0001193125-13-139846.txt : 20130403 0001193125-13-139846.hdr.sgml : 20130403 20130403121450 ACCESSION NUMBER: 0001193125-13-139846 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20130403 DATE AS OF CHANGE: 20130403 GROUP MEMBERS: HILLSIDE FINANCIAL GROUP MEMBERS: HOI TSUN PETER AU GROUP MEMBERS: HOI YEE VICKY CHAN GROUP MEMBERS: HON TAK RINGO NG GROUP MEMBERS: KA MAN AU GROUP MEMBERS: PRIMEON, INC. GROUP MEMBERS: SHILIN INVESTMENTS GROUP MEMBERS: YUIN CHIEK LYE GROUP MEMBERS: ZHICHENG SHI FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Yih Yu Chuan CENTRAL INDEX KEY: 0001556847 FILING VALUES: FORM TYPE: SC 13D MAIL ADDRESS: STREET 1: UNIT 1212, BLOCK A, FOCAL IND. CENTRE STREET 2: 21 MAN LOK STREET CITY: HUNG HOM, KOWLOON STATE: K3 ZIP: 000000 SUBJECT COMPANY: 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: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-82477 FILM NUMBER: 13738548 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 BUSINESS PHONE: 303-770-7131 MAIL ADDRESS: STREET 1: ANDREW N BERNSTEIN PC STREET 2: 8101 EAST PRENTICE AVENUE SUITE 890 CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80111 SC 13D 1 d512471dsc13d.htm SCHEDULE 13D SCHEDULE 13D

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 13D

Under the Securities Exchange Act of 1934

 

 

LJ International Inc.

(Name of Issuer)

Ordinary Shares, $0.01 Par Value Per Share

(Title of Class of Securities)

G55312105

(CUSIP Number)

Mr. Yu Chuan Yih

Mr. Hon Tak Ringo Ng

Ms. Ka Man Au

Mr. Hoi Tsun Peter Au

Mr. Yuin Chiek Lye

Ms. Hoi Yee Vicky Chan

Mr. Zhicheng Shi

Primeon, Inc.

Hillside Financial

Shilin Investments

c/o LJ International Inc.

Unit #12, 12/F, Block A

Focal Industrial Centre

21 Man Lok Street

Hung Hom, Kowloon

Hong Kong

Attention: Ka Man Au

Telephone: (852) 2764-3622

With copies to:

Joseph W.K. CHAN

Sidley Austin LLP

Suite 1901, Shui On Plaza

No. 333 Middle Huai Hai Road

Shanghai 200021

China

(86) 21 2322 9322

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

March 22, 2013

(Date of Event Which Requires Filing of this Statement)

 

 

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box.  ¨

 

 

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

 

 

 

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

 

 


CUSIP No. G55312105

 

  1.   

Name of reporting person:

 

YU CHUAN YIH

  2.  

Check the appropriate box if a member of a group

(a)  ¨        (b)  x

 

  3.  

SEC use only

 

  4.  

Source of funds

 

    PF, OO

  5.  

Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e):    ¨

 

  6.  

Citizenship or place of organization

 

    THE UNITED STATES OF AMERICA

Number of

shares

beneficially

owned by

each

reporting

person

with

 

     7.    

Sole voting power

 

    1,534,353(2)

     8.   

Shared voting power

 

    1,855,700(1)(2)(3)

     9.   

Sole dispositive power

 

    1,534,353(2)

   10.   

Shared dispositive power

 

    1,855,700(1)(2)(3)

11.  

Aggregate amount beneficially owned by each reporting person

 

    3,390,053 (1)(2)

12.  

Check box if the aggregate amount in Row (11) excludes certain shares    ¨

 

13.  

Percent of class represented by amount in Row (11)

 

    10.23%(4)

14.  

Type of reporting person

 

    IN

 

(1) Including 1,855,700 Shares held by Ms. Au for and on the behalf of Mr. Yih.
(2) 3,390,053 Shares beneficially owned by Mr. Yih have been pledged to the Sponsor (as defined herein) pursuant to a share charge dated March 22, 2013, among the Sponsor, Mr. Yih and Ms. Au.
(3) Mr. Yih is a party to a Voting Agreement (as defined herein), dated March 22, 2013, which agreement contains, among other things, certain voting agreements and limitations on the sale of Shares owned by the Reporting Persons (as defined herein). As a result, Mr. Yih may be deemed to be a member of a “group,” within the meaning of Section 13(d)(3) of the Act, comprised of the Reporting Persons. Shares listed as beneficially owned by Mr. Yih include 1,855,700 Shares held by Ms. Au for and on behalf of Mr. Yih, but exclude Shares held by any other Reporting Person (in the case of Ms. Au, other than 1,855,700 Shares held by Ms. Au for and on behalf of Mr. Yih), in each case as to which Mr. Yih disclaims beneficial ownership.
(4) Percentage calculated based on 33,150,672 Shares outstanding, including 32,072,672 Shares outstanding as of March 26, 2013 (as provided by the Company) and vested options to purchase 1,078,000 Shares, exercisable within 60 days of the date hereof.


CUSIP No. G55312105

 

  1.   

Name of reporting person:

 

KA MAN AU

  2.  

Check the appropriate box if a member of a group

(a)  ¨        (b)  x

 

  3.  

SEC use only

 

  4.  

Source of funds

 

    PF, OO

  5.  

Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e):    ¨

 

  6.  

Citizenship or place of organization

 

    HONG KONG

Number of

shares

beneficially

owned by

each

reporting

person

with

 

     7.    

Sole voting power

 

    2,461,730(1) (2)

     8.   

Shared voting power

 

    0(3)

     9.   

Sole dispositive power

 

    2,461,730(1) (2)

   10.   

Shared dispositive power

 

    0(3)

11.  

Aggregate amount beneficially owned by each reporting person

 

    2,461,730(1) (2)

12.  

Check box if the aggregate amount in Row (11) excludes certain shares    ¨

 

13.  

Percent of class represented by amount in Row (11)

 

    7.43% (4)

14.  

Type of reporting person

 

    IN

 

(1) Including vested options to purchase 200,000 Shares, exercisable within 60 days of the date hereof.
(2) 1,855,700 Shares held by Ms. Au for and on behalf of Mr. Yih have been pledged to the Sponsor pursuant to a share charge dated March 22, 2013, among the Sponsor, Mr. Yih and Ms. Au.
(3) Ms. Au is a party to a Voting Agreement (as defined herein), dated March 22, 2013, which agreement contains, among other things, certain voting agreements and limitations on the sale of Shares owned by the Reporting Persons (as defined herein). As a result, Ms. Au may be deemed to be a member of a “group,” within the meaning of Section 13(d)(3) of the Act, comprised of the Reporting Persons. Shares listed as beneficially owned by Ms. Au include 1,855,700 Shares held by Ms. Au for and on behalf of Mr. Yih, but exclude Shares held by any other Reporting Person, in each case as to which Ms. Au disclaims beneficial ownership.
(4) Percentage calculated based on 33,150,672 Shares outstanding, including 32,072,672 Shares outstanding as of March 26, 2013 (as provided by the Company) and vested options to purchase 1,078,000 Shares, exercisable within 60 days of the date hereof.


CUSIP No. G55312105

 

  1.   

Name of reporting person:

 

HON TAK RINGO NG

  2.  

Check the appropriate box if a member of a group

(a)  ¨        (b)  x

 

  3.  

SEC use only

 

  4.  

Source of funds

 

    PF, OO

  5.  

Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e):    ¨

 

  6.  

Citizenship or place of organization

 

    HONG KONG

Number of

shares

beneficially

owned by

each

reporting

person

with

 

     7.    

Sole voting power

 

    577,035(1)

     8.   

Shared voting power

 

    0(2)

     9.   

Sole dispositive power

 

    577,035(1)

   10.   

Shared dispositive power

 

    0(2)

11.  

Aggregate amount beneficially owned by each reporting person

 

    577,035(1)

12.  

Check box if the aggregate amount in Row (11) excludes certain shares    ¨

 

13.  

Percent of class represented by amount in Row (11)

 

    1.74%(3)

14.  

Type of reporting person

 

    IN

 

(1) Including vested options to purchase 200,000 Shares, exercisable within 60 days of the date hereof.
(2) Mr. Ng is a party to a Voting Agreement (as defined herein), dated March 22, 2013, which agreement contains, among other things, certain voting agreements and limitations on the sale of Shares owned by the Reporting Persons (as defined herein). As a result, Mr. Ng may be deemed to be a member of a “group,” within the meaning of Section 13(d)(3) of the Act, comprised of the Reporting Persons. Shares listed as beneficially owned by Mr. Ng exclude Shares held by any other Reporting Person, in each case as to which Mr. Ng disclaims beneficial ownership.
(3) Percentage calculated based on 33,150,672 Shares outstanding, including 32,072,672 Shares outstanding as of March 26, 2013 (as provided by the Company) and vested options to purchase 1,078,000 Shares, exercisable within 60 days of the date hereof.


CUSIP No. G55312105

 

  1.   

Name of reporting person:

 

HOI TSUN PETER AU

  2.  

Check the appropriate box if a member of a group

(a)  ¨        (b)  x

 

  3.  

SEC use only

 

  4.  

Source of funds

 

    PF, OO

  5.  

Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e):    ¨

 

  6.  

Citizenship or place of organization

 

    HONG KONG

Number of

shares

beneficially

owned by

each

reporting

person

with

 

     7.    

Sole voting power

 

    32,000(1)

     8.   

Shared voting power

 

    0(2)

     9.   

Sole dispositive power

 

    32,000(1)

   10.   

Shared dispositive power

 

    0(2)

11.  

Aggregate amount beneficially owned by each reporting person

 

     32,000(1)

12.  

Check box if the aggregate amount in Row (11) excludes certain shares    ¨

 

13.  

Percent of class represented by amount in Row (11)

 

    0.10%(3)

14.  

Type of reporting person

 

    IN

 

(1) Including vested options to purchase 32,000 Shares, exercisable within 60 days of the date hereof.
(2) Mr. Au is a party to a Voting Agreement (as defined herein), dated March 22, 2013, which agreement contains, among other things, certain voting agreements and limitations on the sale of Shares owned by the Reporting Persons (as defined herein). As a result, Mr. Au may be deemed to be a member of a “group,” within the meaning of Section 13(d)(3) of the Act, comprised of the Reporting Persons. Shares listed as beneficially owned by Mr. Au exclude Shares held by any other Reporting Person, in each case as to which Mr. Au disclaims beneficial ownership.
(3) Percentage calculated based on 33,150,672 Shares outstanding, including 32,072,672 Shares outstanding as of March 26, 2013 (as provided by the Company) and vested options to purchase 1,078,000 Shares, exercisable within 60 days of the date hereof.


CUSIP No. G55312105

 

  1.   

Name of reporting person:

 

YUIN CHIEK LYE

  2.  

Check the appropriate box if a member of a group

(a)  ¨        (b)  x

 

  3.  

SEC use only

 

  4.  

Source of funds

 

    PF, OO

  5.  

Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e):    ¨

 

  6.  

Citizenship or place of organization

 

    MALAYSIA

Number of

shares

beneficially

owned by

each

reporting

person

with

 

     7.    

Sole voting power

 

    284,760(1)

     8.   

Shared voting power

 

    0(2)

     9.   

Sole dispositive power

 

    284,760 (1)

   10.   

Shared dispositive power

 

    0(2)

11.  

Aggregate amount beneficially owned by each reporting person

 

    284,760 (1)

12.  

Check box if the aggregate amount in Row (11) excludes certain shares    ¨

 

13.  

Percent of class represented by amount in Row (11)

 

    0.86%(3)

14.  

Type of reporting person

 

    IN

 

(1) Including vested options to purchase 92,000 Shares, exercisable within 60 days of the date hereof.
(2) Mr. Lye is a party to a Voting Agreement (as defined herein), dated March 22, 2013, which agreement contains, among other things, certain voting agreements and limitations on the sale of Shares owned by the Reporting Persons (as defined herein). As a result, Mr. Lye may be deemed to be a member of a “group,” within the meaning of Section 13(d)(3) of the Act, comprised of the Reporting Persons. Shares listed as beneficially owned by Mr. Lye exclude Shares held by any other Reporting Person, in each case as to which Mr. Lye disclaims beneficial ownership.
(3) Percentage calculated based on 33,150,672 Shares outstanding, including 32,072,672 Shares outstanding as of March 26, 2013 (as provided by the Company) and vested options to purchase 1,078,000 Shares, exercisable within 60 days of the date hereof.


CUSIP No. G55312105

 

  1.   

Name of reporting person:

 

HOI YEE VICKY CHAN

  2.  

Check the appropriate box if a member of a group

(a)  ¨        (b)  x

 

  3.  

SEC use only

 

  4.  

Source of funds

 

    PF, OO

  5.  

Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e):    ¨

 

  6.  

Citizenship or place of organization

 

    HONG KONG

Number of

shares

beneficially

owned by

each

reporting

person

with

 

     7.    

Sole voting power

 

    50,000(1)

     8.   

Shared voting power

 

    0(2)

     9.   

Sole dispositive power

 

    50,000 (1)

   10.   

Shared dispositive power

 

    0(2)

11.  

Aggregate amount beneficially owned by each reporting person

 

     50,000(1)

12.  

Check box if the aggregate amount in Row (11) excludes certain shares    ¨

 

13.  

Percent of class represented by amount in Row (11)

 

    0.15%(3)

14.  

Type of reporting person

 

    IN

 

(1) Including vested options to purchase 20,000 Shares, exercisable within 60 days of the date hereof.
(2) Ms. Chan is a party to a Voting Agreement (as defined herein), dated March 22, 2013, which agreement contains, among other things, certain voting agreements and limitations on the sale of Shares owned by the Reporting Persons (as defined herein). As a result, Ms. Chan may be deemed to be a member of a “group,” within the meaning of Section 13(d)(3) of the Act, comprised of the Reporting Persons. Shares listed as beneficially owned by Ms. Chan exclude Shares held by any other Reporting Person, in each case as to which Ms. Chan disclaims beneficial ownership.
(3) Percentage calculated based on 33,150,672 Shares outstanding, including 32,072,672 Shares outstanding as of March 26, 2013 (as provided by the Company) and vested options to purchase 1,078,000 Shares, exercisable within 60 days of the date hereof.


CUSIP No. G55312105

 

  1.   

Name of reporting person:

 

ZHICHENG SHI

  2.  

Check the appropriate box if a member of a group

(a)  ¨        (b)  x

 

  3.  

SEC use only

 

  4.  

Source of funds

 

    PF, OO

  5.  

Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e):    ¨

 

  6.  

Citizenship or place of organization

 

    CHINA

Number of

shares

beneficially

owned by

each

reporting

person

with

 

     7.    

Sole voting power

 

    570,000

     8.   

Shared voting power

 

    864,800(1)(2)

     9.   

Sole dispositive power

 

    570,000

   10.   

Shared dispositive power

 

    864,800(1)(2)

11.  

Aggregate amount beneficially owned by each reporting person

 

    1,434,800(1)

12.  

Check box if the aggregate amount in Row (11) excludes certain shares    ¨

 

13.  

Percent of class represented by amount in Row (11)

 

    4.33%(3)

14.  

Type of reporting person

 

    IN

 

(1) Including 700,000 Shares held by Primeon, Inc., 104,500 Shares held by Hillside Financial and 60,300 Shares held by Shilin Investments. Mr. Shi has sole voting and dispositive power with respect to the Shares held by Primeon, Inc., Hillside Financial and Shilin Investments.
(2) Mr. Shi is a party to a Voting Agreement (as defined herein), dated March 22, 2013, which agreement contains, among other things, certain voting agreements and limitations on the sale of Shares owned by the Reporting Persons (as defined herein). As a result, Mr. Shi may be deemed to be a member of a “group,” within the meaning of Section 13(d)(3) of the Act, comprised of the Reporting Persons. Shares listed as beneficially owned by Mr. Shi exclude Shares held by any Reporting Person other than Shi Shareholders, in each case as to which Mr. Shi disclaims beneficial ownership.
(3) Percentage calculated based on 33,150,672 Shares outstanding, including 32,072,672 Shares outstanding as of March 26, 2013 (as provided by the Company) and vested options to purchase 1,078,000 Shares, exercisable within 60 days of the date hereof.


CUSIP No. G55312105

 

  1.   

Name of reporting person:

 

PRIMEON, INC.

  2.  

Check the appropriate box if a member of a group

(a)  ¨        (b)  x

 

  3.  

SEC use only

 

  4.  

Source of funds

 

    AF, WC, OO

  5.  

Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e):    ¨

 

  6.  

Citizenship or place of organization

 

    STATE OF DELAWARE

Number of

shares

beneficially

owned by

each

reporting

person

with

 

     7.    

Sole voting power

 

    700,000

     8.   

Shared voting power

 

    0 (1)

     9.   

Sole dispositive power

 

    700,000

   10.   

Shared dispositive power

 

    0 (1)

11.  

Aggregate amount beneficially owned by each reporting person

 

    700,000

12.  

Check box if the aggregate amount in Row (11) excludes certain shares    ¨

 

13.  

Percent of class represented by amount in Row (11)

 

    2.11%(2)

14.  

Type of reporting person

 

    CO

 

(1) Primeon, Inc. is a party to a Voting Agreement (as defined herein), dated March 22, 2013, which agreement contains, among other things, certain voting agreements and limitations on the sale of Shares owned by the Reporting Persons (as defined herein). As a result, Primeon, Inc. may be deemed to be a member of a “group,” within the meaning of Section 13(d)(3) of the Act, comprised of the Reporting Persons. Shares listed as beneficially owned by Primeon, Inc. exclude Shares held by any Reporting Person other than Shi Shareholders, in each case as to which Primeon, Inc. disclaims beneficial ownership.
(2) Percentage calculated based on 33,150,672 Shares outstanding, including 32,072,672 Shares outstanding as of March 26, 2013 (as provided by the Company) and vested options to purchase 1,078,000 Shares, exercisable within 60 days of the date hereof.


CUSIP No. G55312105

 

  1.   

Name of reporting person:

 

HILLSIDE FINANCIAL

  2.  

Check the appropriate box if a member of a group

(a)  ¨        (b)  x

 

  3.  

SEC use only

 

  4.  

Source of funds

 

    AF, WC, OO

  5.  

Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e):    ¨

 

  6.  

Citizenship or place of organization

 

    STATE OF MASSACHUSETTS

Number of

shares

beneficially

owned by

each

reporting

person

with

 

     7.    

Sole voting power

 

    104,500

     8.   

Shared voting power

 

    0(1)

     9.   

Sole dispositive power

 

    104,500

   10.   

Shared dispositive power

 

    0(1)

11.  

Aggregate amount beneficially owned by each reporting person

 

    104,500

12.  

Check box if the aggregate amount in Row (11) excludes certain shares    ¨

 

13.  

Percent of class represented by amount in Row (11)

 

    0.32%(2)

14.  

Type of reporting person

 

    CO

 

(1) Hillside Financial is a party to a Voting Agreement (as defined herein), dated March 22, 2013, which agreement contains, among other things, certain voting agreements and limitations on the sale of Shares owned by the Reporting Persons (as defined herein). As a result, Hillside Financial may be deemed to be a member of a “group,” within the meaning of Section 13(d)(3) of the Act, comprised of the Reporting Persons. Shares listed as beneficially owned by Hillside Financial exclude Shares held by any Reporting Person other than Shi Shareholders, in each case as to which Hillside Financial disclaims beneficial ownership.
(2) Percentage calculated based on 33,150,672 Shares outstanding, including 32,072,672 Shares outstanding as of March 26, 2013 (as provided by the Company) and vested options to purchase 1,078,000 Shares, exercisable within 60 days of the date hereof.


