affecting our business prospects.

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There are numerous factors relating to the operations of our business that could adversely affect our success and results.

     As a maker and merchandiser of low-cost, high-quality gem-set jewelry, our existing and future operations are and will be influenced by several factors, including:

    technological developments in the mass production of jewelry;
 
    our ability to meet the design and production requirements of our customers efficiently;
 
    the market acceptance of our customers’ jewelry;
 
    increases in expenses associated with continued sales growth;
 
    our ability to control costs;
 
    our management’s ability to evaluate the public’s taste and new orders to target satisfactory profit margins;
 
    our capacity to develop and manage the introduction of new designed products; and
 
    our ability to compete.

     Quality control is also essential to our operations since customers demand compliance with design and product specifications and consistency of production. We cannot assure that revenue growth will occur on a quarterly or annual basis.

Our sales and marketing operations are performed principally at our executive offices which are located in Hong Kong. This means our results of operations and financial condition may be influenced by the political situation in Hong Kong and by the general state of the Hong Kong economy.

     On July 1, 1997, sovereignty over Hong Kong was transferred from the United Kingdom to China, and Hong Kong became a Special Administrative Region of China, an SAR. As provided in the Sino-British Joint Declaration on the Question of Hong Kong, referred to as the Joint Declaration, and the Basic Law of the Hong Kong SAR of China, referred to as the Basic Law, the Hong Kong SAR is to have a high degree of autonomy except in foreign and defense affairs. Under the Basic Law, the Hong Kong SAR is to have its own legislature, legal and judicial system and full economic autonomy for 50 years. We cannot assure, however, that changes in political or other conditions will not result in an adverse impact on our financial and operating condition.

Our production facilities are located in China. Our results of operations and financial condition may, therefore, be influenced by the economic, political, legal and social conditions in China.

     Since 1978, the Chinese government has been reforming, and is expected to continue to reform, China’s economic and political systems. Such reforms have resulted in significant social progress. Other political, economic and social factors could also lead to further readjustment of the reform measures. This refinement and readjustment process may not always have a positive

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effect on our operations in China. At times, we may also be adversely affected by changes in policies of the Chinese government such as changes in laws and regulations or their interpretation, the introduction of additional measures to control inflation, changes in the rate or method of taxation and imposition of additional restrictions on currency conversion and remittances abroad.

Our products are currently made at our production facility located in Shenzhen, China. However, our insurance may not adequately cover any losses due to fire, casualty or theft.

     We have obtained fire, casualty and theft insurance aggregating approximately $12.0 million, covering several of our stock in trade, goods and merchandise, furniture and equipment and production facility in China. The proceeds of such insurance may not be sufficient to cover material damage to, or the loss of, our production facility due to fire, severe weather, flood or other cause, and such damage or loss would have a material adverse effect on our financial condition, business and prospects. Consistent with the customary practice among enterprises in China and due to the cost in relation to the benefit, we do not carry any business interruption insurance in China.

Sales of our jewelry to retailers are generally stronger during the quarter ending December 31 of each year due to the importance of the holiday selling season.

     The approximately 25% of our sales during the fiscal year ended December 31, 2002 to our largest customer, QVC, Inc., was not seasonal in nature. It has been our management’s experience that the remaining 75% of our total sales is seasonally sensitive.

Our holding company structure creates restrictions on the payment of dividends.

     We have no direct business operations, other than the ownership of our subsidiaries. While we have no current intention of paying dividends, should we, as a holding company, decide in the future to do so, our ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries and other holdings and investments. In addition, our operating subsidiaries are subject to restrictions on their ability to make distributions to us, including as a result of restrictive covenants and minimum net worth requirements in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions.

It may be difficult to serve us with legal process or enforce judgments against us or our management.

     We are a British Virgin Islands holding company, and all or a substantial portion of our assets are located in China and Hong Kong. In addition, all but one of our directors and officers are non-residents of the United States, and all or substantial portions of the assets of such non-residents are located outside the United States. As a result, it may not be possible to effect

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service of process within the United States upon such persons. Moreover, there is doubt as to whether the courts of the British Virgin Islands, China or Hong Kong would enforce:

    judgments of United States courts against us, our directors or our officers based on the civil liability provisions of the securities laws of the United States or any state; or
 
    in original actions brought in the British Virgin Islands, China or Hong Kong, liabilities against us or non-residents based upon the securities laws of the United States or any state.

Some information about us may be unavailable due to exemptions under the Exchange Act for a foreign private issuer.

     We are a foreign private issuer within the meaning of the rules under the Exchange Act. As such, we are exempt from certain provisions applicable to United States public companies, including:

    the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission of quarterly reports on Form 10-Q or current reports on Form 8-K;
 
    the provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information;
 
    the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and
 
    the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any “short-swing” trading transaction.

Because of these exemptions, investors are not provided with the same information which is generally available about public companies organized in the United States.

Since we are a British Virgin Islands company, the rights of our shareholders may be more limited than those of shareholders of a company organized in the United States.

     Under the laws of most jurisdictions in the United States, majority and controlling shareholders generally have certain fiduciary responsibilities to the minority shareholders. Shareholder action must be taken in good faith and actions by controlling shareholders which are obviously unreasonable may be declared null and void. British Virgin Island law protecting the interests of minority shareholders may not be as protective in all circumstances as the law protecting minority shareholders in U.S. jurisdictions. In addition, the circumstances in which a shareholder of a BVI company may sue the company derivatively, and the procedures and defenses that may be available to the company, may result in the rights of shareholders of a BVI company being more limited than those of shareholders of a company organized in the U.S. Furthermore, our directors have the power to take certain actions without shareholder approval which would require shareholder approval under the laws of most U.S. jurisdictions. The

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directors of a BVI corporation, subject in certain cases to court approval but without shareholder approval, may implement a reorganization, merger or consolidation, the sale of any assets, property, part of the business, or securities of the corporation. Our ability to amend our Memorandum of Association and Articles of Association without shareholder approval could have the effect of delaying, deterring or preventing a change in our control without any further action by the shareholders, including a tender offer to purchase our common stock at a premium over then current market prices.

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CAPITALIZATION AND INDEBTEDNESS

The following table sets forth our capitalization as of September 30, 2003:

  on an actual basis (unaudited); and
 
  on an as adjusted basis to give effect to the sale of an assumed 600,000 shares upon exercise of the warrants for cash, and the application of the net proceeds we may receive for our shares. The 600,000 shares assumes that $1,200,000 is raised at a net per common share price of $2.00. The actual change in common stock and additional paid-in capital will depend on the actual number of warrants exercised, and whether they are paid for by cash or on a “cashless” basis.

All data in the following table is unaudited.

                   
      September 30, 2003
     
      (in thousands, except share data)
      (unaudited)
      Actual   As Adjusted
     
 
Long-term debt, net of current maturities
           
 
   
     
 
Shareholders’ Equity:
               
 
Common Stock, $.01 par value per share: 100,000,000 shares authorized, 9,345,506 shares issued and outstanding actual, and 9,945,506 shares issued and outstanding as adjusted
  $ 93     $ 99  
 
Additional paid-in capital
    18,718       19,912  
 
Retained earnings
    7,560       7,560  
 
Exchange translation reserve
    (151 )     (151 )
 
Total shareholders’ equity
    26,220       27,420  
 
Total Capitalization
    26,220       27,420  
 
   
     
 

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SELLING SHAREHOLDERS

     By this prospectus, we are registering 318,200 shares of common stock on behalf of LO Wai Chung Winnie. We have agreed to bear all expenses other than underwriting or selling commissions or any fees and disbursements of counsel to Ms. LO as one of the selling shareholders in connection with the registration of these shares.

     On July 7, 2003, we sold 318,200 shares to Ms. LO for US$540,940 ($1.70 per share) in a private placement of shares. The 318,200 shares are to be sold from time to time by or for the account of Ms. LO, who is not affiliated with us. Ms. LO does not own any other shares of our common stock. None of the proceeds from the sale of the common stock will be received by us. The selling shareholder will pay all brokerage discounts or commissions attributable to the sale for her account. We are not aware of any existing agreement with any broker with respect to the sale of the common stock.

     Ms. LO’s address is Flat 2, 1/F., Block A, Belleve Garden, 53 Kung Lok Road, Kwun Tong, Kowloon, Hong Kong.

     By this prospectus, we are also registering 600,000 shares of common stock that may be acquired by Solo Argento Inc., a British Virgin Islands company, upon exercise of certain warrants. Pursuant to a strategic advisory services agreement dated July 1, 2003, we issued warrants to purchase 600,000 shares to Solo Argento Inc. as partial compensation for their services as our investor relations consultant. Each warrant entitles the holder to purchase one share of common stock at $2.00 per share at any time through March 31, 2004. The warrants also contain a “cashless” exercise feature. For a description of the warrant, see Exhibit 4.3 to the registration statement.

     We have agreed to bear all expenses other than underwriting or selling commissions or any fees and disbursements of counsel to Solo Argento as one of the selling shareholders in connection with the registration of these shares.

     The 600,000 shares which are issuable upon exercise of the warrants may be sold from time to time by or for the account of Solo Argento, who is not affiliated with us other than as our current investor relations consultant. Solo Argento does not own any other shares of our common stock. None of the proceeds from the sale of the common stock issuable upon exercise of the warrants will be received by us. The selling shareholder will pay all brokerage discounts or commissions attributable to the sale for its account. We are not aware of any existing agreement with any broker with respect to the sale of the common stock.

     Solo Argento’s registered address is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

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USE OF PROCEEDS

     The selling shareholders will receive the net proceeds from the sale of their shares of common stock. We will not receive any proceeds from these sales. We may, however, receive proceeds from the exercise of the warrants. Each warrant entitles the holder to purchase shares of common stock at a price of $2.00 per share. The purchase price is payable in cash or by surrendering shares of our common stock with an equal value. If all of the warrants are exercised for cash, we will receive up to $1,200,000.

DETERMINATION OF OFFERING PRICE

     The selling shareholders may use this prospectus from time to time to sell their common stock at a price determined by the shareholder selling the common stock. The price at which the common stock is sold may be based on market prices prevailing at the time of sale, at prices relating to such prevailing market prices, or at negotiated prices.

PLAN OF DISTRIBUTION

     The common stock may be sold from time to time by the selling shareholders, or by pledgees, donees, transferees or other successors in interest. Such sales may be made on one or more exchanges or in the over-the-counter market or otherwise, at prices and at terms then prevailing or at prices related to the then current market price, or in negotiated transactions. The common stock may be sold in one or more of the following types of transactions:

  a block trade in which a selling shareholder will engage a broker-dealer who will then attempt to sell the common stock as agent, or position and resell a portion of the block as principal to facilitate the transaction;
 
  purchases by a broker-dealer as principal and resale by such broker-dealer for its account pursuant to this prospectus;
 
  an exchange distribution in accordance with the rules of such exchange;
 
  ordinary brokerage transactions and transactions in which the broker solicits purchasers;
 
  privately negotiated transactions;
 
  short sales;
 
  if such a sale qualifies, in accordance with Rule 144 promulgated under the Securities Act rather than pursuant to this prospectus; and
 
  any other method permitted pursuant to applicable law.