CUSIP No. G55312105

 

  1.   

Name of reporting person:

 

SHILIN INVESTMENTS

  2.  

Check the appropriate box if a member of a group

(a)  ¨        (b)  x

 

  3.  

SEC use only

 

  4.  

Source of funds

 

    AF, WC, OO

  5.  

Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e):    ¨

 

  6.  

Citizenship or place of organization

 

    STATE OF MAINE

Number of

shares

beneficially

owned by

each

reporting

person

with

 

     7.    

Sole voting power

 

    60,300

     8.   

Shared voting power

 

    0(1)

     9.   

Sole dispositive power

 

    60,300

   10.   

Shared dispositive power

 

    0(1)

11.  

Aggregate amount beneficially owned by each reporting person

 

    60,300

12.  

Check box if the aggregate amount in Row (11) excludes certain shares    ¨

 

13.  

Percent of class represented by amount in Row (11)

 

    0.18%(2)

14.  

Type of reporting person

 

    CO

 

(1) Shilin Investments is a party to a Voting Agreement (as defined herein), dated March 22, 2013, which agreement contains, among other things, certain voting agreements and limitations on the sale of Shares owned by the Reporting Persons (as defined herein). As a result, Shilin Investments may be deemed to be a member of a “group,” within the meaning of Section 13(d)(3) of the Act, comprised of the Reporting Persons. Shares listed as beneficially owned by Shilin Investments exclude Shares held by any Reporting Person other than Shi Shareholders, in each case as to which Shilin Investments disclaims beneficial ownership.
(2) Percentage calculated based on 33,150,672 Shares outstanding, including 32,072,672 Shares outstanding as of March 26, 2013 (as provided by the Company) and vested options to purchase 1,078,000 Shares, exercisable within 60 days of the date hereof.


Introductory Note

This Schedule 13D is filed jointly by Mr. Yu Chuan Yih (“Mr. Yih”), Hon Tak Ringo Ng (“Mr. Ng”), Ms. Ka Man Au (“Ms. Au”), Mr. Hoi Tsun Peter Au (“Mr. Au”), Yuin Chiek Lye (“Mr. Lye”), Ms. Hoi Yee Vicky Chan (“Ms. Chan”, together with Mr. Ng, Ms. Au, Mr. Au, Mr. Lye, the “Management Shareholders”), Zhicheng Shi (“Mr. Shi”), Primeon, Inc. (“Primeon”), Hillside Financial (“Hillside”) and Shilin Investments (“Shilin”, together with Mr. Shi, Primeon and Hillside, the “Shi Shareholders”, together with Mr. Yih and the Management Shareholders, the “Reporting Persons”).

This Schedule 13D supersedes the Schedule 13G filed by Mr. Yih with the SEC on September 4, 2012.

Item 1. Security and Issuer

This Schedule 13D relates to shares (the “Shares”) with a par value of $0.01 of LJ International Inc. (the “Issuer” or the “Company”), a corporation organized under the laws of the British Virgin Islands. The Shares are listed on the NASDAQ Global Market under the symbol “JADE.” The principal executive office of the Issuer is located at Unit #12, 12/F, Block A, Focal Industrial Centre, 21 Man Lok Street, Hung Hom, Kowloon, Hong Kong.

 

Item 2. Identity and Background

(a) This statement of beneficial ownership on Schedule 13D is being filed jointly by the Reporting Persons pursuant to Rule 13d-1(k) promulgated by the SEC under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The Reporting Persons are making this single, joint filing because they may be deemed to constitute a “group” within the meaning of Section 13(d)(3) of the Exchange Act with the respect to the transaction described in Item 4 of this Statement.

The agreement among the Reporting Persons relating to the joint filing of this statement is attached hereto as Exhibit 7.1. Information with respect to each of the Reporting Persons is given solely by such Reporting Person, and no Reporting Person assumes responsibility for the accuracy or completeness of the information concerning the other Reporting Persons, except as otherwise provided in Rule 13d-1(k).

(b) The business address of each of Mr. Yih, Mr. Ng, Ms. Au, Mr. Au, Mr. Lye and Mr. Chan is Unit #12, 12/F, Block A, Focal Industrial Centre, 21 Man Lok Street, Hung Hom, Kowloon, Hong Kong.

The business address of Primeon is at 18 Commerce Way, Suite 3000, Woburn, MA 01801, United States.

The business address of Hillside is at 200 Hillside Ave., Arlington, MA 02476, United States.

The business address of each of Mr. Shi and Shilin is at 1 Novella Street, Lewiston, ME 04240, United States.

(c) The principal occupation of Mr. Yih is Chairman of the Board of Directors, President and Chief Executive Officer of the Company.

The principal occupation of Ms. Au is the Chief Operating Officer and the Secretary of the Company.

The principal occupation of Mr. Ng is the Chief Financial Officer of the Company.

The principal occupation of Mr. Au is the Senior Vice-President of the Company.

The principal occupation of Mr. Lye is the Chief Operating Officer (China) of the Company.

The principal occupation of Ms. Chan is the Director of Sales and Marketing of the Company.

The principal occupation of Mr. Shi is the director of each of Primeon, Hillside and Shilin.


Primeon is a corporation formed under the laws of the State of Delaware and its principal business is making equity investments in operating companies. Hillside is a corporation formed under the laws of the State of Massachusetts and its principal business is making equity investments in operating companies. Shilin is a partnership formed under the laws of the State of Maine and its principal business is making equity investments in operating companies.

(d)-(e) During the last five years, none of the Reporting Persons or, to the knowledge of Primeon, Hillside and Shilin, none of any officer, director or control person of Primeon, Hillside and Shilin has been (A) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (B) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

(f) Mr. Yih is a citizen of the United States of America. Each of Mr. Ng, Ms. Au, Mr. Au and Mr. Chan is a citizen of Hong Kong Special Administrative Region. Mr. Lye is a citizen of Malaysia. Mr. Shi is a citizen of the People’s Republic of China. Primeon is a corporation formed under the laws of the State of Delaware. Hillside is a corporation formed under the laws of the State of Massachusetts. Shilin is a partnership formed under the laws of the State of Maine.

 

Item 3. Source and Amount of Funds or Other Consideration

Pursuant to an Agreement and Plan of Merger, dated as of March 22, 2013 (the “Merger Agreement”), by and among (i) Flora Bloom Holdings (“Parent”), an exempted company with limited liability incorporated under the laws of the Cayman Islands, (ii) Flora Fragrance Holdings Limited (“Merger Sub”), a business company incorporated under the laws of the British Virgin Islands and a wholly-owned subsidiary of Parent and (iii) the Company, subject to the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Parent (the “Merger”). The descriptions of the Merger and of the Merger Agreement set forth in Item 4 below are incorporated by reference in their entirety into this Item 3. The information disclosed in this paragraph is qualified in its entirety by reference to the Merger Agreement, a copy of which is filed as Exhibit 7.11 and is incorporated herein by reference in its entirety.

The Reporting Persons and Urban Prosperity Holding Limited (the “Sponsor,” together with Mr. Yih, the “Consortium Members”), an affiliate of FountainVest China Growth Fund, L.P., FountainVest China Growth Capital Fund, L.P. and FountainVest China Growth Capital-A Fund, L.P (collectively, “FountainVest”) anticipate that approximately $64.1 million will be required to acquire 26,775,994 outstanding Shares owned by public shareholders of the Company (the “Publicly Held Shares”). This amount includes (a) the estimated funds required by the Consortium to (i) purchase the Publicly Held Shares, and (ii) pay for the outstanding options to purchase Shares, and (b) the estimated transaction costs associated with the purchase of the Publicly Held Shares (excluding any tax liabilities).

The financing for the Merger and other transactions contemplated by the Merger Agreement will be obtained by the Consortium Members pursuant to an equity commitment letter, dated as of March 22, 2013 (the “Equity Commitment Letters”), by and among the Parent and FountainVest. Under the terms and subject to the conditions of the Equity Commitment Letters, FountainVest will provide equity financing of an approximate amount of $52.5 million to Parent to consummate the Merger. The information disclosed in this paragraph is qualified in its entirety by reference to the Equity Commitment Letter, a copy of which is filed as Exhibit 7.2 and is incorporated herein by reference in its entirety.

Concurrently with the execution of the Merger Agreement, Mr. Yih entered into a rollover agreement (the “Chairman Rollover Agreement”) with Parent, pursuant to which Mr. Yih agreed that, immediately prior to the effective time of the Merger, an aggregate of 3,390,053 Shares beneficially owned by him shall be cancelled for nil consideration and he will subscribe for 3,390,053 shares of Parent. The information disclosed in this paragraph is qualified in its entirety by reference to the Chairman Rollover Agreement, a copy of which is filed as Exhibit 7.3 and is incorporated herein by reference in its entirety.

Concurrently with the execution of the Merger Agreement, the Management Shareholders entered into a rollover agreement (the “Management Rollover Agreement”) with Parent, pursuant to which the Management Shareholders


agreed that, immediately prior to the effective time of the Merger, (i) an aggregate of 1,005,825 Shares beneficially owned by them shall be cancelled for nil consideration and they shall subscribe for an aggregate of 1,005,825 shares of Parent and (ii) all the options held by them granted by the Company to purchase shares of the Common share shall be cancelled and Parent shall issue to each of them options to acquire the same number of shares of Parent. The information disclosed in this paragraph is qualified in its entirety by reference to the Management Rollover Agreement, a copy of which is filed as Exhibit 7.4 and is incorporated herein by reference in its entirety.

Concurrently with the execution of the Merger Agreement, the Shi Shareholders entered into a rollover agreement the (“Shi Rollover Agreement”) with Parent, pursuant to which the Shi Shareholders agreed that, immediately prior to the effective time of the Merger, an aggregate of 1,434,800 Shares held by the Shi Shareholders shall be cancelled for nil consideration and the Shi Shareholders shall subscribe for an aggregate of 1,434,800 shares of Parent. The information disclosed in this paragraph is qualified in its entirety by reference to the Shi Rollover Agreement, a copy of which is filed as Exhibit 7.5 and is incorporated herein by reference in its entirety.

 

Item 4. Purpose of Transaction

On August 13, 2012, the Consortium Members on behalf of themselves and an acquisition vehicle to be formed and solely owned by them, submitted a non-binding proposal (the “Proposal”) to the Issuer’s Board of Directors for the acquisition of all the outstanding Shares of the Issuer other than the Shares beneficially held by Mr. Yih in a going-private transaction for US$2.00 per share in cash (the “Proposed Transaction”). The Consortium Members also stated in the Proposal that Mr. Yih is interested only in pursuing the Proposed Transaction and has no interest in selling his shares in any other transaction involving the Issuer. The description of the Proposal in this Item 4 is qualified in its entirety by reference to the complete text of the Proposal, a copy of which is filed as Exhibit 7.10 and is incorporated herein by reference in its entirety.

On March 22, 2013, the Company announced in a press release that it had entered into the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation. Under the terms of the Merger Agreement, each Share, issued and outstanding immediately prior to the effective time of the Merger, other than (a) shares held by the Reporting Persons, (b) shares held by shareholders who shall have validly exercised and not effectively withdrawn or lost their right to dissent from the Merger, and (c) shares owned by the Company or its subsidiaries (collectively the “Excluded Shares”), will be converted into the right to receive $2.00 per share in cash without interest and net of applicable withholding taxes. The Merger is subject to the approval of the Company’s shareholders and various other closing conditions.

The purpose of the transactions contemplated under the Merger Agreement, including the Merger, is to acquire all of the Publicly Held Shares. If the Merger is consummated, the Shares will no longer be traded on the NASDAQ Global Market and will cease to be registered under Section 12 of the Exchange Act, and the Company will be privately held by the Consortium Members and the Reporting Persons. The information disclosed in this paragraph and in the preceding paragraph of this Item 4 is qualified in its entirety by reference to the Merger Agreement, and is incorporated herein by reference in its entirety.

Concurrently with the execution of the Merger Agreement, Mr. Yih, the Management Shareholders and the Shi Shareholders (each a “Voting Shareholder,” and collectively the “Voting Shareholders”), who collectively own approximately 19.23% of the outstanding Shares, entered into a voting agreement (the “Voting Agreement”) with Parent, pursuant to which each of the Voting Shareholders has agreed (i) when a meeting of the shareholders of the Company is held, to appear at such meeting or otherwise cause their Shares to be counted as present thereat for the purpose of establishing a quorum, (ii) to vote or cause to be voted at such meeting all their Shares in favor of the adoption of the Merger Agreement and approval of the Merger and (iii) to vote or cause to be voted at such meeting all their Shares against the approval of any alternative transaction proposal or any other action contemplated any an alternative transaction proposal. The information disclosed in this paragraph is qualified in its entirety by reference to the Voting Agreement, a copy of which is filed as Exhibit 7.6, and is incorporated herein by reference in its entirety.

Other than as described in Item 3 and Item 4 above, none of the Reporting Persons nor, to the best knowledge of the Reporting Persons, any of the other persons named in Item 2, has any plans or proposals which relate to or would result in any of the actions specified in clauses (a) through (j) of Item 4 of Schedule 13D. The Reporting Persons may, at any time and from time to time, formulate other purposes, plans or proposals regarding the Issuer, or any other actions that could involve one or more of the types of transactions or have one or more of the results described in paragraphs (a) through (j) of Item 4 of Schedule 13D.


Item 5. Interest in Securities of the Issuer

(a)-(b)

 

Reporting person

   Amount
beneficially
owned:
     Percent
of class:
    Sole power to
vote or
direct
the vote:
     Shared power
to vote or to
direct the vote:
     Sole power to
dispose or to
direct the
disposition of:
     Shared power
to dispose or to
direct the
disposition of:
 

Yu Chuan Yih (3)

     3,390,053         10.23 %     1,534,353         1,855,700         1,534,353         1,855,700   

Hon Tak Ringo Ng (4)

     577,035         1.74     577,035         0         577,035         0   

Ka Man Au (5)

     2,461,730         7.43     2,461,730         0         2,461,730         0   

Hoi Tsun Peter Au (6)

     32,000         0.10     32,000         0         32,000         0   

Yuin Chiek Lye (7)

     284,760         0.86     284,760         0         284,760         0   

Hoi Yee Vicky Chan (8)

     50,000         0.15     50,000         0         50,000         0   

Zhicheng Shi (9)

     1,434,800         4.33     570,000         864,800         570,000         864,800   

Primeon, Inc. (9)

     700,000         2.11     700,000         0         700,000         0   

Hillside Financial (9)

     104,500         0.32     104,500         0         104,500         0   

Shilin Investments (9)

     60,300         0.18     60,300         0         60,300         0   

 

1. Beneficial ownership is determined in accordance with Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
2. Percentage of beneficial ownership of each listed person is based on 33,150,672 Shares outstanding, including 32,072,672 Shares outstanding as of March 26, 2013 (as provided by the Company) and vested options to purchase 1,078,000 Shares, exercisable within 60 days of the date hereof.
3. Including 1,855,700 Shares held in the name of Ms. Au for and on behalf of Mr. Yih.
4. Including vested options to purchase 200,000 Shares, exercisable within 60 days of the date hereof.
5. Including vested options to purchase 200,000 Shares, exercisable within 60 days of the date hereof.
6. Including vested options to purchase 32,000 Shares, exercisable within 60 days of the date hereof.
7. Including vested options to purchase 92,000 Shares, exercisable within 60 days of the date hereof.
8. Including vested options to purchase 20,000 Shares, exercisable within 60 days of the date hereof.
9. Including 700,000, 104,500, 60,300 Shares held through Primeon, Hillside and Shilin respectively. Mr. Shi is a director of Primeon. Mr. Shi is the sole director and shareholder of Hillside. Mr. Shi is the sole director of Shilin. Mr. Shi has sole voting and dispositive power with respect to the Shares held by Primeon, Hillside and Shilin. Pursuant to Section 13(d) of the Exchange Act and the rules promulgated thereunder, Mr. Shi may be deemed to beneficially own all of the Shares held by Primeon, Hillside and Shilin.

(c) To the best knowledge of each of the Reporting Persons, none of the Reporting Persons and no other person described in Item 2 hereof has effected any transactions relating to the Shares during the past sixty (60) days.

(d) Not applicable.

(e) Not applicable.

 

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

On August 13, 2012, the Consortium Members entered into a consortium agreement dated August 13, 2012 (the “Consortium Agreement”) with respect to their participation in and the general structure of the Proposed Transaction. The Consortium Members may agree to admit one or more additional Consortium Members which will provide equity capital for the Proposal Transaction.

In accordance with the terms of the Consortium Agreement, the Consortium Members have agreed to cooperate to:

 

   

undertake due diligence with respect to the Issuer and its business;

 

   

secure equity financing (and, if applicable, other financing) in respect of the Proposed Transaction;

 

   

engage in discussions with the Issuer regarding the Proposed Transaction;


   

negotiate the terms of definitive documentation in respect of the Proposed Transaction;

 

   

enter into a shareholders’ agreement at the completion of the Proposed Transaction; and

 

   

obtain all applicable governmental, statutory, regulatory or other approvals, licenses, waivers or exemptions required or desirable for the consummation of the Proposed Transaction.

In addition, the Consortium Members have agreed to, during the period commencing on the date of the Consortium Agreement and ending on the first to occur of (a) the date eight months after the date hereof, and (b) the mutually agreed termination of this Agreement (the “Exclusivity Period”), among other things, (i) work exclusively with each other to implement the Proposed Transaction, (ii) not initiate, solicit, encourage or otherwise engage in discussions, negotiations or related activities with any third party with respect to a competing transaction, (iii) not provide any information to any third party with a view to the third party or any other person pursuing or considering to pursue a competing transaction, or (iv) enter into any agreement, arrangement or understanding regarding, or do or omit to do, anything which is inconsistent with the Proposed Transaction as contemplated under the Consortium Agreement.

Mr. Yih has also agreed to, during the Exclusivity Period, among other things, (A) vote in favor of the Proposed Transaction and against any competing proposal; (B) not sell, give, pledge, encumber, assign, grant any option for the sale of or otherwise transfer or dispose of, or enter into any agreement, arrangement or understanding to sell, any shares beneficially owned by him; (C) not deposit any shares into a voting trust or grant any proxies or enter into a voting agreement, power of attorney or voting trust with respect to the shares owned by him; and (D) not take any action that would make have the effect of preventing, disabling or delaying Mr. Yih from performing his obligations under the Consortium Agreement.

The Consortium Agreement will terminate if the Consortium Members are unable to agree either (i) as between themselves upon the material terms of the Proposed Transaction, or (ii) with the special committee on the material terms of the Proposed Transaction which the special committee agrees to recommend to the public shareholders of the Issuer. The Consortium Agreement shall also terminate upon the earlier to occur of (i) a written agreement among the Consortium Members to terminate the Consortium Agreement, and (ii) the closing of the Proposed Transaction.

The foregoing description of the material terms of the Consortium Agreement is qualified in its entirety by reference to such document, a copy of which has been filed as Exhibit 7.7 to this Schedule 13D.

On March 22, 2013, the Sponsor entered into a loan agreement (the “Loan Agreement”) with Mr. Yih and Ms. Au, pursuant to which the Sponsor will extend to Mr. Yih (i) a first tranche loan of US$2.5 million within 15 business days, and (ii) a second tranche loan of US$2.5 million upon and subject to completion of the Merger. 50% of the first tranche loan will become due in 2 years and the remaining 50% of the first tranche loan will become due 90 days thereafter. The second tranche loan will become due on the earlier of (a) the completion of an initial public offering of the retail business group of the Company, and (b) December 31, 2015. Both tranches accrue interest at a rate of 4.5% per annum, payable semi-annually in arrears.

The loans are secured by a pledge of all of the Shares beneficially owned by Mr. Yih pursuant to a share charge (the “Share Charge”), dated March 22, 2013, among the Sponsor, Mr. Yih and Ms. Au.

Proceeds of the loans are to be used by Mr. Yih for personal investment purposes. The Loan Agreement and the Share Charge are separate from the merger and other transactions contemplated under the Merger Agreement.

The foregoing description of the material terms of the Loan Agreement and the Share Charge is qualified in its entirety by reference to such documents, copies of which have been filed as Exhibit 7.8 and Exhibit 7.9 respectively to this Schedule 13D.

To the best knowledge of the Reporting Persons, except as provided herein, there are no other contracts, arrangements, understandings or relationships (legal or otherwise) among the Reporting Persons and between any of the Reporting Persons and any other person with respect to any securities of the Issuer.

 

Item 7. Material to Be Filed as Exhibits

 

Exhibit 7.1    Joint Filing Agreement by and among the Reporting Persons dated April 3, 2013
Exhibit 7.2    Equity Commitment Letter by FountainVest in favor of Parent dated March 22, 2013


Exhibit 7.3    Chairman Rollover Agreement by and between Mr. Yih and Parent dated March 22, 2013
Exhibit 7.4    Management Rollover Agreement by and between Management Shareholders and Parent dated March 22, 2013
Exhibit 7.5    Shi Rollover Agreement by and between Shi Shareholders and Parent dated March 22, 2013
Exhibit 7.6    Voting Agreement between Mr. Yih, the Management Shareholders, Shi Shareholders and Parent dated March 22, 2013
Exhibit 7.7    Consortium Agreement by and between Mr. Yih and the Sponsor dated August 13, 2012
Exhibit 7.8    Loan Agreement among Mr. Yih, Ms. Au and the Sponsor dated March 22, 2013
Exhibit 7.9    Share Charge among Mr. Yih, Ms. Au and the Sponsor dated March 22, 2013
Exhibit 7.10    Proposal to the Board of Directors of the Company dated August 13, 2012, incorporated herein by reference to Exhibit 99.2 to the Current Report on Form 6-K furnished by the Company to the SEC on August 17, 2012
Exhibit 7.11    Agreement and Plan of Merger by and among Parent, Merger Sub and the Company dated March 22, 2013, incorporated herein by reference to Exhibit 99.2 to the Current Report on Form 6-K furnished by the Company to the SEC on March 22, 2013


SIGNATURE

After reasonable inquiry and to the best of our knowledge and belief, the undersigned certify that the information set forth in this Schedule 13D is true, complete and correct.

Dated: April 3, 2013

 

Yu Chuan Yih

/s/ Yu Chuan Yih

Hon Tak Ringo Ng

/s/ Hon Tak Ringo Ng

Ka Man Au

/s/ Ka Man Au

Hoi Tsun Peter Au

/s/ Hoi Tsun Peter Au

Yuin Chiek Lye

/s/ Yuin Chiek Lye

Hoi Yee Vicky Chan

/s/ Hoi Yee Vicky Chan

Zhicheng Shi

/s/ Zhicheng Shi

Primeon, Inc.
By:  

/s/ Zhicheng Shi

Name:   Zhicheng Shi
Title:  
Hillside Financial
By:  

/s/ Zhicheng Shi

Name:   Zhicheng Shi
Title:  
Shilin Investments
By:  

/s/ Zhicheng Shi

Name:   Zhicheng Shi
Title:  


LIST OF EXHIBITS

 

Exhibit No.    Description
Exhibit 7.1    Joint Filing Agreement by and among the Reporting Persons dated April 3, 2013
Exhibit 7.2    Equity Commitment Letter by FountainVest in favor of Parent dated March 22, 2013
Exhibit 7.3    Chairman Rollover Agreement by and between Mr. Yih and Parent dated March 22, 2013
Exhibit 7.4    Management Rollover Agreement by and between Management Shareholders and Parent dated March 22, 2013
Exhibit 7.5    Shi Rollover Agreement by and between Shi Shareholders and Parent dated March 22, 2013
Exhibit 7.6    Voting Agreement between Mr. Yih, the Management Shareholders, Shi Shareholders and Parent dated March 22, 2013
Exhibit 7.7    Consortium Agreement by and between Mr. Yih and the Sponsor dated August 13, 2012
Exhibit 7.8    Loan Agreement among Mr. Yih, Ms. Au and the Sponsor dated March 22, 2013
Exhibit 7.9    Share Charge among Mr. Yih, Ms. Au and the Sponsor dated March 22, 2013
Exhibit 7.10    Proposal to the Board of Directors of the Company dated August 13, 2012, incorporated herein by reference to Exhibit 99.2 to the Current Report on Form 6-K furnished by the Company to the SEC on August 17, 2012
Exhibit 7.11    Agreement and Plan of Merger by and among Parent, Merger Sub and the Company dated March 22, 2013, incorporated herein by reference to Exhibit 99.2 to the Current Report on Form 6-K furnished by the Company to the SEC on March 22, 2013
EX-7.1 2 d512471dex71.htm EX-7.1 EX-7.1

EXHIBIT 7.1

Joint Filing Agreement

In accordance with Rule 13d-1(k) promulgated under the Securities Exchange Act of 1934, as amended, the undersigned hereby agree to the joint filing with all other Reporting Persons (as such term is defined in the Schedule 13D referred to below) on behalf of each of them of a statement on Schedule 13D (including amendments thereto) with respect to par value US$0.01 share of LJ International Inc., a British Virgin Islands company, and that this Agreement may be included as an Exhibit to such joint filing. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as of the 3rd day of April, 2013.

 

Yu Chuan Yih

/s/ Yu Chuan Yih

Hon Tak Ringo Ng

/s/ Hon Tak Ringo Ng

Ka Man Au

/s/ Ka Man Au

Hoi Tsun Peter Au

/s/ Hoi Tsun Peter Au

Yuin Chiek Lye

/s/ Yuin Chiek Lye

Hoi Yee Vicky Chan

/s/ Hoi Yee Vicky Chan

Zhicheng Shi

/s/ Zhicheng Shi

Primeon, Inc.
By:  

/s/ Zhicheng Shi

Name:   Zhicheng Shi
Title:  
Hillside Financial
By:  

/s/ Zhicheng Shi

Name:   Zhicheng Shi
Title:  
Shilin Investments
By:  

/s/ Zhicheng Shi

Name:   Zhicheng Shi
Title:  
EX-7.2 3 d512471dex72.htm EX-7.2 EX-7.2

Exhibit 7.2

EXECUTION VERSION

EQUITY COMMITMENT LETTER

FountainVest China Growth Fund, L.P.

FountainVest China Growth Capital Fund, L.P.

FountainVest China Growth Capital-A Fund, L.P.

190 Elgin Avenue

George Town, Grand Cayman KY1-9005

Cayman Islands

March 22, 2013

Flora Bloom Holdings

c/o

FountainVest China Growth Fund, L.P.

FountainVest China Growth Capital Fund, L.P.

FountainVest China Growth Capital-A Fund, L.P.

Ladies and Gentlemen:

This letter agreement sets forth the commitments of each of the parties set forth on Schedule A attached hereto (each, a “Sponsor Fund” and collectively, the “Sponsor Funds”), subject to the terms and conditions contained herein, to purchase certain equity interests of Flora Bloom Holdings, a newly formed exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”). It is contemplated that, pursuant to an Agreement and Plan of Merger (as amended, restated, supplemented or otherwise modified from time to time, the “Merger Agreement”) to be entered into among LJ International Inc. (the “Company”), Parent and Flora Fragrance Holdings Limited, a wholly-owned subsidiary of Parent (“Merger Sub”), Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Parent. Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Merger Agreement.

1. Commitment. This letter agreement confirms the commitment of each of the undersigned, severally and not jointly, subject to the terms and conditions set forth herein, to subscribe for (or cause to be subscribed for) equity securities of Parent in immediately available funds at or prior to the Closing for an aggregate cash purchase price equal to the percentage of the Aggregate Commitment set forth opposite such Sponsor Fund’s name on Schedule A hereto (such amount, with respect to each Sponsor Fund is such Sponsor Fund’s “Sponsor Fund Commitment”), which will be applied to (i) fund a portion of the Exchange Fund and any other amounts required to be paid pursuant to the Merger Agreement and (ii) pay related fees and expenses pursuant to the Merger Agreement; provided that (i) no Sponsor Fund shall, under any circumstances, be obligated to contribute more than its Sponsor Fund Commitment to Parent and the Sponsor Funds, collectively, shall not, under any circumstances, be obligated to contribute more than the Aggregate Commitment to Parent; and (ii) the liability of each Sponsor Fund hereunder shall not exceed its respective Sponsor Fund Commitment, and the liability of the Sponsor Funds, collectively, shall not exceed the Aggregate Commitment. The term “Aggregate Commitment” means an amount equal to $52,483,988. Each Sponsor Fund may effect the purchase of the equity interests of Parent directly or indirectly through one or more direct or


indirect Subsidiaries of such Sponsor Fund or any other private equity fund managed or advised by an affiliate of such Sponsor Fund, including, without limitation, Urban Prosperity Holding Limited. The amount of the Aggregate Commitment to be funded under this letter agreement may be reduced in an amount specified by Parent but only to the extent that it will be possible for Parent and Merger Sub to consummate the transactions contemplated by the Merger Agreement with the Sponsor Funds contributing less than the full amount of the Aggregate Commitment.

2. Conditions. The Aggregate Commitment, including the obligation of each Sponsor Fund to fund its Sponsor Fund Commitment, shall be subject to (i) the execution and delivery of the Merger Agreement by the Company, (ii) the satisfaction or waiver at the Closing of each of the conditions to Parent’s and Merger Sub’s obligations to consummate the Transactions, (iii) either the contemporaneous consummation of the Closing or the obtaining by the Company in accordance with the terms and conditions of Section 9.07(b) of the Merger Agreement of an order requiring Parent to cause the Financing to be funded and to consummate the Merger, and (iv) the contemporaneous closing of the subscription of newly issued Parent shares and the cancellation of the Company Shares by the Rollover Shareholders on the terms and conditions of each Rollover Agreement.

3. Enforceability. This letter agreement may only be enforced by (i) Parent at the direction of the Sponsor Funds or (ii) the Company solely in accordance with, and to the extent expressly permitted by, Section 9.07 of the Merger Agreement. Neither Parent’s, Merger Sub’s nor the Company’s creditors shall have the right to enforce this letter agreement or to cause Parent to enforce this letter agreement.

4. No Modification; Entire Agreement. This letter agreement may not be amended or otherwise modified without the prior written consent of Parent and the Sponsor Funds. Together with the Merger Agreement and the Confidentiality Agreement (as defined in the Merger Agreement), this letter agreement constitutes the sole agreement, and supersedes all prior agreements, understandings and statements, written or oral, between the Sponsor Funds or any of their respective affiliates, on the one hand, and Parent or any of its affiliates, on the other, with respect to the transactions contemplated hereby. Except as expressly permitted in Section 1 and Section 12 hereof, no transfer of any rights or obligations hereunder shall be permitted without the consent of Parent and the Sponsor Funds. Any transfer in violation of the preceding sentence shall be null and void.

5. Governing Law; Jurisdiction. This letter agreement shall be deemed to be made in and in all respects shall be interpreted, construed and governed by and in accordance with the Law of the State of New York excluding (to the greatest extent a New York court would permit) any rule of law that would cause the application of the laws of any jurisdiction other than the State of New York. The parties hereby irrevocably submit to the personal jurisdiction of the courts of the State of New York located in the Borough of Manhattan, and the federal courts of the United States of America located in the State of New York, Borough of Manhattan, solely in respect of the interpretation and enforcement of the provisions of this letter agreement, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this letter agreement may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding

 

2


shall be heard and determined in such a New York State or federal court. The parties hereby consent to and grant any such court jurisdiction over the person of such parties and, to the extent permitted by Law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in herein or in such other manner as may be permitted by Law shall be valid and sufficient service thereof.

6. Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this letter agreement is likely to involve complicated and difficult issues, and therefore each such party hereby irrevocably and unconditionally waives any right such party may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or relating to this letter agreement, or any of the transactions contemplated by this letter agreement. Each party certifies and acknowledges that (i) no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver, (ii) each party understands and has considered the implications of this waiver, (iii) each party makes this waiver voluntarily and (iv) each party has been induced to enter into this letter agreement by, among other things, the mutual waivers and certifications expressed above.

7. Counterparts. This letter agreement may be executed in any number of counterparts (including by email of PDF or scanned versions or by facsimile), each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.

8. Third Party Beneficiaries. The Company is a third party beneficiary of this letter agreement solely to specifically enforce the terms of this letter agreement as set forth in Section 3(ii) of this letter agreement, and shall have no other remedies (contractual, legal or equitable). Except as provided in the immediately preceding sentence, the parties hereby agree that their respective representations, warranties and covenants set forth herein are solely for the benefit of the other party hereto, in accordance with and subject to the terms of this letter agreement, and this letter agreement is not intended to, and does not, confer upon any Person other than the parties hereto any rights or remedies hereunder or any rights to enforce the Aggregate Commitment or any provision of this letter agreement.

9. Confidentiality. This letter agreement shall be treated as confidential and is being provided to Parent solely in connection with the Merger. This letter agreement may not be used, circulated, quoted or otherwise referred to in any document, except with the written consent of each Sponsor Fund and Parent; provided, however, that each of the Sponsor Funds and Parent may disclose the existence and content of this letter agreement to the extent required by Law, the applicable rules of any national securities exchange or in connection with any SEC filings relating to the Merger, and the Sponsor Funds may disclose the existence and content of this letter agreement to any Sponsor Fund Affiliate (as defined below). Notwithstanding the foregoing, a copy of this letter agreement may be provided to the Company if the Company agrees to treat this letter agreement as confidential. If provided to the Company, the Company may disclose the existence and content of this letter agreement (i) to its affiliates and representatives who need to know the existence of this letter agreement and are subject to confidentiality obligations with each Sponsor Fund and/or Parent; (ii) in connection with any litigation relating to the Merger, the Merger Agreement, and the transactions contemplated thereby as permitted by or provided for in the Merger Agreement; and (iii) in any U.S. Securities and Exchange Commission filings relating to the Merger if required under U.S. securities laws.

 

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10. Termination. This letter, and the obligation of each Sponsor Fund to fund its Sponsor Fund Commitment will terminate automatically and immediately upon the earliest to occur of (a) the Closing, (b) the first anniversary of the date hereof, (c) the valid termination of the Merger Agreement in accordance with its terms or (d) the Company or any of its affiliates asserting a claim against any Sponsor Fund or any affiliate thereof in connection with the Merger Agreement or any of the transactions contemplated hereby or thereby (other than as expressly permitted by clause (ii) of Section 3 of this letter agreement).

11. No Recourse. Notwithstanding anything that may be expressed or implied in this letter agreement, or any document or instrument delivered in connection herewith, by its acceptance of the benefits of this letter agreement, the addressee covenants, agrees and acknowledges that no person other than the undersigned has any obligation hereunder and that, notwithstanding that any of the undersigned may be a partnership or limited liability company, the addressee has no right of recovery under this letter agreement or under any document or instrument delivered in connection herewith, or for any claim based on, in respect of, or by reason of, such obligations or their creation, against, and no personal liability shall attach to, the former, current or future equity holders, controlling persons, directors, officers, employees, agents, advisors, representatives, affiliates, members, managers, general or limited partners or assignees of the undersigned or any former, current or future stockholder, controlling person, director, officer, employee, general or limited partner, member, manager, affiliate, agent, advisors or representatives of any of the foregoing (each, a “Sponsor Fund Affiliate”), through the undersigned or otherwise, whether by or through attempted piercing the corporate veil, by or through a claim by or on behalf of Parent against the Sponsor Fund Affiliates, whether by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute, regulation or applicable Law, or otherwise.

12. Assignment. The rights, interests or obligations under this letter agreement may not be assigned and/or delegated, in whole or in part, by any party or by operation of Law or otherwise without the prior written consent of the other party, except that, without the prior written consent of Parent, the rights, interests or obligations under this letter agreement may be assigned and/or delegated, in whole or in part, by any Sponsor Fund to one or more of its affiliates or to one or more private equity funds sponsored or managed by any such affiliate, provided that the applicable Sponsor Fund will remain liable hereunder. Any attempted assignment in violation of this Section 12 shall be null and void.

13. Severability. Any term or provision of this letter agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this letter agreement in any other jurisdiction. If any provision of this letter agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.

[Remainder of page intentionally left blank]

 

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Sincerely,

 

FOUNTAINVEST CHINA GROWTH FUND, L.P.
By FountainVest China Growth Partners GP1, L.P., its general partner
By FountainVest China Growth Partners GP Ltd, its general partner
By:  

/s/ Kui Tang

  Name:   Kui Tang
  Title:   Director
FOUNTAINVEST CHINA GROWTH CAPITAL FUND, L.P.
By FountainVest China Growth Partners GP1, L.P., its general partner
By FountainVest China Growth Partners GP Ltd, its general partner
By:  

/s/ Kui Tang

  Name:   Kui Tang
  Title:   Director
FOUNTAINVEST CHINA GROWTH CAPITAL-A FUND, L.P.
By FountainVest China Growth Partners GP1, L.P., its general partner
By FountainVest China Growth Partners GP Ltd, its general partner
By:  

/s/ Kui Tang

  Name:   Kui Tang
  Title:   Director

[SIGNATURE PAGE – EQUITY COMMITMENT LETTER]


Agreed to and accepted:

 

FLORA BLOOM HOLDINGS
By:  

/s/ Neil Gray

  Name:   Neil Gray
  Title:   Director

 

[SIGNATURE PAGE – EQUITY COMMITMENT LETTER]


SCHEDULE A

 

Sponsor Fund

   Sponsor Fund  Commitment
(% of Aggregate Commitment)
 

FountainVest China Growth Fund, L.P.

   US$  31,108,833.00 (59.272999 %) 

FountainVest China Growth Capital Fund, L.P.

   US$  20,892,836.00 (39.808019 %) 

FountainVest China Growth Capital-A Fund, L.P.

   US$ 482,319.00 (0.918982 %) 

 

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EX-7.3 4 d512471dex73.htm EX-7.3 EX-7.3

Exhibit 7.3

EXECUTION VERSION

CHAIRMAN ROLLOVER AGREEMENT

This CHAIRMAN ROLLOVER AGREEMENT (this “Agreement”) is made and entered into as of March 22, 2013 by and among Flora Bloom Holdings, a Cayman Islands exempted company (“Parent”), and Mr. Yu Chuan Yih (the “Rollover Person”). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement (as defined below).

RECITALS

WHEREAS, concurrently herewith Parent, Flora Fragrance Holdings Limited, a British Virgin Islands business company and a wholly-owned subsidiary of Parent (“Merger Sub”), and LJ International Inc., a business company with limited liability incorporated under the laws of the British Virgin Islands (the “Company”), are entering into an Agreement and Plan of Merger (as may be amended, supplemented or otherwise modified, the “Merger Agreement”), pursuant to which Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Parent (the “Merger”);

WHEREAS, as of date hereof, the Rollover Person is the registered holder and “beneficial owner” (within the meaning of Rule 13d-3 under the Exchange Act) of the number of ordinary shares, par value US$0.01 per share, of the Company (each, a “Company Share”) as set forth under the heading “Shares – Company Shares” opposite the Rollover Person’s name on Schedule A hereto (such Shares, the “Rollover Shares”);

WHEREAS, in connection with the consummation of the transactions contemplated by the Merger Agreement, including the Merger, the Rollover Person agrees to (a) the cancellation of his Rollover Shares for nil consideration in the Merger, and (b) subscribe for newly issued ordinary shares of Parent, par value US$0.0001 per share (each, a “Parent Share” and collectively, the “Parent Shares”) immediately prior to the Closing;

WHEREAS, in order to induce Parent and Merger Sub to enter into the Merger Agreement and consummate the transactions contemplated thereby, including the Merger, the Rollover Person is entering into this Agreement; and

WHEREAS, the Rollover Person acknowledges that Parent and Merger Sub are entering into the Merger Agreement in reliance on the representations, warranties, covenants and other agreements of the Rollover Person as set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, Parent and the Rollover Person hereby agree as follows:

1. Rollover Shares.

(a) Subscription of Parent Shares. Immediately prior to the Closing, Parent shall issue to the Rollover Person, and the Rollover Person (or, if designated by the Rollover Person in writing, in the name of an affiliate of the Rollover Person) shall subscribe for, the number of Parent Shares at a subscription price of US$0.0001 per share as set forth under the heading “Shares – Parent Shares” opposite the Rollover Person’s name in Schedule A hereto. The Rollover Person hereby acknowledges and agrees that he shall have no right to any Merger Consideration in respect of his Rollover Shares.