     In making sales, brokers or dealers engaged by the selling shareholders may arrange for other brokers or dealers to participate. Brokers or dealers will receive commissions or discounts from selling shareholders in amounts to be negotiated prior to the sale. The selling shareholders and any broker-dealers that participate in the distribution may be deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act of 1933, and any proceeds or commissions received by them, and any profits on the resale of shares sold by broker-dealers, may be deemed to be underwriting discounts and commissions. To the extent, if any, that the

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selling shareholders may be considered “underwriters” within the meaning of the Securities Act, the sale of the shares by them shall be covered by this prospectus.

     In connection with distributions of the common stock or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers. In connection with such transactions, broker-dealers may engage in short sales of the common stock in the course of hedging the positions they assume with selling shareholders. The selling shareholders may also sell common stock short and redeliver the common stock to close out such short positions. The selling shareholders may also enter into option or other transactions with broker-dealers which require the delivery to the broker-dealer of the common stock, which the broker-dealer may resell or otherwise transfer pursuant to this prospectus. The selling shareholders may also loan or pledge common stock to a broker-dealer and the broker-dealer may sell the common stock so loaned or, upon a default, the broker-dealer may effect sales of the pledged common stock pursuant to this prospectus.

     If any selling shareholder notifies us that a material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, we will file a prospectus supplement, if required pursuant to Rule 424(c) under the Securities Act of 1933, setting forth:

  the name of each of the participating broker-dealers;
 
  the number of shares involved;
 
  the price at which the shares were sold;
 
  the commissions paid or discounts or concessions allowed to the broker-dealers, where applicable;
 
  a statement to the effect that the broker-dealers did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus; and
 
  any other facts material to the transaction.

     We are paying the expenses incurred in connection with preparing and filing this prospectus and the registration statement to which it relates, other than selling commissions and discounts.

     The selling shareholders may agree to indemnify any broker-dealer or agent that participates in transactions involving sales of the common stock against various liabilities, including liabilities arising under the Securities Act.

     In order to comply with the securities laws of various states, if applicable, sales of the common stock made in those states will only be through registered or licensed brokers or dealers. In addition, some states do not allow the securities to be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with by us and the selling shareholders.

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     Under applicable rules and regulations of the Exchange Act, any person engaged in the distribution of the common stock may not simultaneously engage in market-making activities with respect to our common stock for a period of up to five business days prior to the commencement of such distribution. In addition to those restrictions, each selling shareholder will be subject to the Exchange Act and the rules and regulations under the Exchange Act, including Regulation M and Rule 10b-7, which provisions may limit the timing of the purchases and sales of our securities by the selling shareholders.

DESCRIPTION OF SECURITIES

     We have previously registered our common stock under the Exchange Act by filing a Form 8-A on February 20, 1998.

LEGAL MATTERS

     Certain legal matters have been passed upon for us by Andrew N. Bernstein, P.C., 5445 DTC Parkway, Suite 520, Greenwood Village, Colorado 80111. Andrew N. Bernstein, Esq., the sole shareholder of Andrew N. Bernstein, P.C., owns options to acquire 100,000 shares of our common stock at $2.00 per share at any time until April 30, 2008.

EXPERTS

     Our audited consolidated financial statements as of April 30, 2001 and 2002 and December 31, 2002 and for each of the three years ended April 30, 2002 and the eight months ended December 31, 2002, have been incorporated by reference in this prospectus in reliance upon the report of Moores Rowland, Hong Kong, independent auditors, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. Moores Rowland, Hong Kong merged with Mazars, Hong Kong on October 1, 2003 and are now practicing under the name of Moores Rowland Mazars.

EXPENSES OF THE ISSUE

     The following table sets forth the various expenses to be paid by us in connection with the issuance and distribution of the 918,200 shares of common stock being registered on behalf of the selling shareholders. All amounts shown are estimates, except for the SEC registration fee. We will pay all expenses in connection with the distribution of the shares of common stock being sold by the selling shareholders (including fees and expenses of our counsel), except for the underwriting discount and for legal fees of any counsel selected by them.

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SEC Registration Fee
  $ 203  
Legal and accounting fees and expenses
    17,600  
Filing, printing and mailing expenses
    2,000  
Miscellaneous
    197  
 
   
 
 
Total
  $ 20,000  
 
   
 

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 8. Indemnification of Directors and Officers.

     As in most United States jurisdictions, the board of directors of a British Virgin Islands company is charged with the management and affairs of the company, and subject to any limitations to the contrary in the Memorandum of Association of the Company, the Board of Directors is entrusted with the power to manage the business and affairs of the Company. In most United States jurisdictions, directors owe a fiduciary duty to the company and its shareholders, including a duty of care, pursuant to which directors must properly apprise themselves of all reasonably available information, and a duty of loyalty, pursuant to which they must protect the interests of the company and refrain from conduct that injures the company or its shareholders or that deprives the company or its shareholders of any profit or advantage. Many United States jurisdictions have enacted various statutory provisions which permit the monetary liability of directors to be eliminated or limited. Under British Virgin Islands law, liability of a director to the company is basically limited to cases of wilful malfeasance in the performance of his duties or to cases where the director has not acted honestly and in good faith and with a view to the best interests of the company. However, under its Memorandum of Association, the Company is authorized to indemnify any person who is made or threatened to be made a party to a legal or administrative proceeding by virtue of being a director, officer or liquidator of the Company, provided such person acted honestly and in good faith and with a view to the best interests of the Company and, in the case of a criminal proceeding, such person had no reasonable cause to believe that his conduct was unlawful. The Company’s Memorandum of Association also permits the Company to indemnify any director, officer or liquidator of the Company who was successful in any proceeding against expenses and judgments, fines and amounts paid in settlement and reasonably incurred in connection with the proceeding, where such person met the standard of conduct described in the preceding sentence.