(b) Cancellation of Rollover Shares. Subject to the terms and conditions set forth herein, the Rollover Person agrees that his Rollover Shares shall be cancelled at the Closing for nil consideration in connection with the Merger.

(c) Closing. Subject to the satisfaction in full (or waiver) of all of the conditions set forth in Sections 7.01 and 7.02 of the Merger Agreement (other than conditions that by their nature are to be satisfied or waived, as applicable, at the Closing), the closing of the subscription and issuance of Parent Shares contemplated hereby shall take place immediately prior to the Closing.

2. Irrevocable Election.

(a) The execution of this Agreement by the Rollover Person evidences, subject to Section 6 hereof, the irrevocable election and agreement by the Rollover Person to subscribe for Parent Shares and agree to the cancellation of his Rollover Shares on the terms and conditions set forth herein. In furtherance of the foregoing, subject to that certain share charge dated March 22, 2013 between the Rollover Person as chargor and Urban Prosperity Holding Limited as chargee (the “Share Charge”), the Rollover Person covenants and agrees that from the date hereof until any termination of this Agreement pursuant to Section 5 hereof, the Rollover Person shall not, directly or indirectly, (i) tender any Rollover Shares into any tender or exchange offer, (ii) sell (constructively or otherwise), transfer, pledge, hypothecate, grant, encumber, assign or otherwise dispose of (collectively, “Transfer”), or enter into any Contract, option or other arrangement or understanding with respect to the Transfer of, any Rollover Shares or any right, title or interest thereto or therein (including by operation of law) including, without limitation, any swap transaction, option, warrant, forward purchase or sale transaction, futures transaction, cap transaction, floor transaction, collar transaction or any other similar transaction (including any option with respect to any such transaction) or combination of any such transactions, in each case involving any Rollover Shares and which (x) has, or would reasonably be expected to have, the effect of reducing or limiting the Rollover Person’s economic interest in such Rollover Shares and/or (y) grants a third party the right to vote or direct the voting of such Rollover Shares (any such transaction, a “Derivative Transaction”), (iii) deposit any Rollover Shares into a voting trust or grant any proxy or power of attorney or enter into a voting agreement (other than that certain Voting Agreement of even date herewith by and among Parent and the Rollover Person (the “Voting Agreement”)) with respect to any Rollover Shares, (iv) knowingly take any action that would make any representation or warranty of the Rollover Person set forth in this Agreement untrue or incorrect or would prevent or delay the

 

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Rollover Person from performing any of his obligations under this Agreement, or (v) agree (whether or not in writing) to take any of the actions referred to in the foregoing clauses (i) through (iv). Any purported Transfer in violation of this paragraph shall be void.

(b) The Rollover Person further covenants and agrees that he shall promptly (and in any event within forty-eight (48) hours) notify Parent of any new Shares with respect to which beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) is acquired by the Rollover Person, including, without limitation, by purchase, as a result of a stock dividend, stock split, recapitalization, combination, reclassification, exchange or change of such shares, or upon exercise or conversion of any securities of the Company after the date hereof.

3. Representations and Warranties of the Rollover Person. To induce Parent to issue the Parent Shares and Parent and Merger Sub to enter into the Merger Agreement and consummate the transactions contemplated thereby, except as provided for and in accordance with the Share Charge, the Rollover Person makes the following representations and warranties to Parent, each and all of which shall be true and correct as of the date of this Agreement and as of the Closing:

(a) Ownership of Shares. (i) The Rollover Person (A) is the beneficial owner of, and has good and valid title to, the Rollover Shares, free and clear of Liens other than as created by this Agreement and the Voting Agreement, and (B) has sole or shared (together with affiliates controlled by the Rollover Person only) voting power, power of disposition, and power to demand dissenter’s rights (if applicable), in each case with respect to all of the Rollover Shares, with no limitations, qualifications, or restrictions on such rights, subject to applicable United States federal securities laws, laws of the British Virgin Islands, and the terms of this Agreement and the Voting Agreement; (ii) the Rollover Shares are not subject to any voting trust agreement or other Contract to which the Rollover Person is a party restricting or otherwise relating to the voting or Transfer of the Rollover Shares other than this Agreement and the Voting Agreement; and (iii) the Rollover Shares are not Transferred pursuant to any Derivative Transaction. As of the date hereof, other than the Rollover Shares, the Rollover Person does not own, beneficially or of record, any Shares, Company Options, other securities of the Company, or any direct or indirect interest in any such securities (including by way of derivative securities). The Rollover Person has not appointed or granted any proxy or power of attorney that is still in effect with respect to any Rollover Shares, except as contemplated by this Agreement or the Voting Agreement.

(b) Organization, Standing and Authority. The Rollover Person has full legal power and capacity to execute and deliver this Agreement and to perform the Rollover Person’s obligations hereunder. This Agreement has been duly and validly executed and delivered by the Rollover Person and, assuming due authorization, execution and delivery by Parent, constitutes a legal, valid and binding obligation of the Rollover Person, enforceable against the Rollover Person in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law). If the Rollover Person is married, and any of the Rollover Shares of the Rollover Person constitute community property or otherwise need spousal or other approval for

 

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this Agreement to be legal, valid and binding, this Agreement has been duly and validly executed and delivered by the Rollover Person’s spouse and, assuming due authorization, execution and delivery by Parent, constitutes a legal, valid and binding obligation of the Rollover Person’s spouse, enforceable against the Rollover Person’s spouse in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

(c) Consents and Approvals; No Violations. Except for the applicable requirements of the Exchange Act, (i) no filing with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary on the part of the Rollover Person for the execution, delivery and performance of this Agreement by the Rollover Person or the consummation by the Rollover Person of the transactions contemplated hereby, and (ii) neither the execution, delivery or performance of this Agreement by the Rollover Person nor the consummation by the Rollover Person of the transactions contemplated hereby, nor compliance by the Rollover Person with any of the provisions hereof shall (A) result in any breach or violation of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on property or assets of the Rollover Person pursuant to any Contract to which the Rollover Person is a party or by which the Rollover Person or any property or asset of the Rollover Person is bound or affected, or (B) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Rollover Person or any of the Rollover Person’s properties or assets.

(d) Litigation. There is no Action pending against the Rollover Person or, to the knowledge of the Rollover Person, any other Person or, to the knowledge of the Rollover Person, threatened against the Rollover Person or any other Person that restricts or prohibits (or, if successful, would restrict or prohibit) the performance by the Rollover Person of his obligations under this Agreement.

(e) Reliance. The Rollover Person understands and acknowledges that Parent and Merger Sub are entering into the Merger Agreement in reliance upon the Rollover Person’s execution and delivery of this Agreement and the representations and warranties of the Rollover Person contained herein.

(f) Receipt of Information. The Rollover Person has been afforded the opportunity to ask such questions as he has deemed necessary of, and to receive answers from, representatives of Parent and Merger Sub concerning the terms and conditions of the transactions contemplated hereby and the merits and risks of owning Parent Shares. The Rollover Person acknowledges that he has been advised to discuss with his own counsel the meaning and legal consequences of the Rollover Person’s representations and warranties in this Agreement and the transactions contemplated hereby.

4. Representations and Warranties of Parent. Parent makes the following representations and warranties to the Rollover Person, each and all of which shall be true and correct as of the date of this Agreement and as of the Closing:

(a) Organization, Standing and Authority. Parent is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation and has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly and validly executed and delivered by Parent and, assuming due authorization, execution and delivery by the Rollover Person, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

 

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(b) Consents and Approvals; No Violations. Except for the applicable requirements of the Exchange Act and Laws of the Cayman Islands, (i) no filing with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary on the part of Parent for the execution, delivery and performance of this Agreement by Parent or the consummation by Parent of the transactions contemplated hereby, and (ii) neither the execution, delivery or performance of this Agreement by Parent nor the consummation by Parent of the transactions contemplated hereby nor compliance by Parent with any of the provisions hereof shall (A) conflict with or violate any provision of the organizational documents of Parent, (B) result in any breach or violation of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on such property or asset of Parent pursuant to, any Contract to which Parent is a party or by which Parent or any property or asset of Parent is bound or affected, or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent or any of Parent’s properties or assets.

(c) Issuance of Parent Shares. The Parent Shares to be issued under this Agreement, when issued and delivered in accordance with the terms hereof and payment of the subscription price therefor, are duly authorized, validly issued, fully paid and nonassessable, and free and clear of all Liens, other than restrictions arising under applicable securities laws and the Parent Shareholders Agreement (as defined below).

5. Other Covenants and Agreements.

(a) The Rollover Person shall bear and pay, reimburse, indemnify and hold harmless Parent, Merger Sub and any affiliate thereof (collectively, the “Indemnified Parties”) for, from and against (i) any and all liabilities for PRC Taxes imposed upon, incurred by or asserted against any of the Indemnified Parties, arising from or attributable to the receipt of Parent Shares by the Rollover Person or his affiliates pursuant to this Agreement (collectively, the “Tax Liabilities”) and (ii) any reasonable costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, interests, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of the Tax Liabilities. For the avoidance of doubt, the term “Tax Liabilities” shall include any and all liability for PRC Taxes suffered by any of the Indemnified Parties as a result of the payments described in clause (i) above, including without limitation, any liability for withholding Taxes.

 

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(b) The Rollover Person shall negotiate in good faith with the relevant parties the terms and conditions of a shareholders agreement to be entered into by the Rollover Person and Parent, among other parties, at the Closing (the “Parent Shareholders Agreement”).

(c) The Rollover Person, if deemed a PRC resident (as defined under SAFE Circular 75) and subject to any of the registration or reporting requirements of SAFE Circular 75, shall, as soon as practicable after the date hereof, submit an application to the State Administration of Foreign Exchange (“SAFE”) for the registration or amendment registration of his holding of Company Shares (whether directly or indirectly) in the Company in accordance with the requirements of SAFE Circular 75 (or any successor Law, rule or regulation) and complete such registration prior to the Closing.

6. Termination. This Agreement, and the obligation of the Rollover Person to the cancellation of the Rollover Shares, will terminate immediately upon the valid termination of the Merger Agreement in accordance with its terms; provided, that this Section 6 and Section 8 shall survive the termination of this Agreement, and the parties hereto shall continue to be liable for breaches of this Agreement occurring prior to the termination of this Agreement.

7. Further Assurances. The Rollover Person hereby covenants that, from time to time, the Rollover Person will do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, such further acts, conveyances, transfers, assignments, powers of attorney and assurances necessary to cancel all of the Rollover Shares in accordance with the terms of this Agreement.

8. Miscellaneous.

(a) Amendments and Modification. This Agreement may not be amended, altered, supplemented or otherwise modified except upon the execution and delivery of a written agreement executed by each party hereto.

(b) Waiver. No failure or delay of any party hereto in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have hereunder. Any agreement on the part of a party hereto to any such waiver shall be valid only if set forth in a written instrument executed and delivered by such party.

(c) Survival of Representations and Warranties. All representations and warranties of the Rollover Person and Parent contained herein shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

 

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(d) Notices. All notices and other communications hereunder shall be in writing (in the English language) and shall be deemed duly given (i) upon receipt if delivered personally, or if by email or facsimile, upon confirmation of receipt by email or facsimile, (ii) one Business Day after being sent by express courier service, or (iii) three Business Days after being sent by registered or certified mail, return receipt requested. All notices hereunder shall be delivered to the addresses set forth below or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

If to the Rollover Person, in accordance with the contact information set forth next to the Rollover Person’s name on Schedule A hereto.

If to Parent:

Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue

George Town

Grand Cayman KY1-9005

Cayman Islands

with a copy to:

Mr. Yu Chuan Yih

c/o LJ International Inc.

Unit #12, 12/F, Block A

Focal Industrial Centre

21 Man Lok Street

Hung Hom, Kowloon, Hong Kong

Facsimile: +86 755 2526 0329

Email: yih@ljintl.com

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

Sidley Austin LLP

Suite 1901, Shui On Plaza

No. 333 Middle Huai Hai Road

Shanghai 200021

China

Attention: Mr. Joseph Chan

Facsimile: +86 21 5306 8966

Email: joseph.chan@sidley.com

and

Urban Prosperity Holding Limited

190 Elgin Avenue

George Town

Grand Cayman KY1-9005

Cayman Islands

 

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with a copy to:

FountainVest Partners (Asia) Limited

Suite 705-708, ICBC Tower

3 Garden Road

Central, Hong Kong

Attention: Mr. George Chuang / Mr. Edward Yu / Mr. Brian Lee

Facsimile: +852 3107 2490

Email: georgechuang@fountainvest.com / edwardyu@fountainvest.com / brianlee@fountainvest.com

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

Fried, Frank, Harris, Shriver & Jacobson

1601 Chater House

8 Connaught Road Central

Hong Kong

Attention: Mr. Douglas Freeman / Mr. Victor Chen

Facsimile: +852 3760 3611

E-mail: douglas.freeman@friedfrank.com / victor.chen@friedfrank.com

(e) Entire Agreement. This Agreement (together with the Merger Agreement, the Consortium Agreement dated August 13, 2012 by and between Urban Prosperity Holding Limited, an affiliate of FountainVest Partners, and the Rollover Person and the Voting Agreement to the extent referred to in this Agreement) constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and supersedes all other prior agreements and understandings, both written and oral, among the parties, with respect to the subject matter hereof.

(f) Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to or shall confer upon any person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement, except as specifically set forth in this Agreement, provided that, the Company is an express third party beneficiary of the covenant in Section 1, and assuming full performance by the Rollover Person thereof, shall have the right directly to enforce specifically Section 1 of this Agreement against the Rollover Person and Parent in accordance with, and to the extent expressly permitted by, Section 9.07 of the Merger Agreement.

(g) Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York, without regard to (to the greatest extent a New York court would permit) any applicable conflicts of law principles that would cause the application of the laws of any other jurisdiction.

 

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(h) Jurisdiction; Enforcement. The parties hereto agree that any Action brought by any party hereto to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any State of New York or United States Federal court sitting in the Borough of Manhattan, the City of New York. Each party hereto submits to the jurisdiction of any such court in any Action seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated hereby, and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such Action. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such Action in any such court or that any such Action brought in any such court has been brought in an inconvenient forum.

(i) Specific Performance. The parties hereto acknowledge and agree that monetary damages would not be an adequate remedy in the event that any covenant or agreement in this Agreement is not performed in accordance with its terms, and therefore agree that, in addition to and without limiting any other remedy or right available, each party hereto will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof. Each party hereto agrees not to oppose the granting of such relief in the event a court determines that such a breach has occurred, and to waive any requirement for the securing or posting of any bond in connection with such remedy. All rights, powers, and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party hereto shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.

(j) Assignment; Binding Effect. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Parent may assign this Agreement (in whole but not in part) in connection with a permitted assignment of the Merger Agreement by Parent. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns and, in the case of the Rollover Person, his estate, heirs, beneficiaries, personal representatives and executors.

(k) Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

 

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(l) Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO TRIAL BY JURY IN ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENTS OR INSTRUMENTS REFERRED TO IN THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF EACH OF THE PARTIES HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.

(m) Counterparts. This Agreement may be executed in two or more counterparts, and by facsimile or, pdf format, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other party.

(n) No Presumption Against Drafting Party. Each of the parties to this Agreement acknowledges that it has been represented by independent counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.

 

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IN WITNESS WHEREOF, Parent and the Rollover Person have caused to be executed or executed this Agreement as of the date first written above.

 

PARENT:
FLORA BLOOM HOLDINGS
By:  

/s/ Neil Gray

  Name:   Neil Gray
  Title:   Director

[SIGNATURE PAGE – CHAIRMAN ROLLOVER AGREEMENT]


ROLLOVER PERSON:
YU CHUAN YIH

/s/ Yu Chuan Yih

[SIGNATURE PAGE – CHAIRMAN ROLLOVER AGREEMENT]


Schedule A

 

Rollover Person

  

Address and Facsimile

   Shares  
      Company Shares     Parent Shares  

Yu Chuan Yih

  

c/o LJ International Inc.

Unit #12, 12/F, Block A

Focal Industrial Centre

21 Man Lok Street

Hung Hom, Kowloon, Hong Kong

Facsimile: +852 2764 3783

     3,390,053     3,390,053   

 

* 1,855,700 of the 3,390,053 Company Shares are held by Ka Man Au as a nominee for the Rollover Person (such Company Shares, the “Nominee Shares”). Immediately after the date hereof and in any event prior to the Closing, the Rollover Person shall procure that the Nominee Shares be removed from The Depositary Trust and Clearing Corporation (DTC) System and be registered in the name of the Rollover Person on the share register of the Company.

 

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EX-7.4 5 d512471dex74.htm EX-7.4 EX-7.4

Exhibit 7.4

EXECUTION VERSION

MANAGEMENT ROLLOVER AGREEMENT

This MANAGEMENT ROLLOVER AGREEMENT (this “Agreement”) is made and entered into as of March 22, 2013 by and among Flora Bloom Holdings, a Cayman Islands exempted company (“Parent”), and the individuals listed on Schedule A hereto (collectively, the “Rollover Persons” and each, a “Rollover Person”). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement (as defined below).

RECITALS

WHEREAS, concurrently herewith Parent, Flora Fragrance Holdings Limited, a British Virgin Islands business company and a wholly-owned subsidiary of Parent (“Merger Sub”), and LJ International Inc., a business company with limited liability incorporated under the laws of the British Virgin Islands (the “Company”), are entering into an Agreement and Plan of Merger (as may be amended, supplemented or otherwise modified, the “Merger Agreement”), pursuant to which Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Parent (the “Merger”);

WHEREAS, as of date hereof, each of the Rollover Persons (1) is the registered holder and “beneficial owner” (within the meaning of Rule 13d-3 under the Exchange Act) of the number of ordinary shares, par value US$0.01 per share, of the Company (each, a “Company Share”) as set forth under the heading “Shares – Company Shares” opposite such Rollover Person’s name on Schedule A hereto (such Shares, the “Rollover Shares”), and/or (2) holds the number of Company Options, each of which is exercisable to acquire one Company Share, as set forth under the heading “Options – Company Options – Number” opposite such Rollover Person’s name on Schedule A hereto (such Company Options, the “Rollover Options”);

WHEREAS, in connection with the consummation of the transactions contemplated by the Merger Agreement, including the Merger, each of the Rollover Persons (1) agrees to (a) the cancellation of his or her Rollover Shares for nil consideration in the Merger, and (b) subscribe for newly issued ordinary shares of Parent, par value US$0.0001 per share (each, a “Parent Share” and collectively, the “Parent Shares”) immediately prior to the Closing, and (2) desires to enter into this Agreement with Parent in connection with the treatment of the Rollover Options in the Merger;

WHEREAS, in order to induce Parent and Merger Sub to enter into the Merger Agreement and consummate the transactions contemplated thereby, including the Merger, the Rollover Persons are entering into this Agreement; and

WHEREAS, each Rollover Person acknowledges that Parent and Merger Sub are entering into the Merger Agreement in reliance on the representations, warranties, covenants and other agreements of such Rollover Person as set forth in this Agreement.


AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, Parent and the Rollover Persons hereby agree as follows:

1. Rollover Shares.

(a) Subscription of Parent Shares. Immediately prior to the Closing, Parent shall issue to each Rollover Person that is a registered holder or beneficial owner of a Rollover Share, and such Rollover Person (or, if designated by such Rollover Person in writing, in the name of an affiliate of such Rollover Person) shall subscribe for, the number of Parent Shares at the ratio of one Rollover Share to one Parent Share and at a subscription price of US$0.0001 per share as set forth under the heading “Shares – Parent Shares” opposite such Rollover Person’s name in Schedule A hereto. Each Rollover Person hereby acknowledges and agrees that such Rollover Person shall have no right to any Merger Consideration in respect of his or her Rollover Shares.

(b) Cancellation of Rollover Shares. Subject to the terms and conditions set forth herein, each Rollover Person agrees that his or her Rollover Shares shall be cancelled at the Closing for nil consideration in connection with the Merger.

(c) Closing. Subject to the satisfaction in full (or waiver) of all of the conditions set forth in Sections 7.01 and 7.02 of the Merger Agreement (other than conditions that by their nature are to be satisfied or waived, as applicable, at the Closing), the closing of the subscription and issuance of Parent Shares contemplated hereby shall take place immediately prior to the Closing.

2. Rollover Options.

(a) Grant of Parent Options. In respect of each Rollover Option held by a Rollover Person immediately prior to the Closing, Parent shall grant to such Rollover Person as soon as reasonably practicable following the Closing an option exercisable to acquire one Parent Share (each, a “Parent Option”) for each such Rollover Option as set forth in Schedule A hereto. Each Parent Option granted to such Rollover Person shall have an exercise or purchase price equal the exercise or purchase price of the corresponding Rollover Option. Such Parent Option shall otherwise retain the same grant date, the same vesting or exercise schedule, the same term and expiration date and substantially the same other material terms and conditions as the Rollover Option held by such Rollover Person; provided that notwithstanding anything in this Agreement to the contrary, all Parent Options shall be issued under and governed by (i) a share incentive plan of Parent (the “Parent Incentive Option”) to be adopted by the Parent as soon as reasonably practicable following the Closing with customary terms and conditions of the share incentive plans of this type, and (ii) one or more new option agreement(s) to be entered into by the Rollover Persons and Parent. In the event any Rollover Options held by any Rollover Person are forfeited, expired or otherwise become void prior to the Closing, Schedule A hereto shall promptly be updated to reflect and account for any such event.

(b) Cancellation of Rollover Options. Subject to the terms and conditions set forth herein, each Rollover Person agrees that his or her Rollover Options shall be cancelled at the Closing and become null and void in return for the grant of the Parent Options pursuant to Section 2(a) above.

 

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3. Irrevocable Election.

(a) The execution of this Agreement by each Rollover Person evidences, subject to Section 7 hereof, the irrevocable election and agreement by such Rollover Person to subscribe for Parent Shares and/or receive Parent Options and agree to the cancellation of his or her Rollover Shares and Rollover Options on the terms and conditions set forth herein, as applicable. In furtherance of the foregoing, each Rollover Person covenants and agrees, severally and not jointly, that from the date hereof until any termination of this Agreement pursuant to Section 6 hereof, such Rollover Person shall not, directly or indirectly, (i) tender any Rollover Shares into any tender or exchange offer, (ii) sell (constructively or otherwise), transfer, pledge, hypothecate, grant, encumber, assign or otherwise dispose of (collectively, “Transfer”), or enter into any Contract, option or other arrangement or understanding with respect to the Transfer of, any Rollover Shares or Rollover Options or any right, title or interest thereto or therein (including by operation of law) including, without limitation, any swap transaction, option, warrant, forward purchase or sale transaction, futures transaction, cap transaction, floor transaction, collar transaction or any other similar transaction (including any option with respect to any such transaction) or combination of any such transactions, in each case involving any Rollover Shares or Rollover Options which (x) has, or would reasonably be expected to have, the effect of reducing or limiting such Rollover Person’s economic interest in such Rollover Shares or Rollover Options and/or (y) grants a third party the right to vote or direct the voting of such Rollover Shares (any such transaction, a “Derivative Transaction”), (iii) deposit any Rollover Shares into a voting trust or grant any proxy or power of attorney or enter into a voting agreement (other than that certain Voting Agreement of even date herewith by and among Parent and such Rollover Person (the “Voting Agreement”)) with respect to any Rollover Shares, (iv) knowingly take any action that would make any representation or warranty of such Rollover Person set forth in this Agreement untrue or incorrect or would prevent or delay such Rollover Person from performing any of his or her obligations under this Agreement, or (v) agree (whether or not in writing) to take any of the actions referred to in the foregoing clauses (i) through (iv). Any purported Transfer in violation of this paragraph shall be void.

(b) Each Rollover Person further covenants and agrees, severally and not jointly, that such Rollover Person (i) shall promptly (and in any event within forty-eight (48) hours) notify Parent of any new Shares with respect to which beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) is acquired by such Rollover Person, including, without limitation, by purchase, as a result of a stock dividend, stock split, recapitalization, combination, reclassification, exchange or change of such shares, or upon exercise or conversion of any securities of the Company after the date hereof, and (ii) shall not exercise any of his or her Rollover Options from the date hereof until the cancellation thereof pursuant to Section 2(b) hereof or any termination of this Agreement pursuant to Section 6 hereof.

 

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4. Representations and Warranties of the Rollover Persons. To induce Parent to issue the Parent Shares and grant the Parent Options and Parent and Merger Sub to enter into the Merger Agreement and consummate the transactions contemplated thereby, each Rollover Person makes, severally and not jointly, with respect to itself the following representations and warranties to Parent, each and all of which shall be true and correct as of the date of this Agreement and as of the Closing:

(a) Ownership of Shares and/or Options. (i) Such Rollover Person (A) is the beneficial owner of, and has good and valid title to, the Rollover Shares and/or the Rollover Options (as applicable), free and clear of Liens other than as created by this Agreement and the Voting Agreement, and (B) to the extent such Rollover Person holds or beneficially owns any Rollover Shares, has sole or shared (together with affiliates controlled by such Rollover Person only) voting power, power of disposition, and power to demand dissenter’s rights (if applicable), in each case with respect to all such Rollover Shares, with no limitations, qualifications, or restrictions on such rights, subject to applicable United States federal securities laws, laws of the British Virgin Islands, laws of the People’s Republic of China and the terms of this Agreement and the Voting Agreement; (ii) to the extent such Rollover Person holds or beneficially owns any Rollover Shares, such Rollover Shares are not subject to any voting trust agreement or other Contract to which such Rollover Person is a party restricting or otherwise relating to the voting or Transfer of the Rollover Shares other than this Agreement and the Voting Agreement; and (iii) to the extent such Rollover Person holds or beneficially owns any Rollover Shares and/or Rollover Options, the Rollover Shares and/or Rollover Options are not Transferred pursuant to any Derivative Transaction. As of the date hereof, other than the Rollover Shares and the Rollover Options, such Rollover Person does not own, beneficially or of record, any Shares, Company Options, securities of the Company, or any direct or indirect interest in any such securities (including by way of derivative securities). Such Rollover Person has not appointed or granted any proxy or power of attorney that is still in effect with respect to any Rollover Shares or Rollover Options, except as contemplated by this Agreement or the Voting Agreement.

(b) Organization, Standing and Authority. Such Rollover Person has full legal power and capacity to execute and deliver this Agreement and to perform such Rollover Person’s obligations hereunder. This Agreement has been duly and validly executed and delivered by such Rollover Person and, assuming due authorization, execution and delivery by Parent, constitutes a legal, valid and binding obligation of such Rollover Person, enforceable against such Rollover Person in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law). If such Rollover Person is married, and any of the Rollover Shares or Rollover Options of such Rollover Person constitute community property or otherwise need spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been duly and validly executed and delivered by such Rollover Person’s spouse and, assuming due authorization, execution and delivery by Parent, constitutes a legal, valid and binding obligation of such Rollover Person’s spouse, enforceable against such Rollover Person’s spouse in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

 

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(c) Consents and Approvals; No Violations. Except for the applicable requirements of the Exchange Act, (i) no filing with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary on the part of such Rollover Person for the execution, delivery and performance of this Agreement by such Rollover Person or the consummation by such Rollover Person of the transactions contemplated hereby, and (ii) neither the execution, delivery or performance of this Agreement by such Rollover Person nor the consummation by such Rollover Person of the transactions contemplated hereby, nor compliance by such Rollover Person with any of the provisions hereof shall (A) conflict with or violate any provision of the organizational documents of any such Rollover Person that is an entity, (B) result in any breach or violation of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on property or assets of such Rollover Person pursuant to any Contract to which such Rollover Person is a party or by which such Rollover Person or any property or asset of such Rollover Person is bound or affected, or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to such Rollover Person or any of such Rollover Person’s properties or assets.

(d) Litigation. There is no Action pending against such Rollover Person or, to the knowledge of such Rollover Person, any other Person or, to the knowledge of such Rollover Person, threatened against any such Rollover Person or any other Person that restricts or prohibits (or, if successful, would restrict or prohibit) the performance by such Rollover Person of his or her obligations under this Agreement.

(e) Reliance. Such Rollover Person understands and acknowledges that Parent and Merger Sub are entering into the Merger Agreement in reliance upon such Rollover Person’s execution and delivery of this Agreement and the representations and warranties of such Rollover Person contained herein.

(f) Receipt of Information. Such Rollover Person has been afforded the opportunity to ask such questions as he or she has deemed necessary of, and to receive answers from, representatives of Parent and Merger Sub concerning the terms and conditions of the transactions contemplated hereby and the merits and risks of owning Parent Shares and/or Parent Options. Such Rollover Person acknowledges that he or she has been advised to discuss with his or her own counsel the meaning and legal consequences of such Rollover Person’s representations and warranties in this Agreement and the transactions contemplated hereby.

5. Representations and Warranties of Parent. Parent makes the following representations and warranties to the Rollover Person, each and all of which shall be true and correct as of the date of this Agreement and as of the Closing:

(a) Organization, Standing and Authority. Parent is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation and has all requisite power and authority to execute and deliver this Agreement and to perform its

 

5


obligations hereunder. This Agreement has been duly and validly executed and delivered by Parent and, assuming due authorization, execution and delivery by the Rollover Person, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

(b) Consents and Approvals; No Violations. Except for the applicable requirements of the Exchange Act and Laws of the Cayman Islands, (i) no filing with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary on the part of Parent for the execution, delivery and performance of this Agreement by Parent or the consummation by Parent of the transactions contemplated hereby, and (ii) neither the execution, delivery or performance of this Agreement by Parent nor the consummation by Parent of the transactions contemplated hereby nor compliance by Parent with any of the provisions hereof shall (A) conflict with or violate any provision of the organizational documents of Parent, (B) result in any breach or violation of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on such property or asset of Parent pursuant to, any Contract to which Parent is a party or by which Parent or any property or asset of Parent is bound or affected, or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent or any of Parent’s properties or assets.

(c) Issuance of Parent Shares. The Parent Shares to be issued under this Agreement, when issued and delivered in accordance with the terms hereof and payment of the subscription price therefor, are duly authorized, validly issued, fully paid and nonassessable, and free and clear of all Liens, other than restrictions arising under applicable securities laws and the Parent Shareholders Agreement (as defined below).

6. Other Covenants and Agreements.

(a) Each Rollover Person shall, severally and not jointly, bear and pay, reimburse, indemnify and hold harmless Parent, Merger Sub and any affiliate thereof (collectively, the “Indemnified Parties”) for, from and against (i) any and all liabilities for PRC Taxes imposed upon, incurred by or asserted against any of the Indemnified Parties, arising from or attributable to the receipt of Parent Shares and Parent Options by such Rollover Person or his or her affiliates pursuant to this Agreement (collectively, the “Tax Liabilities”) and (ii) any reasonable costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, interests, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of the Tax Liabilities. For the avoidance of doubt, the term “Tax Liabilities” shall include any and all liability for PRC Taxes suffered by any of the Indemnified Parties as a result of the payments described in clause (i) above, including without limitation, any liability for withholding Taxes.

 

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(b) Each Rollover Person shall agree be subject to a definitive shareholders agreement to be negotiated by Mr. Yu Chuan Yih (the “Chairman”) and Parent and to be executed at or immediately following the Closing (the “Parent Shareholders Agreement”) pursuant to which each Rollover Person will agree to, among other covenants and agreements, certain transfer restrictions in respect of his or her equity interest in Parent, and certain management incentive arrangements (including employee stock option plans) to be provided by Parent.

(c) Each Rollover Person, if a PRC resident (as defined under SAFE Circular 75) and subject to any of the registration or reporting requirements of SAFE Circular 75, shall, as soon as practicable after the date hereof, submit an application to the State Administration of Foreign Exchange (“SAFE”) for the registration or amendment registration of his or her holding of Company Shares (whether directly or indirectly) in the Company in accordance with the requirements of SAFE Circular 75 (or any successor Law, rule or regulation) and complete such registration prior to the Closing.

7. Termination. This Agreement, and the obligation of the Rollover Persons to the cancellation of the Rollover Shares and Rollover Options, will terminate immediately upon the valid termination of the Merger Agreement in accordance with its terms; provided, that this Section 7 and Section 9 shall survive the termination of this Agreement, and the parties hereto shall continue to be liable for breaches of this Agreement occurring prior to the termination of this Agreement.

8. Further Assurances. Each Rollover Person hereby covenants that, from time to time, such Rollover Person will do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, such further acts, conveyances, transfers, assignments, powers of attorney and assurances necessary to cancel all of the Rollover Shares and Rollover Options in accordance with the terms of this Agreement.

9. Miscellaneous.

(a) Amendments and Modification. This Agreement may not be amended, altered, supplemented or otherwise modified except upon the execution and delivery of a written agreement executed by each party hereto.

(b) Waiver. No failure or delay of any party hereto in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have hereunder. Any agreement on the part of a party hereto to any such waiver shall be valid only if set forth in a written instrument executed and delivered by such party.

 

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(c) Survival of Representations and Warranties. All representations and warranties of the Rollover Persons and Parent contained herein shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

(d) Notices. All notices and other communications hereunder shall be in writing (in the English language) and shall be deemed duly given (i) upon receipt if delivered personally, or if by email or facsimile, upon confirmation of receipt by email or facsimile, (ii) one Business Day after being sent by express courier service, or (iii) three Business Days after being sent by registered or certified mail, return receipt requested. All notices hereunder shall be delivered to the addresses set forth below or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

If to any Rollover Person, in accordance with the contact information set forth next to such Rollover Person’s name on Schedule A hereto.

If to Parent:

Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue

George Town

Grand Cayman KY1-9005

Cayman Islands

with a copy to:

Mr. Yu Chuan Yih

c/o LJ International Inc.

Unit #12, 12/F, Block A

Focal Industrial Centre

21 Man Lok Street

Hung Hom, Kowloon, Hong Kong

Facsimile: +852 2764 3783

Email: yih@ljintl.com

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

Sidley Austin LLP

Suite 1901, Shui On Plaza

No. 333 Middle Huai Hai Road

Shanghai 200021

China

Attention: Mr. Joseph Chan

Facsimile: +86 21 5306 8966

Email: joseph.chan@sidley.com

and

 

8


Urban Prosperity Holding Limited

Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue

George Town

Grand Cayman KY1-9005

Cayman Islands

with a copy to:

FountainVest Partners (Asia) Limited

Suite 705-708, ICBC Tower

3 Garden Road

Central, Hong Kong

Attention: Mr. George Chuang / Mr. Edward Yu / Mr. Brian Lee

Facsimile: +852 3107 2490

Email: georgechuang@fountainvest.com / edwardyu@fountainvest.com / brianlee@fountainvest.com

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

Fried, Frank, Harris, Shriver & Jacobson

1601 Chater House

8 Connaught Road Central

Hong Kong

Attention: Mr. Douglas Freeman / Mr. Victor Chen

Facsimile: +852 3760 3628

E-mail: douglas.freeman@friedfrank.com / victor.chen@friedfrank.com

(e) Entire Agreement. This Agreement (together with the Merger Agreement and the Voting Agreement to the extent referred to in this Agreement) constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and supersedes all other prior agreements and understandings, both written and oral, among the parties, with respect to the subject matter hereof.

(f) Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to or shall confer upon any person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement, except as specifically set forth in this Agreement, provided that, the Company is an express third party beneficiary of the covenant in Section 1 and, assuming full performance by the Rollover Person thereof, shall have the right directly to enforce specifically Section 1 of this Agreement against the Rollover Person and Parent in accordance with, and to the extent expressly permitted by, Section 9.07 of the Merger Agreement.

 

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(g) Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York, without regard to (to the greatest extent a New York court would permit) any applicable conflicts of law principles that would cause the application of the laws of any other jurisdiction.

(h) Jurisdiction; Enforcement. The parties hereto agree that any Action brought by any party hereto to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any State of New York or United States Federal court sitting in the Borough of Manhattan, the City of New York. Each party hereto submits to the jurisdiction of any such court in any Action seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated hereby, and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such Action. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such Action in any such court or that any such Action brought in any such court has been brought in an inconvenient forum.

(i) Specific Performance. The parties hereto acknowledge and agree that monetary damages would not be an adequate remedy in the event that any covenant or agreement in this Agreement is not performed in accordance with its terms, and therefore agree that, in addition to and without limiting any other remedy or right available, each party hereto will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof. Each party hereto agrees not to oppose the granting of such relief in the event a court determines that such a breach has occurred, and to waive any requirement for the securing or posting of any bond in connection with such remedy. All rights, powers, and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party hereto shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.

(j) Assignment; Binding Effect. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Parent may assign this Agreement (in whole but not in part) in connection with a permitted assignment of the Merger Agreement by Parent. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns and, in the case of any applicable Rollover Person, his or her estate, heirs, beneficiaries, personal representatives and executors.

(k) Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

 

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(l) Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO TRIAL BY JURY IN ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENTS OR INSTRUMENTS REFERRED TO IN THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF EACH OF THE PARTIES HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.

(m) Counterparts. This Agreement may be executed in two or more counterparts, and by facsimile or, pdf format, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties; provided, however, that if any Rollover Person fails for any reason to execute, or perform his or her obligations under, this Agreement, this Agreement shall remain effective as to all other Rollover Persons executing this Agreement.

(n) No Presumption Against Drafting Party. Each of the parties to this Agreement acknowledges that it has been represented by independent counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.

 

11


IN WITNESS WHEREOF, Parent and the Rollover Persons have caused to be executed or executed this Agreement as of the date first written above.