     The Company has provisions in its Memorandum of Association that insure or indemnify, to the full extent allowed by the laws of the Territory of the British Virgin Islands, directors, officers, employees, agents or persons serving in similar capacities in other enterprises at the request of the Company.

     The Company may obtain a directors’ and officers’ insurance policy.

Item 9.    Exhibits.

     
Exhibit No.   Name of Exhibit
4.1   Specimen certificate for common stock (filed as Exhibit 4.1 to the Company’s Registration Statement on Form F-1, File No. 333-7912 and incorporated by reference)

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Exhibit No.   Name of Exhibit
4.2   Strategic Advisory Services Agreement dated as of July 1, 2003 by and between the Company and Solo Argento Inc.
     
4.3   Form of Common Stock Purchase Warrant issued in connection with the July 1, 2003 Strategic Advisory Services Agreement
     
5.1   Opinion of Andrew N. Bernstein, P.C.
     
23.1   Consent of Moores Rowland Mazars, independent auditors
     
23.2   Consent of Andrew N. Bernstein, P.C. (included in Exhibit 5.1)

Item 10. Undertakings.

     (a)      Rule 415 Offerings.

               The undersigned registrant hereby undertakes that it will:

               (1) File, during any period in which it offers or sells securities, a post-effective amendment to this Registration Statement to:

   
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
     
(ii) Reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; and
     
(iii) Include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement;

               (2) For the purpose of determining any liability under the Securities Act of 1933, treat each such post-effective amendment as a new registration statement relating to the securities offered therein, and the offering of such securities at that time to be the initial bona fide offering thereof;

               (3) Remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and

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               (4) File a post-effective amendment to the registration statement to include any financial statements required by section 210.3-19 at the start of any delayed offering or throughout a continuous offering.

     (b)      Filings Incorporating Subsequent Exchange Act documents by reference.

               The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

     (c)      Request for acceleration of effective date.

               Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Act”), may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-3 and has duly caused this Registration Statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in Hong Kong on November 7, 2003.

         
    LJ INTERNATIONAL INC.
         
    By:   /s/ YU CHUAN YIH
       
        Yu Chuan Yih
        Chairman and President

     Pursuant to the requirements of the Securities Act of 1933, this Registration Statement or amendment thereto has been signed by the following persons in the capacities and on the dates indicated.

         
Signature   Title   Date
 
/s/ YU CHUAN YIH

Yu Chuan Yih
  President, Chief Executive Officer
and Chairman of the Board of
Directors (Principal Executive
Officer)
  11/7/03
 
/s/ KA MAN AU

Ka Man Au
  Chief Operating Officer and
Director
  11/7/03
 
/s/ HON TAK RINGO NG

Hon Tak Ringo Ng
  Chief Financial Officer
(Principal Financial and Accounting
Officer) and Director
  11/7/03
 
/s/ LIONEL C. WANG

Lionel C. Wang
  Director   11/7/03
 
/s/ PO YEE ELSA YUE

Po Yee Elsa Yue
  Director   11/7/03
 
/s/ ANDREW N. BERNSTEIN

Andrew N. Bernstein
  Authorized Representative in the
United States
  11/7/03

 


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EXHIBIT INDEX

         
Exhibit       Page
Number   Description of Exhibit   Number
  4.1   Specimen certificate for common stock (filed as Exhibit 4.1 to the Company’s Registration Statement on Form F-1, File No. 333-7912 and incorporated by reference)  
         
  4.2   Strategic Advisory Services Agreement dated as of July 1, 2003 by and between the Company and Solo Argento Inc.    
         
  4.3   Form of Common Stock Purchase Warrant issued in connection with the July 1, 2003 Strategic Advisory Services Agreement    
         
  5.1   Opinion of Andrew N. Bernstein, P.C.    
         
23.1   Consent of Moores Rowland Mazars, independent auditors    
         
23.2   Consent of Andrew N. Bernstein, P.C. (included in Exhibit 5.1)  

  EX-4.2 3 d10301exv4w2.htm EX-4.2 STRATEGIC ADVISORY SERVICES AGREEMENT exv4w2

 

Exhibit 4.2

Strategic Advisory Services Agreement

THIS AGREEMENT made in duplicate this 1st day of July 2003, between Solo Argento Inc., a BVI company (the “Consultant”) and LJ International Inc., a BVI Company (the “Client”).

IN CONSIDERATION the Consultant and Client hereby covenant and agree, each with the other, as follows:

1.   Object
 
    The Consultant shall furnish to Client, its services in accordance with the details and specifications marked as Schedule “A” and attached hereto (such Schedule constituting an integral term of the agreement). The Consultant shall perform such services at all times in accordance with the rules of the art and in full compliance with the statutes, laws, ordinances and regulations governing its profession, trade craft or business.
 
2.   Independent Contractor

  (1)   The Consultant shall have the sole supervision and direction of the work covered by this agreement. The consultant shall be responsible for the manner in which the said work is done, for the method employed in doing the same and for all acts and things done in the performance of the Consultant’s obligations hereunder. It is agreed and understood that at all times the foregoing shall remain subject to the approval of the Board of Directors of the Client. Nothing herein shall operate or be construed to believe the Consultant of any duties or obligations imposed upon it as an independent contractor.
 
  (2)   Furthermore, the Consultant hereby agrees that any authorized representative of Client shall at all reasonable times have access to inspect all working papers, materials and other work-in-progress as the authorized representative shall see fit to perform.

3.   Expenses
 
    In addition to the agreed consideration for the Consultant’s fees, Client shall reimburse the Consultant for all reasonable expenses, including transportation expenses, incurred during the performance of the Consultant’s service. Client shall pay the Consultant for such expenses within thirty days upon the submittal of expense statements together with duly receipted bills or vouchers. Consultant shall obtain the prior written approval of the Client for any expenses to be incurred by Consultant in excess of US$1,000.
 
4.   Liability
 
    The Consultant hereby assumes all risks incidental to its performance of this agreement and shall, at all times, fully indemnify and save harmless Client, its successors and assigns, from and against any and all claims, damages, losses, costs and expenses which Client may from time to time incur or suffer as a result of, or arising out of, injury to, or death of, persons or damage to real of tangible personal property which may be caused by the negligence of the Consultant, its agents, servants or employees under this agreement.
 
5.   Consultant’s Fee
 
    Client shall pay the Consultant for its services a total fee of US$240,000.00, to its representative in Hong Kong, for the duration of this Agreement commencing the date of execution hereof. The payments are payable as follows:

 
Payment #1 - January 1, 2004, $60,000.00 due and payable within 15 business days
Payment #2 - July 1, 2004, $60,000.00 due and payable within 15 business days
Payment #3 - January 1, 2005, $60,000.00 due and payable within 15 business days
Payment #4 - July 1, 2005, $60,000.00 due and payable within 15 business days

    Warrants
 
    A total of 600,000 warrants are granted to the Consultant and are exercisable at US$2.00 per share at any time through March 31, 2004.

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6.   Term
 
    This contract shall be deemed to have come into force and effect on the 1st day of July, 2003, and shall terminate on the 30th day of June, 2005 and may be renewed on the mutual agreement of the parties on the terms to be agreed.
 
7.   Assignment and Subletting
 
    It is expressly agreed that this agreement shall not be assigned, sublet or transferred, in whole or in part, without prior written consent of the parties.
 
8.   Confidential Information

  (1)   Except as may be necessary in the performance of an order under this agreement, the Consultant shall not at any time or in any manner make or cause to be made any copies, pictures, duplicates, facsimiles or other reproduction or recordings of any type, or any abstracts or summaries of any reports, studies, memoranda, correspondence, manuals, records, plans or other written, printed or otherwise recorded material of the Client, or which relate in any manner to be present or prospective business of the Client. The Consultant shall have no interest in any of this material and agrees to surrender any of this material which may be in its possession to the Client immediately upon the termination of this agreement or at any time prior to the termination upon the request of the Client.
 
  (2)   The Consultant shall not at any time (except under legal process) divulge any matters relating to the business of the Client or any customers or agents of the Client which may become known to it by reason of its Services under an order, orders or otherwise and shall be true to the Client in all dealings and transactions relating to the Services contemplated by this agreement and any order. Furthermore, the Consultant shall not use at any time (whether during the continuance of this agreement or after its termination) for its own benefit or purposes or for the benefit or purposes of any other person, firm, corporation, association or other business entity, any trade secrets, business development programs, or plans belonging to or relating to the affairs of the Client, including knowledge relating to customers, clients, or employees of the Client.
 
  (3)   Except as may be necessary in the performance of an order under this agreement, the Client shall not at any time or in any manner make or cause to be made any copies, pictures, duplicates, facsimiles or other reproduction or recordings of any type, or any abstracts or summaries of any reports, studies, memoranda, correspondence, manuals, records, plans or other written, printed or otherwise recorded material of the Consultant, or which relate in any manner to the present or prospective business of the Consultant, its contacts or clients. The Client shall have no interest in any of this material and agrees to surrender any of this material which may be in its possession to the Consultant immediately upon the termination of this agreement or at any time prior to the termination upon the request of the Consultant.
 
  (4)   The Client shall not at any time (except under legal process) divulge any matters relating to the business of the Consultant or any customers or agents of the Consultant which may become known to it by reason of its Services under an order, orders or otherwise and shall be true to the Consultant in all dealings and transactions relating to the Services contemplated by this agreement and any order. Furthermore, the Client shall not use at any time (whether during the continuance of this agreement or after its termination) for its own benefit or purposes or for the benefit or purposes of any other person, firm, corporation, association or other business entity, any trade secrets, business development programs, or plans belonging to or relating to the affairs of the Consultant, including knowledge relating to customers, clients, or employees of the Consultant.

9.   Time of Essence

  (1)   Time shall be deemed to be of the essence of the agreement, provided that the time for completing any work, which has been or is likely to be delayed by reason of force majeure or other cause beyond the reasonable control of the Consultant, shall be extended by a period equal to the length of the delay so caused, provided that prompt notice in writing of the occurrence causing or likely to cause such delay is given to Client.
 
  (2)   Client shall advise the Consultant in writing of any occurrence causing or likely to cause delays in the completion of its responsibilities under this agreement.

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10.   Termination
 
    Either party may terminate this agreement in the event of a “Default” being committed and unremedied as hereafter described
 
    DEFAULT – The following shall constitute incidents of Default by either party:

  a)   Fraudulent Acts or willful misrepresentations including but not limited to:

i)   any direct misrepresentation or misrepresentation by omission by either party or any of its agents or employees concerning the other party which results in any liability, either civil or criminal.
 
ii)   Any direct misrepresentation or misrepresentation or omission by either party or any of its agents or employees to the other party regarding any material matter relating to this contract.

  b)   Bankruptcy or insolvency. Either party:

i)   Files a petition for relief in bankruptcy or makes an assignment for the benefit of creditors.
 
ii)   Applies for or consents to the appointment of a trustee or receiver or a trustee or receiver is appointed for either party, or
 
iii)   Bankruptcy, insolvency or liquidation or other proceedings are commended by one party against the other and such proceedings are not discharged or dismissed within sixty (60) days after such appointment or commencement.

   c)   Any breach of the terms of this agreement. Either party’s violation of any of the provisions of this Agreement without cure after ten (10) days of receipt of written notice made to the party regarding the violation.