 

PARENT:
FLORA BLOOM HOLDINGS
By:  

/s/ Neil Gray

  Name:   Neil Gray
  Title:   Director

[SIGNATURE PAGE – MANAGEMENT ROLLOVER AGREEMENT]


ROLLOVER PERSONS:
HON TAK RINGO NG

/s/ Hon Tak Ringo Ng

[SIGNATURE PAGE – MANAGEMENT ROLLOVER AGREEMENT]


KA MAN AU

/s/ Ka Man Au

[SIGNATURE PAGE – MANAGEMENT ROLLOVER AGREEMENT]


PETER AU

/s/ Peter Au

[SIGNATURE PAGE – MANAGEMENT ROLLOVER AGREEMENT]


YUIN CHIEK LYE

/s/ Yuin Chiek Lye

[SIGNATURE PAGE – MANAGEMENT ROLLOVER AGREEMENT]


VICKY CHAN

/s/ Vicky Chan

[SIGNATURE PAGE – MANAGEMENT ROLLOVER AGREEMENT]


Schedule A

 

Rollover Person*

   Shares      Options
   Company
Shares
    Parent
Shares
     Company Options    Parent Options
        Number      Exercise
Price
     Expiration
Date
   Number      Exercise
Price
     Expiration
Date

Hon Tak Ringo Ng

     377,035        377,035         150,000       $ 2.0       June 30,
2013
     150,000       $ 2.0       October 28,
2014
          50,000       $ 0.6       February 16,
2014
     50,000       $ 0.6       October 28,
2014

Ka Man Au

     406,030 **      406,030         150,000       $ 2.0       June 30,
2013
     150,000       $ 2.0       October 28,
2014
          50,000       $ 0.6       February 16,
2014
     50,000       $ 0.6       October 28,
2014

Peter Au

     —          —           16,000       $ 0.6       February 16,
2014
     16,000       $ 0.6       October 28,
2014
          16,000       $ 0.6       February 16,
2015
     16,000       $ 0.6       February 16,
2015

Yuin Chiek Lye

     192,760        192,760         10,000       $ 0.4       October 28,
2013
     10,000       $ 0.4       October 28,
2014
          10,000       $ 0.4       October 28,
2014
     10,000       $ 0.4       October 28,
2014
          10,000       $ 0.4       October 28,
2015
     10,000       $ 0.4       October 28,
2015
          10,000       $ 0.4       October 28,
2016
     10,000       $ 0.4       October 28,
2016
          10,000       $ 0.4       October 28,
2017
     10,000       $ 0.4       October 28,
2017
          10,000       $ 0.4       October 28,
2018
     10,000       $ 0.4       October 28,
2018
          16,000       $ 0.6       February 16,
2014
     16,000       $ 0.6       October 28,
2014
          16,000       $ 0.6       February 16,
2015
     16,000       $ 0.6       February 16,
2015

Vicky Chan

     30,000        30,000         10,000       $ 0.6       February 16,
2014
     10,000       $ 0.6       October 28,
2014
          10,000       $ 0.6       February 16,
2015
     10,000       $ 0.6       February 16,
2015

 

* Address and Facsimile for the above persons:

 

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c/o LJ International Inc.

Unit #12, 12/F, Block A

Focal Industrial Centre

21 Man Lok Street

Hung Hom, Kowloon, Hong Kong

Facsimile: +852 2764 3783

 

** The 406,030 Company Shares for which Ka Man Au is the registered holder and beneficial owner hereunder do not include the 1,855,700 Company Shares Ka Man Au held as a nominee for the Chairman. For the avoidance of doubt, such 1,855,700 Company Shares shall be deemed to form part of the “Rollover Shares” as defined in the Chairman Rollover Agreement to be entered into by and among Parent and the Chairman concurrently with the Merger Agreement, and treated in accordance therewith, and Ka Man Au hereby acknowledges and agrees to such treatment.

 

19

EX-7.5 6 d512471dex75.htm EX-7.5 EX-7.5

Exhibit 7.5

EXECUTION VERSION

SHI ROLLOVER AGREEMENT

This SHI ROLLOVER AGREEMENT (this “Agreement”) is made and entered into as of March 22, 2013 by and among Flora Bloom Holdings, a Cayman Islands exempted company (“Parent”), Mr. Zhicheng Shi (“Mr. Shi”), Primeon, Inc., a corporation formed under the laws of the State of Delaware and controlled by Mr. Shi(“Primeon”), Hillside Financial, a corporation formed under the laws of the State of Massachusetts and controlled by Mr. Shi (“Hillside”), and Shilin Investments, a partnership formed under the laws of the State of Maine and controlled by Mr. Shi (“Shilin”, together with Mr. Shi, Primeon and Hillside, the “Rollover Persons” and each, a “Rollover Person”). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement (as defined below).

RECITALS

WHEREAS, concurrently herewith Parent, Flora Fragrance Holdings Limited, a British Virgin Islands business company and a wholly-owned subsidiary of Parent (“Merger Sub”), and LJ International Inc., a business company with limited liability incorporated under the laws of the British Virgin Islands (the “Company”), are entering into an Agreement and Plan of Merger (as may be amended, supplemented or otherwise modified, the “Merger Agreement”), pursuant to which Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Parent (the “Merger”);

WHEREAS, as of the date hereof, Mr. Shi controls Primeon, Hillside and Shilin, whether through equity ownership, contractually or otherwise;

WHEREAS, as of date hereof, the Rollover Persons are the registered holders and “beneficial owners” (within the meaning of Rule 13d-3 under the Exchange Act) of the number of ordinary shares, par value US$0.01 per share, of the Company (each, a “Company Share”) as set forth under the heading “Shares – Company Shares” opposite the Rollover Persons’ names on Schedule A hereto (such Shares, the “Rollover Shares”);

WHEREAS, in connection with the consummation of the transactions contemplated by the Merger Agreement, including the Merger, the Rollover Persons agree to (a) the cancellation of their Rollover Shares for nil consideration in the Merger, and (b) subscribe for newly issued ordinary shares of Parent, par value US$0.0001 per share (each, a “Parent Share” and collectively, the “Parent Shares”) immediately prior to the Closing;

WHEREAS, in order to induce Parent and Merger Sub to enter into the Merger Agreement and consummate the transactions contemplated thereby, including the Merger, the Rollover Persons are entering into this Agreement; and

WHEREAS, the Rollover Persons acknowledge that Parent and Merger Sub are entering into the Merger Agreement in reliance on the representations, warranties, covenants and other agreements of the Rollover Persons as set forth in this Agreement.


AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, Parent and the Rollover Persons hereby agree as follows:

1. Rollover Shares.

(a) Subscription of Parent Shares. Immediately prior to the Closing, Parent shall issue to the Rollover Persons, and the Rollover Persons (or, if designated by the Rollover Persons in writing, in the name of an affiliate of the Rollover Persons) shall subscribe for, the number of Parent Shares at the ratio of one Rollover Share to one Parent Share and at a subscription price of US$0.0001 per share as set forth under the heading “Shares – Parent Shares” opposite the Rollover Persons’ name in Schedule A hereto. The Rollover Persons hereby acknowledge and agree that they shall have no right to any Merger Consideration in respect of their Rollover Shares.

(b) Cancellation of Rollover Shares. Subject to the terms and conditions set forth herein, the Rollover Persons agree that their Rollover Shares shall be cancelled at the Closing for nil consideration in connection with the Merger.

(c) Closing. Subject to the satisfaction in full (or waiver) of all of the conditions set forth in Sections 7.01 and 7.02 of the Merger Agreement (other than conditions that by their nature are to be satisfied or waived, as applicable, at the Closing), the closing of the subscription and issuance of Parent Shares contemplated hereby shall take place immediately prior to the Closing.

(d) Rollover Person SPV and Subsequent Rollover Shares. In connection with and for purposes of this Agreement, and subject to the terms of this Agreement, Mr. Shi may create a holding company (the “ Rollover Person SPV”) and (a) contribute the Company Shares of which the Rollover Persons are the “beneficial owners” (within the meaning of Rule 13d-3 under the Exchange Act) to the Rollover Person SPV in exchange for voting equity interests of the Rollover Person SPV, and (b) allow other shareholders of the Company proposed by Mr. Shi, and acceptable to Parent and the Chairman, to (i) contribute their Company Shares to the Rollover Person SPV in exchange for non-voting equity interests in the Rollover Person SPV and in such case, upon formation of the Rollover Person SPV, Mr. Shi shall cause the Rollover Person SPV to execute and deliver a joinder to this Agreement and the definition of “Rollover Persons” hereunder shall be deemed to include the “Rollover Person SPV” and Schedule A shall be updated accordingly, or (ii) to enter into a rollover agreement and voting agreement including terms and conditions that are substantially similar to this Agreement and the Voting Agreement (as defined below), respectively, provided such Company Shares shall not exceed 2% in the aggregate of the outstanding share capital of the Company. For purposes of the Merger Agreement, the shares of each such shareholder shall be deemed to be the “Subsequent Rollover Shares” and each such shareholder shall be deemed a “Subsequent Rollover Shareholders”, as such terms are defined and used in the Merger Agreement. The arrangements contemplated by this Section (d) must be completed by no later than two (2) months after the date of this Agreement.

 

2


In the event that Mr. Shi forms the Rollover Person SPV in accordance with the foregoing paragraph, Mr. Shi agrees that he shall be the sole director of the Rollover Person SPV, and further agrees that he shall have (a) complete control over the management of the Rollover SPV, including with respect to voting and board composition, and (b) the sole right to control the voting and disposition of any securities of the Company acquired by means of purchase, dividend or distribution, the conversion of any convertible securities, or pursuant to the exercise of any options of the Company or otherwise.

2. Irrevocable Election.

(a) The execution of this Agreement by the Rollover Persons evidences, subject to Section 6 hereof, the irrevocable election and agreement by the Rollover Persons to subscribe for Parent Shares and agree to the cancellation of their Rollover Shares on the terms and conditions set forth herein. In furtherance of the foregoing, the Rollover Persons covenant and agree that from the date hereof until any termination of this Agreement pursuant to Section 5 hereof, the Rollover Persons shall not, directly or indirectly, (i) tender any Rollover Shares into any tender or exchange offer, (ii) sell (constructively or otherwise), transfer, pledge, hypothecate, grant, encumber, assign or otherwise dispose of (collectively, “Transfer”), or enter into any Contract, option or other arrangement or understanding with respect to the Transfer of, any Rollover Shares or any right, title or interest thereto or therein (including by operation of law) including, without limitation, any swap transaction, option, warrant, forward purchase or sale transaction, futures transaction, cap transaction, floor transaction, collar transaction or any other similar transaction (including any option with respect to any such transaction) or combination of any such transactions, in each case involving any Rollover Shares and which (x) has, or would reasonably be expected to have, the effect of reducing or limiting the Rollover Persons’ economic interest in such Rollover Shares and/or (y) grants a third party the right to vote or direct the voting of such Rollover Shares (any such transaction, a “Derivative Transaction”), (iii) deposit any Rollover Shares into a voting trust or grant any proxy or power of attorney or enter into a voting agreement (other than that certain Voting Agreement of even date herewith by and among Parent and the Rollover Persons (the “Voting Agreement”)) with respect to any Rollover Shares, (iv) knowingly take any action that would make any representation or warranty of the Rollover Persons set forth in this Agreement untrue or incorrect or would prevent or delay the Rollover Persons from performing any of their obligations under this Agreement, or (v) agree (whether or not in writing) to take any of the actions referred to in the foregoing clauses (i) through (iv). Any purported Transfer in violation of this paragraph shall be void.

(b) The Rollover Persons further covenant and agree that they shall promptly (and in any event within forty-eight (48) hours) notify Parent of any new Shares with respect to which beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) is acquired by the Rollover Persons, including, without limitation, by purchase, as a result of a stock dividend, stock split, recapitalization, combination, reclassification, exchange or change of such shares, or upon exercise or conversion of any securities of the Company after the date hereof.

 

3


3. Representations and Warranties of the Rollover Persons. To induce Parent to issue the Parent Shares and Parent and Merger Sub to enter into the Merger Agreement and consummate the transactions contemplated thereby, the Rollover Persons make the following representations and warranties to Parent, each and all of which shall be true and correct as of the date of this Agreement and as of the Closing:

(a) Ownership of Shares. (i) Mr. Shi has the sole power to vote or dispose of the Company Shares held by Primeon, Hillside and Shilin, whether through equity ownership, contractually or otherwise; (ii) each Rollover Person (A) is the beneficial owner of, and has good and valid title to, the Rollover Shares, free and clear of Liens other than as set forth in (i) above and as created by this Agreement and the Voting Agreement, and (B) has sole or shared (together with affiliates controlled by such Rollover Person only) voting power, power of disposition, and power to demand dissenter’s rights (if applicable), in each case with respect to all such Rollover Shares, with no limitations, qualifications, or restrictions on such rights, subject to applicable United States federal securities laws, laws of the British Virgin Islands and the terms of this Agreement and the Voting Agreement; (iii) the Rollover Shares are not subject to any voting trust agreement or other Contract to which any one of the Rollover Persons is a party restricting or otherwise relating to the voting or Transfer of the Rollover Shares other than as set forth in (i) above, this Agreement and the Voting Agreement; and (iii) the Rollover Shares are not Transferred pursuant to any Derivative Transaction. As of the date hereof, other than the Rollover Shares, the Rollover Persons do not own, beneficially or of record, any Shares, Company Options, other securities of the Company, or any direct or indirect interest in any such securities (including by way of derivative securities). The Rollover Persons have not appointed or granted any proxy or power of attorney that is still in effect with respect to any Rollover Shares, except as contemplated by this Agreement or the Voting Agreement.

(b) Organization, Standing and Authority. The Rollover Persons have full legal power and capacity to execute and deliver this Agreement and to perform their obligations hereunder. This Agreement has been duly and validly executed and delivered by the Rollover Persons and, assuming due authorization, execution and delivery by Parent, constitutes a legal, valid and binding obligation of the Rollover Persons, enforceable against the Rollover Persons in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law). If Mr. Shi is married, and any of the Rollover Shares of Mr. Shi constitute community property or otherwise need spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been duly and validly executed and delivered by Mr. Shi’s spouse and, assuming due authorization, execution and delivery by Parent, constitutes a legal, valid and binding obligation of Mr. Shi’s spouse, enforceable against Mr. Shi’s spouse in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

(c) Consents and Approvals; No Violations. Except for the applicable requirements of the Exchange Act, (i) no filing with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary on the part of the Rollover Persons for the

 

4


execution, delivery and performance of this Agreement by the Rollover Persons or the consummation by the Rollover Persons of the transactions contemplated hereby, and (ii) neither the execution, delivery or performance of this Agreement by the Rollover Persons nor the consummation by the Rollover Persons of the transactions contemplated hereby, nor compliance by the Rollover Persons with any of the provisions hereof shall (A) conflict with or violate any provision of the organizational documents of any such Rollover Person that is any entity, (B) result in any breach or violation of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on property or assets of the Rollover Persons pursuant to any Contract to which the Rollover Persons is a party or by which the Rollover Persons or any property or asset of the Rollover Persons is bound or affected, or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Rollover Persons or any of the Rollover Persons’ properties or assets.

(d) Litigation. There is no Action pending against the Rollover Persons or, to the knowledge of the Rollover Persons, any other Person or, to the knowledge of the Rollover Persons, threatened against the Rollover Persons or any other Person that restricts or prohibits (or, if successful, would restrict or prohibit) the performance by the Rollover Persons of their obligations under this Agreement.

(e) Reliance. Each Rollover Person understands and acknowledges that Parent and Merger Sub are entering into the Merger Agreement in reliance upon such Rollover Person’s execution and delivery of this Agreement and the representations and warranties of such Rollover Person contained herein.

(f) Receipt of Information. The Rollover Persons have been afforded the opportunity to ask such questions as they have deemed necessary of, and to receive answers from, representatives of Parent and Merger Sub concerning the terms and conditions of the transactions contemplated hereby and the merits and risks of owning Parent Shares. The Rollover Persons acknowledge that they have been advised to discuss with their own counsel the meaning and legal consequences of the Rollover Persons’ representations and warranties in this Agreement and the transactions contemplated hereby.

4. Representations and Warranties of Parent. Parent makes the following representations and warranties to the Rollover Persons, each and all of which shall be true and correct as of the date of this Agreement and as of the Closing:

(a) Organization, Standing and Authority. Parent is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its formation and has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly and validly executed and delivered by Parent and, assuming due authorization, execution and delivery by the Rollover Persons, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

 

5


(b) Consents and Approvals; No Violations. Except for the applicable requirements of the Exchange Act and Laws of the Cayman Islands, (i) no filing with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary on the part of Parent for the execution, delivery and performance of this Agreement by Parent or the consummation by Parent of the transactions contemplated hereby, and (ii) neither the execution, delivery or performance of this Agreement by Parent nor the consummation by Parent of the transactions contemplated hereby nor compliance by Parent with any of the provisions hereof shall (A) conflict with or violate any provision of the organizational documents of Parent, (B) result in any breach or violation of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on such property or asset of Parent pursuant to, any Contract to which Parent is a party or by which Parent or any property or asset of Parent is bound or affected, or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent or any of Parent’s properties or assets.

(c) Issuance of Parent Shares. The Parent Shares to be issued under this Agreement, when issued and delivered in accordance with the terms hereof and payment of the subscription price therefor, are duly authorized, validly issued, fully paid and nonassessable, and free and clear of all Liens, other than restrictions arising under applicable securities laws and the Parent Shareholders Agreement (as defined below).

5. Other Covenants and Agreements.

(a) The Rollover Persons shall bear and pay, reimburse, indemnify and hold harmless Parent, Merger Sub and any affiliate thereof (collectively, the “Indemnified Parties”) for, from and against (i) any and all liabilities for PRC Taxes imposed upon, incurred by or asserted against any of the Indemnified Parties, arising from or attributable to the receipt of Parent Shares by the Rollover Persons or their affiliates pursuant to this Agreement (collectively, the “Tax Liabilities”) and (ii) any reasonable costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, interests, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of the Tax Liabilities. For the avoidance of doubt, the term “Tax Liabilities” shall include any and all liability for PRC Taxes suffered by any of the Indemnified Parties as a result of the payments described in clause (i) above, including without limitation, any liability for withholding Taxes.

(b) Each of the Rollover Persons shall be a passive investor in Parent and shall be subject to a definitive shareholders agreement in respect of Parent to be negotiated by the Chairman and Parent and to be executed at or immediately following the Closing pursuant to which each Rollover Person will agree to, among other covenants and agreements, certain transfer restrictions in respect of their equity interests in Parent and certain management incentive arrangements (including employee stock option plans) to be provided by Parent.

(c) Mr. Shi, if deemed a PRC resident (as defined under SAFE Circular 75) and subject to any of the registration or reporting requirements of SAFE Circular 75, shall, as soon as practicable after the date hereof, submit an application to the State Administration of Foreign Exchange (“SAFE”) for the registration or amendment registration of his holding of Company Shares (whether directly or indirectly) in the Company in accordance with the requirements of SAFE Circular 75 (or any successor Law, rule or regulation) and complete such registration prior to the Closing.

 

6


6. Termination. This Agreement, and the obligation of the Rollover Persons to the cancellation of the Rollover Shares, will terminate immediately upon the valid termination of the Merger Agreement in accordance with its terms; provided, that this Section 6 and Section 8 shall survive the termination of this Agreement, and the parties hereto shall continue to be liable for breaches of this Agreement occurring prior to the termination of this Agreement.

7. Further Assurances. The Rollover Persons hereby covenant that, from time to time, the Rollover Persons will do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, such further acts, conveyances, transfers, assignments, powers of attorney and assurances necessary to cancel all of the Rollover Shares in accordance with the terms of this Agreement.

8. Miscellaneous.

(a) Amendments and Modification. This Agreement may not be amended, altered, supplemented or otherwise modified except upon the execution and delivery of a written agreement executed by each party hereto.

(b) Waiver. No failure or delay of any party hereto in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have hereunder. Any agreement on the part of a party hereto to any such waiver shall be valid only if set forth in a written instrument executed and delivered by such party.

(c) Survival of Representations and Warranties. All representations and warranties of the Rollover Persons and Parent contained herein shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.