11.   Miscellaneous
 
    These Terms and Conditions and this Agreement set forth the understanding between the parties and supersedes prior agreements and representations between the parties, whether written or oral, regarding the subject matter contained herein.

  i.   Governing Law and Dispute Resolution – This Agreement shall be construed and interpreted in accordance with the laws of the State of California. None of the parties shall institute an arbitration or court proceeding to resolve a dispute between the parties except as expressly herein provided. If there is a dispute, either party may demand direct negotiation. If such dispute is not resolved within fifteen (15) Business Days after a demand for direct negotiation, the parties shall attempt to resolve the dispute through mediation conducted in Arroyo Grande, California. If the parties do not promptly agree on a mediator, then any of the parties may notify the American Arbitration Association, to initiate selection of a mediator from the commercial dispute resolution panel. The parties shall pay the fees and expenses of the mediator shall issue a written statement to the parties to that effect and either party may then seek relief through arbitration, which shall be binding, before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the “Association”). The place of arbitration shall be Arroyo Grande, California. Any party seeking arbitration by written notice to the other party by first class registered postal mail, or confirmed receipt email or fax, may commence arbitration at any time after receipt of written mediator’s statement. The arbitrator shall be selected by the joint agreement of the parties, but if they do not so agree within fifteen (15) business days after the date of the notice referred to above, the selection shall be made pursuant to the rules from the panel of arbitrators maintained by such Association. The arbitrator shall render his decision normally within one hundred eighty (180) days of appointment. Any award rendered by the arbitrator shall be final, conclusive and binding upon the parties hereto and there shall be no right of appeal therefrom. Any court having jurisdiction thereof may enter judgment upon the award rendered by the arbitrator. The unsuccessful party shall pay all costs and expenses of arbitration, including attorneys’ fees and expenses of the arbitrator. The arbitrator shall not be permitted to award punitive or similar type damages under any circumstances.
 
  ii.   Waiver/Severability – The waiver by either party of a breach or right under this Agreement will not constitute a waiver of any other or subsequent breach or right. If any provision of

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      this Agreement is found to be invalid or unenforceable by a court of competent jurisdiction, such provision shall be severed from the remainder of this Agreement, which will remain in full force and effect.
 
  iii.   Force Majeure – Neither party shall be in default or otherwise liable for any delay in or failure of its performance under this Agreement where such delay or failure of its performance hereunder arises by reason of any Act of God, or any government or any governmental body, acts of war, the elements, strikes or labor disputes, or other cause beyond the control of the party. Neither party shall have any liability under this Agreement for consequential damages including without limitation, loss of loyalty, income or profit.
 
  iv.   This Agreement may be amended in whole or in part only in writing and identified as an amendment to this specific Agreement sequentially numbered and dated and signed by an order of Client and an officer of Consultant.
 
  v.   This Agreement shall be binding upon and shall inure to the benefit of the administrators, legal representatives, successors and assignees of the parties hereto.
 
  vi.   The enforceability or the invalidity of any provision of this Agreement as applied to a particular circumstance or situation or instance shall not invalidate or adversely impact or materially effect the enforceability or the applicability of any other provision of this Agreement.
 
  vii.   Whenever required by the text, the singular shall include the plural, the male shall include the female and neuter and in all cases visa versa.
 
  viii.   Any notice required or given pursuant to this Agreement shall be given in writing and shall be deemed to be effectively given upon personal (hand delivery), or upon postmark from the post office of the party giving such notice by registered or certified mail, return receipt requested, addressed to each of the parties being noticed at the address on the front of this Agreement or their last known address of business.
 
  ix.   The parties to this Agreement agree that the intent, terms and conditions of this Agreement shall be construed in accordance with and governed in all respects by the laws of the State of California. Any litigation which may be initiated based upon this Agreement and the rights and obligations hereunder shall be filed in the State of California.
 
  x.   In any legal action arising out of or relating to, or due to this Agreement is caused to occur by a party to this Agreement, then the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements in addition to any other relief to which the prevailing party may be entitled.
 
  xi.   The parties to this Agreement hereby agree to indemnify and hold harmless the other from any and all claims, costs, fees, expenses, and judgments incurred by the party by reason of the conduct of the other party, its agents, directors, its representatives and employees.
 
  xii.   The above Agreement may be signed in counterparts.

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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands, and where a corporation their seals, duly attested to by a proper signing officer authorized on that behalf. The parties do hereby represent and warrant that they are authorized to enter into this agreement, that they understand the contents and that they have had the opportunity to seek independent legal advice prior to the execution hereof.

         
Signed by:       For: Solo Argento Inc.
   
   
    Authorized Signing Officer    
         
Signed by:       For: LJ International Inc.
   
   
    Authorized Signing Officer    

5 EX-4.3 4 d10301exv4w3.htm EX-4.3 FORM OF COMMON STOCK PURCHASE WARRANT exv4w3

 

Exhibit 4.3

NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY REGULATION D AND SUCH OTHER SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT.

STOCK PURCHASE WARRANT

To Purchase 600,000 Shares of Common Stock of

LJ INTERNATIONAL INC.

     THIS CERTIFIES that, for value received, Solo Argento Inc. (the “Holder”) is entitled, upon the terms and subject to the conditions hereinafter set forth, at any time on or after July 1, 2003 (the “Initial Exercise Date”) and on or prior to the close of business on March 31, 2004 (the “Termination Date”) but not thereafter, to subscribe for and purchase from LJ International Inc., a company duly incorporated and validly existing under the laws of the British Virgin Islands (the “Company”), up to Six Hundred Thousand (600,000) shares (the “Warrant Shares”) of common stock, $0.01 par value, of the Company (the “Common Stock”). The purchase price of one share of Common Stock (the “Exercise Price”) under this Warrant shall be $2.00 per Warrant Share. The Exercise Price and the number of shares for which the Warrant is exercisable shall be subject to adjustment as provided herein.

     1.     Title to Warrant. This Warrant and all rights hereunder are not transferable, in whole or in part, by the Holder.

     2.     Authorization of Shares. The Company covenants that all shares of Common Stock which may be issued upon the exercise of rights represented by this Warrant will, upon exercise of the rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

     3.     Exercise of Warrant; Registration Rights.

          (a) Except as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and before the close of business on the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the

 


 

address of Holder appearing on the books of the Company). Upon payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank, the Holder shall be entitled to receive a certificate for the number of shares of Common Stock so purchased. Certificates for shares purchased hereunder shall be delivered to the Holder as soon as practicable after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased shares of Common Stock called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

               This Warrant may also be exercised by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A)  = the last sales price per share of Common Stock on the Trading Day preceding the date of such election;

(B)  = the Exercise Price of the Warrants; and

(X)  = the number of shares issuable upon exercise of the Warrants in accordance with the terms of this Warrant.

          (b) The Company agrees to include the shares of Common Stock issuable upon exercise of this Warrant in any new registration statement filed by the Company after the issuance date hereof, which registration statement is on a form which permits the registration of shares for resale by selling stockholders, so as to permit the resale of such shares by the Holder. The Company will notify the Holder of the effectiveness of any such registration statement promptly after such event, and shall provide the Holder with copies of a final prospectus to be used in connection with any resales of shares. In addition, the Company agrees to use its best efforts to file a registration statement covering the sale of the shares of Common Stock issuable upon exercise of this Warrant within six (6) months from the date hereof and to use its best efforts to obtain the effectiveness of the registration statement and to maintain the prospectus included in the registration statement for a period of time, not exceeding nine (9) months, as may be necessary to effect the sale of the Common Stock. The Holder understands that the Company will prepare, file and maintain the registration statement at the cost and expense of the Company (except for the fees and expenses of counsel to the Holder). The Holder also confirms that there is no assurance or

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guarantee that the registration statement covering the Common Stock will be declared effective by the Securities and Exchange Commission.

     4.     No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the Exercise Price.

     5.     Charges, Taxes and Expenses. Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

     6.     Closing of Books. The Company will not close its shareholder books or records in any manner which prevents the timely exercise of this Warrant.

     7.     Division and Combination.

          (a) This Warrant may be divided or combined with other Warrants upon presentation at the aforesaid office of the Company, together with a written notice specifying the denominations in which new Warrants are to be issued, signed by Holder or its agent or attorney. The Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

          (b) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.

          (c) The Company agrees to maintain, at its aforesaid office, books for the registration of the Warrants.

     8.     No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

     9.     Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant certificate or any stock certificate relating to the Warrant Shares, and

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in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it and its transfer agent, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

     10.     Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

     11.     Adjustments of Exercise Price and Number of Warrant Shares. (a) Stock Splits, etc. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which he would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

          (b) Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock of the Company, then Holder shall have the right

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thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of shares of Common Stock for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 11. For purposes of this Section 11, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 11 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.

     12.     Voluntary Adjustment by the Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

     13.     Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall promptly mail by registered or certified mail, return receipt requested, to the Holder notice of such adjustment or adjustments setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such notice, in the absence of manifest error, shall be conclusive evidence of the correctness of such adjustment.

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     14.     Notice of Corporate Action. If at any time:

               (a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or

               (b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,

               (c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at least 10 days’ prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 10 days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 16(d).

     15.     Authorized Shares. The Company covenants that during the period the Warrant is exercisable, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Nasdaq Stock Market.

               The Company shall not by any action, including, without limitation, amending its memorandum of association or articles of association or through any reorganization, transfer of

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assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

          Upon the request of Holder, the Company will at any time during the period this Warrant is exercisable acknowledge in writing, in form reasonably satisfactory to Holder, the continuing validity of this Warrant and the obligations of the Company hereunder.

          Before taking any action which would cause an adjustment reducing the current Exercise Price below the then par value, if any, of the shares of Common Stock issuable upon exercise of the Warrants, the Company shall take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of such Common Stock at such adjusted Exercise Price.

          Before taking any action which would result in an adjustment in the number of shares of Common Stock for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

     16.     Miscellaneous.

          (a) Jurisdiction. This Warrant shall be binding upon any successors or assigns of the Company. This Warrant shall constitute a contract under the laws of the British Virgin Islands, without regard to its conflict of law, principles or rules.

          (b) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale by state and federal securities laws.

          (c) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the Company fails to comply with any provision of this Warrant, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs

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and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder if Holder is the prevailing party.

          (d) Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) hand delivered, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the first business day following the date of sending by reputable courier service, fully prepaid, addressed to such address, or (c) upon actual receipt of such mailing, if mailed. The addresses for such communications shall be:

     
If to the Company:   LJ International Inc.
    Unit #12, 12/F, Block A
    Focal Industrial Centre
    21 Man Lok Street
    Hung Hom, Kowloon, Hong Kong
    Attention: Chairman
    Telephone: 011-852-2764-3622
    Facsimile: 011-852-2764-3783
     
with a copy to (shall not   Andrew N. Bernstein, P.C.
constitute notice):   5445 DTC Parkway, Suite 520
    Greenwood Village, CO 80111, U.S.A.
    Attention: Andrew N. Bernstein, Esq.
    Telephone: (303) 770-7131
    Facsimile: (303) 770-7332

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if to Holder:   Solo Argento Inc.
    P.O. Box 957, Offshore Incorporations Centre
    Road Town, Tortola, British Virgin Islands
    Telephone: (284) 494-8184
    Facsimile: (284) 494-5132

Either party hereto may from time to time change its address or facsimile number for notices under this Section 16(d) by giving written notice of such changed address or facsimile number to the other party hereto as provided in this Section 16(d).