(d) Notices. All notices and other communications hereunder shall be in writing (in the English language) and shall be deemed duly given (i) upon receipt if delivered personally, or if by email or facsimile, upon confirmation of receipt by email or facsimile, (ii) one Business Day after being sent by express courier service, or (iii) three Business Days after being sent by registered or certified mail, return receipt requested. All notices hereunder shall be delivered to the addresses set forth below or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

If to the Rollover Persons:

c/o Mr. Zhicheng Shi

1 Novella Street

Lewiston, ME 04240

U.S.A.

Email: zhicheng@primeon.com

 

7


If to Parent:

Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue

George Town

Grand Cayman KY1-9005

Cayman Islands

with a copy to:

Mr. Yu Chuan Yih

c/o LJ International Inc.

Unit #12, 12/F, Block A

Focal Industrial Centre

21 Man Lok Street

Hung Hom, Kowloon, Hong Kong

Facsimile: +86 755 2526 0329

Email: yih@ljintl.com

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

Sidley Austin LLP

Suite 1901, Shui On Plaza

No. 333 Middle Huai Hai Road

Shanghai 200021

China

Attention: Mr. Joseph Chan

Facsimile: +86 21 5306 8966

Email: joseph.chan@sidley.com

and

Urban Prosperity Holding Limited

Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue

George Town

Grand Cayman KY1-9005

Cayman Islands

 

8


with a copy to:

FountainVest Partners (Asia) Limited

Suite 705-708, ICBC Tower

3 Garden Road

Central, Hong Kong

Attention: Mr. George Chuang / Mr. Edward Yu / Mr. Brian Lee

Facsimile: +852 3107 2490

Email: georgechuang@fountainvest.com / edwardyu@fountainvest.com / brianlee@fountainvest.com

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

Fried, Frank, Harris, Shriver & Jacobson

1601 Chater House

8 Connaught Road Central

Hong Kong

Attention: Mr. Douglas Freeman / Mr. Victor Chen

Facsimile: +852 3760 3611

E-mail: douglas.freeman@friedfrank.com / victor.chen@friedfrank.com

(e) Entire Agreement. This Agreement (together with the Merger Agreement and the Voting Agreement to the extent referred to in this Agreement) constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and supersedes all other prior agreements and understandings, both written and oral, among the parties, with respect to the subject matter hereof.

(f) Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to or shall confer upon any person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement, except as specifically set forth in this Agreement, provided that, the Company is an express third party beneficiary of the covenant in Section 1, and assuming full performance by the Rollover Persons thereof, shall have the right directly to enforce specifically Section 1 of this Agreement against the Rollover Persons and Parent in accordance with, and to the extent expressly permitted by, Section 9.07 of the Merger Agreement.

(g) Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York, without regard to (to the greatest extent a New York court would permit) any applicable conflicts of law principles that would cause the application of the laws of any other jurisdiction.

 

9


(h) Jurisdiction; Enforcement. The parties hereto agree that any Action brought by any party hereto to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any State of New York or United States Federal court sitting in the Borough of Manhattan, the City of New York. Each party hereto submits to the jurisdiction of any such court in any Action seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated hereby, and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such Action. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such Action in any such court or that any such Action brought in any such court has been brought in an inconvenient forum.

(i) Specific Performance. The parties hereto acknowledge and agree that monetary damages would not be an adequate remedy in the event that any covenant or agreement in this Agreement is not performed in accordance with its terms, and therefore agree that, in addition to and without limiting any other remedy or right available, each party hereto will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof. Each party hereto agrees not to oppose the granting of such relief in the event a court determines that such a breach has occurred, and to waive any requirement for the securing or posting of any bond in connection with such remedy. All rights, powers, and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party hereto shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.

(j) Assignment; Binding Effect. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Parent may assign this Agreement (in whole but not in part) in connection with a permitted assignment of the Merger Agreement by Parent. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns and, in the case of Mr. Shi, his estate, heirs, beneficiaries, personal representatives and executors.

(k) Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

(l) Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY

 

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RIGHT SUCH PARTY MAY HAVE TO TRIAL BY JURY IN ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENTS OR INSTRUMENTS REFERRED TO IN THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF EACH OF THE PARTIES HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.

(m) Counterparts. This Agreement may be executed in two or more counterparts, and by facsimile or, pdf format, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other party.

(n) No Presumption Against Drafting Party. Each of the parties to this Agreement acknowledges that it has been represented by independent counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.

 

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IN WITNESS WHEREOF, Parent and the Rollover Persons have caused to be executed or executed this Agreement as of the date first written above.

 

PARENT:
FLORA BLOOM HOLDINGS
By:  

/s/ Neil Gray

  Name:   Neil Gray
  Title:   Director

[SIGNATURE PAGE – SHI ROLLOVER AGREEMENT]


ROLLOVER PERSONS:
ZHICHENG SHI

/s/ Zhicheng Shi

PRIMEON, INC.
By:  

/s/ Zhicheng Shi

Name:   Zhicheng Shi
Title:  
HILLSIDE FINANCIAL
By:  

/s/ Zhicheng Shi

Name:   Zhicheng Shi
Title:  
SHILIN INVESTMENTS
By:  

/s/ Zhicheng Shi

Name:   Zhicheng Shi
Title:  

[SIGNATURE PAGE – SHI ROLLOVER AGREEMENT]


Schedule A

 

Rollover Persons

   Shares  
   Company Shares      Parent Shares  

Primeon, Inc.

     700,000         700,000   

Hillside Financial

     104,500         104,500   

Shilin Investments

     60,300         60,300   

Mr. Zhicheng Shi

     570,000         570,000   
EX-7.6 7 d512471dex76.htm EX-7.6 EX-7.6

Exhibit 7.6

EXECUTION VERSION

VOTING AGREEMENT

This VOTING AGREEMENT (this “Agreement”) is entered into as of March 22, 2013 by and among Flora Bloom Holdings, a Cayman Islands exempted company (“Parent”), Flora Fragrance Holdings Limited, a British Virgin Islands business company and wholly-owned subsidiary of Parent (“Merger Sub”), and the shareholders of LJ International Inc., a British Virgin Islands business company (the “Company”) listed on Schedule A hereto (each, a “Shareholder” and collectively the “Shareholders”). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement (as defined below).

WHEREAS, Parent, Merger Sub and LJ International Inc. have, concurrently with the execution of this Agreement, entered into an Agreement and Plan of Merger, dated as of the date hereof (as may be amended, supplemented or otherwise modified, the “Merger Agreement”), which provides, among other things, for the merger of Merger Sub with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Parent (the “Merger”), upon the terms and subject to the conditions set forth in the Merger Agreement;

WHEREAS, the Shareholders, Parent and Merger Sub are executing this agreement concurrently with the execution of the Merger Agreement;

WHEREAS, as of the date hereof, each Shareholder is entered in the register of members of the Company as the holder and beneficial owner (as defined under Rule 13d-3 of the Exchange Act) of (i) certain Shares and (ii) certain Company Options to acquire Shares as set forth opposite such Shareholder’ name on Schedule A hereto (such Shares and Company Options, together with any other Shares acquired (whether beneficially or of record) by the Shareholder after the date hereof and prior to the earlier of the Effective Time and the termination of all of the Shareholder’s obligations under this Agreement, including any Shares acquired by means of purchase, dividend or distribution, or issued upon the exercise of any Company Options or warrants or the conversion of any convertible securities or otherwise, being collectively referred to herein as the “Securities”);

WHEREAS, pursuant to that certain Chairman Rollover Agreement, that certain Management Rollover Agreement and that certain Shi Rollover Agreement, each dated as of the date hereof (together, the “Rollover Agreements”), the Shareholders have agreed, as applicable, to cancel certain of their Securities in the Merger and subscribe for ordinary shares of Parent at or immediately prior to the Closing in accordance with the terms and conditions of such agreements to which each is a party;

WHEREAS, receipt of the Requisite Company Vote is a condition to the consummation of the Merger; and

WHEREAS, as a condition to the willingness of Parent and Merger Sub to enter into the Merger Agreement and in consideration therefor, each Shareholder has agreed to enter into this Agreement.


NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

VOTING; GRANT AND APPOINTMENT OF PROXY

Section 1.1 Voting. From and after the date hereof until the earlier of (a) the Effective Time and (b) the termination of the Merger Agreement pursuant to and in compliance with the terms therein (such earlier time, the “Expiration Time”), each Shareholder irrevocably and unconditionally hereby agrees that at any meeting (whether annual or special and each adjourned or postponed meeting) of the Company’s shareholders, however called, or in connection with any written resolution of the Company’s shareholders, each Shareholder shall (i) appear at such meeting or otherwise cause its Securities to be counted as present thereat for purposes of determining whether a quorum is present and (ii) vote or cause to be voted (including by proxy or written resolution, if applicable) all of such Shareholder’s Securities, without regard to any Change in Company Recommendation,

(A) for approval of the Merger Agreement and the transactions contemplated by the Merger Agreement,

(B) against any Competing Transaction, without regard to the terms of such Competing Transaction, or any other transaction, proposal, agreement or action made in opposition to approval of the Merger Agreement or in competition or inconsistent with the Merger and the other transactions contemplated by the Merger Agreement,

(C) against any other action, agreement or transaction that is intended, that could reasonably be expected, or the effect of which could reasonably be expected, to materially impede, interfere with, delay, postpone, discourage or adversely affect the Merger or any of the other transactions contemplated by the Merger Agreement or this Agreement or the performance by such Shareholder of its obligations under this Agreement, including, without limitation: (i) any extraordinary corporate transaction, such as a scheme of arrangement, merger, consolidation or other business combination involving the Company or any of its Subsidiaries (other than the Merger); (ii) a sale, lease or transfer of a material amount of assets of the Company or any Subsidiary or a reorganization, recapitalization or liquidation of the Company or any Subsidiary; (iii) an election of new members to the board of directors of the Company, other than nominees to the board of directors of the Company who are serving as directors of the Company on the date of this Agreement or as otherwise provided in the Merger Agreement; (iv) any material change in the present capitalization or dividend policy of the Company or any amendment or other change to the Company’s memorandum or articles of association, except if approved in writing by Parent; (v) any other action that would require the consent of Parent pursuant to Section 5.01 of the Merger Agreement, except if approved in writing by Parent; or (vi) any other material change in the Company’s corporate structure or business, except if approved in writing by Parent,

 

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(D) against any action, proposal, transaction or agreement that would reasonably be expected to result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company contained in the Merger Agreement, or of such Shareholder contained in this Agreement,

(E) in favor of any adjournment or postponement of the Shareholders’ Meeting as may be requested by Parent, and

(F) in favor of any other matter necessary to the consummation of the transactions contemplated by the Merger Agreement.

Section 1.2 Grant of Irrevocable Proxy; Appointment of Proxy.

(a) From and after the date hereof until the Expiration Time, each Shareholder hereby irrevocably appoints Parent and any designee thereof as its proxy and attorney-in-fact (with full power of substitution), to vote or cause to be voted (including by proxy or written resolution, if applicable) the Securities in accordance with Section 1.1 at any annual or special meeting of the Shareholders of the Company, however called, including any adjournment or postponement thereof, at which any of the matters described in Section 1.1 is to be considered. Each Shareholder (and with respect to Mr. Yu Chuan Yih (“Mr. Yih”), except as provided for and in accordance with that certain share charge dated March 22, 2013 between Mr. Yih as chargor and Urban Prosperity Holding Limited as chargee (the “Share Charge”)) represents that all proxies, powers of attorney, instructions or other requests given by such Shareholder prior to the execution of this Agreement in respect of the voting of such Shareholder’s Securities, if any, are not irrevocable and each Shareholder hereby revokes (or causes to be revoked) any and all previous proxies, powers of attorney, instructions or other requests with respect to such Shareholder’s Securities. Each Shareholder shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy.

(b) Each Shareholder affirms that the irrevocable proxy set forth in this Section 1.2 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Each Shareholder further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in this Section 1.2, is intended to be irrevocable prior to the Expiration Time. If for any reason the proxy granted herein is not irrevocable, then each Shareholder agrees to vote such Shareholder’s Securities in accordance with Section 1.1 above as instructed by Parent in writing prior to the Expiration Time. The parties agree that the foregoing is a voting agreement.

Section 1.3 Restrictions on Transfers. Except as provided for in the Rollover Agreements or pursuant to the Merger Agreement, or, with respect to Mr. Yih, the Share Charge, each Shareholder hereby agrees that, from the date hereof until the Expiration Time, such Shareholder shall not, directly or indirectly, (a) sell (constructively or otherwise), transfer, assign, tender in any tender or exchange offer, pledge, grant, encumber, hypothecate or similarly dispose of (by merger, testamentary disposition, operation of law or otherwise) (collectively, “Transfer”), either voluntarily or involuntarily, or enter into any Contract, option or other

 

3


arrangement or understanding with respect to the Transfer of any Securities, including, without limitation, any swap transaction, option, warrant, forward purchase or sale transaction, futures transaction, cap transaction, floor transaction, collar transaction or any other similar transaction (including any option with respect to any such transaction) or combination of any such transactions, in each case involving any Securities and which (x) has, or would reasonably be expected to have, the effect of reducing or limiting such Shareholder’s economic interest in such Securities and/or (y) grants a third party the right to vote or direct the voting of such Securities (any such transaction, a “Derivative Transaction”), (b) deposit any Securities into a voting trust or enter into a voting agreement or arrangement or grant any proxy or power of attorney with respect thereto that is inconsistent with this Agreement, (c) convert or exchange, or take any action which would result in the conversion or exchange, of any Securities, (d) knowingly take any action that would make any representation or warranty of such Shareholder set forth in this Agreement untrue or incorrect or would prevent or delay such Shareholder from performing any of his, her, or its obligations under this Agreement, or (e) agree (whether or not in writing) to take any of the actions referred to in the foregoing clauses (a), (b) (c) or (d).

ARTICLE II

NO SOLICITATION

Section 2.1 Restricted Activities. Prior to the Expiration Time, each Shareholder in its capacity as a shareholder of the Company shall not, and shall cause its officers, directors, employees, agents, advisors and other representatives (in each case, acting in their capacity as such to such Shareholder, in its capacity as a shareholder (the “Shareholder’s Representatives”)) not to, directly or indirectly: (i) solicit, initiate or encourage (including by way of furnishing nonpublic information), or take any other action to facilitate, any inquiries or the making of any proposal or offer (including, without limitation, any proposal or offer to the Company’s shareholders) that constitutes, or could reasonably be expected to lead to, any Competing Transaction, (ii) enter into, maintain or continue discussions or negotiations with, or provide any nonpublic information to, any person or entity in furtherance of such inquiries or to obtain a proposal or offer for a Competing Transaction, (iii) agree to, approve, endorse or recommend any Competing Transaction or enter into any letter of intent or Contract or commitment contemplating or otherwise relating to any Competing Transaction, or (iv) resolve or propose or agree to do any of the foregoing.

Section 2.2 Notification. Each Shareholder, in its capacity as a shareholder of the Company, shall and shall cause such Shareholder’s Representatives to, immediately cease and cause to be terminated any discussions or negotiations with any parties that may have been conducted heretofore with respect to a Competing Transaction. From and after the date hereof until the Expiration Time, each Shareholder shall promptly advise Parent in writing of (x) any Competing Transaction, (y) any request it receives in its capacity as a shareholder of the Company for non-public information relating to the Company or any Subsidiary, other than requests for information not reasonably expected to be related to or result into a Competing Transaction, and (z) any inquiry or request for discussion or negotiation it receives in its capacity as a shareholder of the Company regarding a Competing Transaction, including in each case the identity of the person making any such Competing Transaction or indication or inquiry and the

 

4


terms of any such Competing Transaction or indication or inquiry (including, if applicable, copies of any written requests, proposals or offers, including proposed agreements). Each Shareholder, in its capacity as a shareholder of the Company, shall keep Parent reasonably informed on a reasonably current basis of the status and terms (including any material changes to the terms thereof) of any such Competing Transaction or indication or inquiry (including, if applicable, any revised copies of written requests, proposals and offers) and the status of any such discussions or negotiations to the extent known by such Shareholder. This Section 2.2 shall not apply to any Competing Transaction received by the Company. Each Shareholder’s receipt, in its capacity as a shareholder of the Company, of any Competing Transaction shall not relieve such Shareholder from any of its obligations hereunder.

ARTICLE III

REPRESENTATIONS, WARRANTIES AND COVENANTS

OF THE SHAREHOLDERS

Section 3.1 Representations and Warranties. Each Shareholder (and with respect to Mr. Yih, except as provided for and in accordance with the Share Charge) represents and warrants to Parent and Merger Sub as follows: (a) such Shareholder has full legal right, power, capacity and authority to execute and deliver this Agreement, to perform such Shareholder’s obligations hereunder and to consummate the transactions contemplated hereby, (b) this Agreement has been duly executed and delivered by such Shareholder and the execution, delivery and performance of this Agreement by such Shareholder and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of such Shareholder and no other actions or proceedings on the part of such Shareholder are necessary to authorize this Agreement or to consummate the transactions contemplated hereby, (c) assuming this Agreement constitutes the valid and binding agreement of Parent and Merger Sub, this Agreement constitutes the valid and binding agreement of such Shareholder, enforceable against such Shareholder in accordance with its terms, (d) the execution and delivery of this Agreement by such Shareholder does not, and the consummation of the transactions contemplated hereby and the compliance with the provisions hereof will not, conflict with or violate any law or agreement binding upon such Shareholder or such Shareholder’s Securities, nor require any authorization, consent or approval of, or filing with, any Governmental Authority, except for filings with the Securities and Exchange Commission by such Shareholder, (e) except for such transfer restrictions of general applicability as may be provided under the Securities Act and the “blue sky” laws of the various states of the United States, such Shareholder owns, beneficially and of record, or controls all of its Securities, and all of such Securities are free and clear of any proxy, voting restriction, adverse claim or other Lien (other than any restrictions created by this Agreement and the Rollover Agreements), and has sole or shared (together with affiliates controlled by such Shareholder) voting power and power of disposition with respect to such Securities, with no restrictions on such Shareholder’s rights of voting or disposition pertaining thereto, and no person other than such Shareholder has any right to direct or approve the voting or disposition of any of such Shareholder’s Securities, and (f) such Shareholder has not Transferred any Securities pursuant to any Derivative Transaction. Each Shareholder understands and acknowledges that Parent and Merger Sub are entering into the Merger Agreement in reliance upon such Shareholder’s execution, delivery and performance of this Agreement.

 

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Section 3.2 Covenants. Each Shareholder (and with respect to Mr. Yih, subject to the Share Charge) hereby:

(a) agrees, prior to the Expiration Time, not to take any action that would make any representation or warranty of such Shareholder contained herein untrue or incorrect or have or could have the effect of preventing, impeding or interfering with or adversely affecting the performance by such Shareholder of its obligations under this Agreement;

(b) irrevocably waives, and agrees not to exercise, any rights of appraisal or rights of dissent from the Merger that such Shareholder may have with respect to such Shareholder’s Securities (including without limitation any rights under Section 179 of the BVI Companies Act) prior to the Expiration Time;

(c) agrees to promptly notify Parent and Merger Sub of the number of any new Securities acquired by the Shareholder after the date hereof and prior to the Expiration Time;

(d) agrees to permit the Company to publish and disclose in the Proxy Statement, such Shareholder’s identity and ownership of Shares or other equity securities of the Company and the nature of such Shareholder’s commitments, arrangements and understandings under this Agreement and the Rollover Agreements;

(e) authorizes the Company, Parent, Merger Sub and their respective counsel and representatives to notify the Company’s transfer agent that there is a stop transfer order with respect to all of the Shareholder’s Securities (and that this Agreement places limits on the voting and transfer of such Securities);

(f) agrees that, prior to the Expiration Time, it shall support, and grant all approvals, and take all actions reasonably requested by Parent or Merger Sub to ensure that any and all Takeover Statutes shall be inapplicable to this Agreement, the Merger Agreement, the Merger or the other transactions contemplated by the Merger Agreement; and

(g) agrees that, upon request of Parent or Merger Sub, such Shareholder shall execute and deliver any additional documents, consents or instruments and take such further actions as may reasonably be deemed by Parent or Merger Sub to be necessary or desirable to carry out the provisions of this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Section 4.1 Representations and Warranties of Parent and Merger Sub. Each of Parent and Merger Sub hereby, jointly and severally, represents and warrants to each Shareholder as follows: (a) this Agreement has been duly and validly authorized by each of Parent’s and Merger

 

6


Sub’s respective board of directors, (b) this Agreement has been duly executed and delivered by a duly authorized officer or other representative of each of Parent and Merger Sub, and (c) assuming this Agreement constitutes a valid and binding agreement of Shareholders, this Agreement constitutes a valid and binding agreement of Parent and Merger Sub, enforceable against Parent and Merger Sub, as applicable, in accordance with its terms, and (d) the execution and delivery of this Agreement by Parent and Merger Sub does not, and the consummation of the transactions contemplated hereby and the compliance with the provisions hereof will not, conflict with or violate any law or agreement binding upon Parent or Merger Sub, nor require any authorization, consent or approval of, or filing with, any Governmental Authority, except for filings with the Securities and Exchange Commission.