          (e) Limitation of Liability. No provision hereof, in the absence of affirmative action by Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

          (f) Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

          (g) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of the Holder from time to time of this Warrant and shall be enforceable by the Holder.

          (h) Indemnification. The Company agrees to indemnify and hold harmless Holder from and against any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys’ fees, expenses and disbursements of any kind which may be imposed upon, incurred by or asserted against Holder in any manner relating to or arising out of any failure by the Company to perform or observe in any material respect any of its covenants, agreements, undertakings or obligations set forth in this Warrant; provided, however, that the Company will not be liable hereunder to the extent that any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys’ fees, expenses or disbursements are found in a final non-appealable judgment by a court to have resulted from Holder’s negligence, bad faith or willful misconduct in its capacity as a stockholder or warrantholder of the Company.

          (i) Amendment. This Warrant may be modified or amended or the provisions hereof waived only with the written consent of the Company and the Holder.

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          (j) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

          (k) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

     IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated: July 1, 2003

 
LJ INTERNATIONAL INC.
 
By:
      Yu Chuan Yih,
      Chairman

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NOTICE OF EXERCISE

To: LJ International Inc.

     (1)  The undersigned hereby elects to purchase                shares of Common Stock (the “Common Stock”), of LJ International Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

     (2)  Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:

 

(Name)
 

(Address)
 

 

(Social Security or Taxpayer Identification Number)

Dated:

   
 
Signature

-11- EX-5.1 5 d10301exv5w1.htm EX-5.1 OPINION/CONSENT OF ANDREW N. BERNSTEIN, PC exv5w1

 

ANDREW N. BERNSTEIN, P.C.

ATTORNEY AT LAW
5445 DTC PARKWAY, SUITE 520
GREENWOOD VILLAGE, COLORADO 80111
TELEPHONE (303) 770-7131
FACSIMILE (303) 770-7332
E-MAIL: anbpc@attglobal.net

Exhibit 5.1

November 7, 2003

LJ International Inc.
Unit #12, 12/F, Block A
Focal Industrial Centre
21 Man Lok Street
Hung Hom, Kowloon, Hong Kong

     
Re:   LJ International Inc.
    Registration Statement on Form F-3
    File No. 333-     

Gentlemen:

We have acted as U.S. securities counsel to LJ International Inc., a company duly incorporated and validly existing under the laws of the British Virgin Islands (the “Company”), in connection with the preparation of the above-referenced Registration Statement on Form F-3 (the “Registration Statement”), to be filed by the Company with the Securities and Exchange Commission (the “Commission”) on or about November 7, 2003. The Registration Statement relates to the registration under the Securities Act of 1933, as amended (the “Act”), of up to 918,200 shares of Common Stock, $.001 par value (the “Shares”), to be sold on behalf of the Selling Shareholders. Capitalized terms used herein and not otherwise defined have the meanings given to them in the Registration Statement.

In connection with this opinion, we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of (i) the Restated Memorandum of Association and Articles of Association and the Bylaws of the Company, (ii) certain resolutions of the Board of Directors of the Company relating to the registration of the Shares, (iii) the Registration Statement, and (iv) such other documents as we have deemed necessary or appropriate as bases for the opinion set forth below. In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such

 


 

LJ International Inc.
November 7, 2003
Page 2

latter documents. As to any facts material to this opinion which we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of the Company and others.

Members of our firm are admitted to the practice of law in the State of Colorado, and we express no opinion as to the laws of any other jurisdiction.

Based upon and subject to the foregoing, we are of the opinion that the Shares registered pursuant to the Registration Statement, when sold, issued and delivered in the manner and upon receipt of the consideration therefor described in the Stock Purchase Warrant, will be validly issued, fully paid and nonassessable under British Virgin Island law.

This opinion is furnished to you solely for your benefit in connection with the filing of the Registration Statement and is not to be used, circulated, quoted or otherwise referred to for any other purpose without our prior written consent. Notwithstanding the foregoing, we hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the Registration Statement. We also consent to the reference to our firm under the caption “Legal Matters” in the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission.

   
  Very truly yours,
   
  /s/ ANDREW N. BERNSTEIN, P.C.
 
  Andrew N. Bernstein, P.C.

ANB/prr

  EX-23.1 6 d10301exv23w1.htm EX-23.1 CONSENT OF MOORES ROWLAND MAZARS exv23w1

 

Exhibit 23.1

     
Moores Rowland Mazars   Chartered Accountants
Certified Public Accountants
(CHINEESE LOGO)
   
  34th Floor, The Lee Gardens
  33 Hysan Avenue
  Causeway Bay, Hong Kong
  (CHINEESE LOGO)
   
  Tel (CHINEESE LOGO) : (852) 2909 5555
  Fax (CHINEESE LOGO) : (852) 2810 0032
   
  Email (CHINEESE LOGO) : info@mr-mazars.com.hk
  Website (CHINEESE LOGO) : www.mr-mazars.com.hk

Consent of Independent Auditors

In connection with the offer of 918,200 shares of common stock of LJ International Inc., we consent to the inclusion in the Form F-3 registration statement of our report dated May 15, 2003, which was signed in our former name of Moores Rowland, on our audits of the consolidated financial statements of LJ International Inc. as of April 30, 2001, April 30, 2002 and December 31, 2002 and for each of the years in the three-year period ended April 30, 2002 and for the eight-month period ended December 31, 2002. We also consent to the reference to our firm under the caption “Experts”.

(-s- MOORES ROWLAND MAZARS)
Moores Rowland Mazars
Chartered Accountants
Certified Public Accountants, Hong Kong

Dated: November 7, 2003

     
(MRI LOGO)   (MAZARS LOGO)

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