ARTICLE V

TERMINATION

Section 5.1 Termination. This Agreement shall terminate and be of no further force or effect upon the earlier to occur of (a) the Closing and (b) the date of termination of the Merger Agreement in accordance with its terms. Notwithstanding the preceding sentence, this Article V and Article VI shall survive any termination of this Agreement. Nothing in this Article V shall relieve or otherwise limit any party’s liability for any breach of this Agreement prior to termination.

ARTICLE VI

MISCELLANEOUS

Section 6.2 Notices. All notices and other communications hereunder shall be in writing (in the English language) and shall be deemed duly given (i) upon receipt if delivered personally, or if by email or facsimile, upon confirmation of receipt by email or facsimile, (ii) one Business Day after being sent by express courier service, or (iii) three Business Days after being sent by registered or certified mail, return receipt requested. All notices hereunder shall be delivered to the address set forth on the signature pages hereto under each party’s name, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

Section 6.3 Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

 

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Section 6.4 Entire Agreement. This Agreement (together with the Merger Agreement and the Rollover Agreements to the extent referred to in this Agreement) constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and supersedes all other prior agreements and understandings, both written and oral, among the parties, with respect to the subject matter hereof.

Section 6.5 Specific Performance. The parties hereto acknowledge and agree that monetary damages would not be an adequate remedy in the event that any covenant or agreement in this Agreement is not performed in accordance with its terms, and therefore agree that, in addition to and without limiting any other remedy or right available, each party hereto will have the right to an injunction, temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof. Each party hereto agrees not to oppose the granting of such relief in the event a court determines that such a breach has occurred, and to waive any requirement for the securing or posting of any bond in connection with such remedy. All rights, powers, and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party hereto shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party.

Section 6.6 Amendments and Modification. This Agreement may not be amended, altered, supplemented or otherwise modified except upon the execution and delivery of a written agreement executed by each party hereto.

Section 6.7 Waiver. No failure or delay of any party hereto in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have hereunder. Any agreement on the part of a party hereto to any such waiver shall be valid only if set forth in a written instrument executed and delivered by such party.

Section 6.8 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York, without regard to (to the greatest extent a New York court would permit) any applicable conflicts of law principles that would cause the application of the laws of any other jurisdiction.

Section 6.9 Jurisdiction; Enforcement. The parties agree that any Action brought by any party to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any State of New York or United States Federal court sitting in the Borough of Manhattan, the City of New York. Each of the parties submits to the jurisdiction of any such court in any Action seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated hereby, and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such Action. Each party

 

8


irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding in any such court or that any such proceeding brought in any such court has been brought in an inconvenient forum.

Section 6.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO TRIAL BY JURY IN ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENTS OR INSTRUMENTS REFERRED TO IN THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF EACH OF THE PARTIES IN NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.

Section 6.11 Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to or shall confer upon any person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement, except as specifically set forth in this Agreement.

Section 6.12 Assignment; Binding Effect. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Parent and Merger Sub may assign this Agreement (in whole but not in part) in connection with a permitted assignment of the Merger Agreement by Parent or Merger Sub, as applicable. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns and, in the case of each Shareholder, his, her or its estate, heirs, beneficiaries, personal representatives and executors.

Section 6.13 No Presumption Against Drafting Party. Each of the parties to this Agreement acknowledges that it has been represented by independent counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has no application and is expressly waived.

Section 6.14 Counterparts. This Agreement may be executed in two or more counterparts, and by facsimile or, pdf format, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties.

[Signature Pages to follow]

 

9


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

 

PARENT
FLORA BLOOM HOLDINGS
By:  

/s/ Neil Gray

Name:   Neil Gray
Title:   Director

 

Intertrust Corporate Services (Cayman) Limited

190 Elgin Avenue, George Town

Grand Cayman KY1-9005

Cayman Islands

with a copy to:

Mr. Yu Chuan Yih

c/o LJ International Inc.

Unit #12, 12/F, Block A

Focal Industrial Centre

21 Man Lok Street

Hung Hom, Kowloon, Hong Kong

Facsimile:   +86 755 2526 0329
Email: yih@ljintl.com
with a copy (which shall not constitute notice) to:

Sidley Austin LLP

Suite 1901, Shui On Plaza

No. 333 Middle Huai Hai Road

Shanghai 200021

China

Attention:   Mr. Joseph Chan
Facsimile:   +86 21 5306 8966
Email: joseph.chan@sidley.com

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


and
Urban Prosperity Holding Limited
190 Elgin Avenue, George Town
Grand Cayman KY1-9005
Cayman Islands
with a copy to:
FountainVest Partners (Asia) Limited
Suite 705-708, ICBC Tower
3 Garden Road
Central, Hong Kong
Attention:   Mr. George Chuang / Mr. Edward Yu / Mr. Brian Lee
Facsimile:   +852 3107 2490
Email:   georgechuang@fountainvest.com / edwardyu@fountainvest.com / brianlee@fountainvest.com
with a copy (which shall not constitute notice) to:
Fried, Frank, Harris, Shriver & Jacobson
1601 Chater House
8 Connaught Road Central
Hong Kong
Attention:   Mr. Douglas Freeman / Mr. Victor Chen
Facsimile:   +852 3760 3611
Email:   douglas.freeman@friedfrank.com / victor.chen@friedfrank.com

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


MERGER SUB
FLORA FRAGRANCE HOLDINGS LIMITED
By:  

/s/ David Lamb

Name:  
Title:  

 

c/o Codan Trust Company (B.V.I.) Ltd. of Commerce House
Wickhams Cay 1, P.O. Box 3140
Road Town, Tortola
British Virgin Islands, VG1110
with a copy to:

Mr. Yu Chuan Yih

c/o LJ International Inc.

Unit #12, 12/F, Block A

Focal Industrial Centre
21 Man Lok Street
Hung Hom, Kowloon, Hong Kong
Facsimile:   +852 2764 3783
Email: yih@ljintl.com
with a copy (which shall not constitute notice) to:
Sidley Austin LLP
Suite 1901, Shui On Plaza
No. 333 Middle Huai Hai Road
Shanghai 200021
China
Attention:   Mr. Joseph Chan
Facsimile:   +86 21 5306 8966
Email: joseph.chan@sidley.com
and

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


Urban Prosperity Holding Limited
Intertrust Corporate Services (Cayman) Limited
190 Elgin Avenue
George Town
Grand Cayman KY1-9005
Cayman Islands
with a copy to:
FountainVest Partners (Asia) Limited
Suite 705-708, ICBC Tower
3 Garden Road
Central, Hong Kong
Attention:   Mr. George Chuang / Mr. Edward Yu / Mr. Brian Lee
Facsimile:   +852 3107 2490
Email:   georgechuang@fountainvest.com / edwardyu@fountainvest.com / brianlee@fountainvest.com
with a copy (which shall not constitute notice) to:

Fried, Frank, Harris, Shriver & Jacobson

1601 Chater House

8 Connaught Road Central
Hong Kong
Attention:   Mr. Douglas Freeman / Mr. Victor Chen
Facsimile:   +852 3760 3611
Email:   douglas.freeman@friedfrank.com / victor.chen@friedfrank.com

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


SHAREHOLDERS
YU CHUAN YIH

/s/ Yu Chuan Yih

c/o LJ International Inc.
Unit #12, 12/F, Block A
Focal Industrial Centre
21 Man Lok Street
Hung Hom, Kowloon, Hong Kong
Facsimile: +852 2764 3782

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


HON TAK RINGO NG

/s/ Hon Tak Ringo Ng

c/o LJ International Inc.
Unit #12, 12/F, Block A
Focal Industrial Centre
21 Man Lok Street
Hung Hom, Kowloon, Hong Kong
Facsimile: +852 2764 3782

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


KA MAN AU

/s/ Ka Man Au

c/o LJ International Inc.
Unit #12, 12/F, Block A
Focal Industrial Centre
21 Man Lok Street
Hung Hom, Kowloon, Hong Kong
Facsimile:   +852 2764 3782

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


PETER AU

/s/ Peter Au

c/o LJ International Inc.
Unit #12, 12/F, Block A
Focal Industrial Centre
21 Man Lok Street
Hung Hom, Kowloon, Hong Kong
Facsimile:   +852 2764 3782

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


YUIN CHIEK LYE

/s/ Yuin Chiek Lye

c/o LJ International Inc.
Unit #12, 12/F, Block A
Focal Industrial Centre
21 Man Lok Street
Hung Hom, Kowloon, Hong Kong
Facsimile:   +852 2764 3782

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


VICKY CHAN

/s/ Vicky Chan

c/o LJ International Inc.
Unit #12, 12/F, Block A
Focal Industrial Centre
21 Man Lok Street
Hung Hom, Kowloon, Hong Kong
Facsimile:   +852 2764 3782

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


ZHICHENG SHI

/s/ Zhicheng Shi

1 Novella Street
Lewiston, ME 04240
U.S.A.

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


PRIMEON, INC.

/s/ Zhicheng Shi

c/o Zhicheng Shi
1 Novella Street
Lewiston, ME 04240
U.S.A.

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


HILLSIDE FINANCIAL

/s/ Zhicheng Shi

c/o Zhicheng Shi
1 Novella Street
Lewiston, ME 04240
U.S.A.

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


SHILIN INVESTMENTS

/s/ Zhicheng Shi

c/o Zhicheng Shi
1 Novella Street
Lewiston, ME 04240
U.S.A.

[SIGNATURE PAGE – FORM OF VOTING AGREEMENT]


SCHEDULE A1

 

Shareholder

   Share      Company Option  

Yu Chuan Yih

     3,390,053         —     

Hon Tak Ringo Ng

     377,035         200,000   

Ka Man Au

     406,030         200,000   

Peter Au

     —           32,000   

Yuin Chiek Lye

     192,760         92,000   

Vicky Chan

     30,000         20,000   

Zhicheng Shi

     570,000         —     

Primeon, Inc.

     700,000         —     

Hillside Financial

     104,500         —     

Shilin Investments

     60,300         —     

 

1  For the avoidance of doubt, the numbers set forth below are as of the date hereof.

 

24

EX-7.7 8 d512471dex77.htm EX-7.7 EX-7.7

Exhibit 7.7

CONSORTIUM AGREEMENT

This Consortium Agreement (“Agreement”) is entered into as August 13, 2012 by and between Urban Prosperity Holding Limited, an affiliate of FountainVest Partners (“FountainVest”), and Mr. Yu Chuan Yih (the “Shareholder”) in connection with a possible acquisition (the “Transaction”) of LJ International Inc. (the “Company”), to be effected through a special purpose vehicle (“Bidco”) to be owned by the Sponsor(s) (as defined in Section 23 below) and the Shareholder.

Each of the Shareholder and the Sponsor is referred to herein as a “Party”, and collectively, the “Parties”. The Shareholder and the Sponsor (together, the “Consortium”), intending to be legally bound, hereby agree to the following:

1. Process.

(a) The Parties agree to participate in the Transaction on the terms set forth in this Agreement. The Parties shall use their reasonable best efforts and cooperate in good faith to collectively: (i) undertake due diligence with respect to the Company and its business, (ii) secure equity financing (and, if applicable, other financing) in respect of the Transaction; (iii) engage in discussions with the Company regarding the Transaction; (iv) negotiate the terms of definitive documentation in respect of the Transaction (the “Definitive Agreements”), including without limitation the terms of agreements between the Parties required to support the Transaction or to regulate the relationship between the Parties; and (v) obtain all applicable governmental, statutory, regulatory or other approvals, licenses, waivers or exemptions required or, in the reasonable opinion of the Parties, desirable for the consummation of the Transaction. This Agreement does not constitute any binding commitment with respect to a Transaction. Such a commitment will result only from the execution of Definitive Agreements, and then will be on the terms provided in such documentation. In no event will either Party hereto be obligated without such Party’s consent to enter into or otherwise be a party to any Definitive Agreements.

(b) All advisors to the Consortium (the “Advisors”) shall be jointly selected by the Sponsor and the Shareholder. In connection with the Transaction, Fried, Frank Harris, Shriver & Jacobson LLP (“Fried Frank”) is acting as international legal advisor to the Consortium, Conyers, Dill & Pearman is acting as British Virgin Islands legal advisor to the Consortium, and Sidley Austin LLP is acting as legal advisor to the Shareholder.

2. Commitment to the Consortium. Within the Exclusivity Period, and without limiting any other rights that the Sponsor has under its previous agreement with the Company, unless FountainVest and the Shareholder have otherwise consented in writing:

(a) The Shareholder and the Sponsor agree to deal exclusively with each other in respect to the Transaction, and neither the Shareholder nor the Sponsor will (and will cause Bidco and each of their respective Representatives not to) : (i) directly or indirectly initiate, solicit, encourage or otherwise engage in discussions, negotiations or related activities with any third party with respect to a Competing Transaction, (ii) provide any information to any third

 

1


party with a view to the third party or any other person pursuing or considering to pursue a Competing Transaction, or (iii) enter into any written or oral agreement, arrangement or understanding (whether legally binding or not) regarding, or do or omit to do, anything which is inconsistent with the Transaction as contemplated under this Agreement;

(b) The Shareholder agrees (i) to vote, or cause to be voted, at every shareholder or members meeting (whether by written consent or otherwise) all Securities in favor of the Transaction and against any Competing Transaction or matter that would facilitate a Competing Transaction; and (ii) not to, and will not permit any of its Representatives to, directly or indirectly: (A) sell, offer to sell, give, pledge, encumber, assign, grant any option for the sale of or otherwise transfer or dispose of, or enter into any agreement, arrangement or understanding to sell, any Shareholder Shares (“Transfer”), or enter into any contract, option or other arrangement or understanding with respect to a Transfer or limitation on voting rights of the Shareholder Shares, or any right, title or interest thereto or therein, (B) deposit any Shareholder Shares into a voting trust or grant any proxies or enter into a voting agreement, power of attorney or voting trust with respect to any Shareholder Shares, (C) take any action that would make have the effect of preventing, disabling or delaying the Shareholder from performing its obligations under this Agreement or (D) agree (whether or not in writing) to take any of the actions referred to in the foregoing clauses (i) or (ii) of this Section 2(b); and

(c) The Shareholder and the Sponsor will, and will cause their respective Representatives to, immediately cease and terminate any existing activities, discussions and negotiations in connection with any Competing Transaction other than with the Parties. During the Exclusivity Period, the Shareholder and the Sponsor shall provide each other notice of any unsolicited offer or proposal received in relation to any Competing Transaction, including the terms of any such offer or proposal, and any written communications with respect thereto, which the Shareholder or the Sponsor may receive.

(d) In the event of a Competing Transaction, the Shareholder agrees that he shall not enter into any understanding or arrangement with any party to such Competing Transaction or any affiliate of such party (including taking any employment, consulting, or advisory role with or holding any equity or debt in the Company or any successor entity of the Company or its businesses) for a two-year period commencing on the date of the completion of the Competing Transaction.

3. Additional Consortium Members. The Shareholder and FountainVest may agree to admit one or more additional Consortium members which will provide equity capital to the Consortium for the consummation of the Transaction. Such additional Consortium members shall execute a deed of adherence to this Agreement in form and substance satisfactory to each of them.

4. Debt Financing. The Parties agree and acknowledge that the closing of the Transaction shall not be subject to any debt financing condition. In the event that debt financing is required as mutually determined by the Parties, the Parties shall use their reasonable best efforts to arrange debt financing for the Transaction. The Parties shall work together and

 

2


cooperate in good faith in connection with arranging the debt financing. The Sponsor shall coordinate with banks and other financing sources identified by the Sponsor in connection with the debt financing, and the Shareholder shall provide such necessary assistance in connection with arranging the debt financing as may be reasonably requested by the Sponsor.

5. Confidentiality. Each of the Shareholder and the Sponsor shall, and shall direct its Representatives to, keep this Agreement and the Transaction confidential and shall not make any public statement or announcement concerning or disclose to any third party the fact that discussions or negotiations are taking place concerning the Transaction or any of the terms, conditions or other facts with respect thereto, including the status thereof, other than as mutually agreed in writing by the Shareholder and the Sponsor or as required by applicable laws, rules or regulations. Each of the Sponsor and the Shareholder will coordinate in good faith on all public disclosure required by securities laws or exchange rules, press releases and other public relation matters relating to the Transaction.

6. Certain Fees and Expenses.

(a) Upon consummation of the Transaction, Bidco shall reimburse each Party hereto for all fees and out-of-pocket expenses incurred by them in connection with the Transaction.

(b) If the Transaction is not eventually consummated (and Section 6(c) below does not apply), the Sponsor agrees to pay (and in the case of more than one Sponsor, to share ratably based on such Sponsor’s planned equity participation in the Transaction) all fees and out-of-pocket expenses payable by the Consortium in connection with the Transaction incurred prior to the termination of this Agreement, including (i) any fees and expenses payable to the Advisors and any lenders and other financing sources and (ii) any reasonable fees and expenses payable to Sidley Austin LLP and to the extent disclosed and agreed to by the Sponsor, any fees and expenses payable to any other advisors in connection with their representation of the Shareholder. 

(c) If the Transaction is not consummated and one of the Parties has breached this Agreement, then such breaching Party shall reimburse any non-breaching Party for all fees and out-of-pocket expenses payable by such non-breaching Party in connection with the Transaction, without prejudice to any rights and remedies otherwise available to such non-breaching Party.

(d) Each of the Parties shall share, ratably based on such Party’s planned equity participation in the Transaction, any termination, topping, break-up or other fees or amounts payable by the Company or Bidco, net of the expenses required to be borne by them pursuant to Section 6(b).

7. Shareholders Agreement. The Shareholder and the Sponsor shall negotiate in good faith to enter into (and cause Bidco to enter into) the Shareholders’ Agreement, at or prior to the completion of the Transaction, on terms and conditions mutually agreed among the Parties.

 

3


8. Limitation of Liability. The obligations of each Party under this Agreement are several (and not joint or joint and several).

9. Specific Performance. Each Party acknowledges and agrees that the other Party would be irreparably injured by a breach of this Agreement by it and that money damages alone are an inadequate remedy for actual or threatened breach of this Agreement. Accordingly, each Party shall be entitled to bring an action for specific performance and/or injunctive or other equitable relief (without posting a bond or other security) to enforce or prevent any violations of any provision of this Agreement, in addition to all other rights and remedies available at law or in equity to such Party, including the right to claim money damages for breach of any provision of this Agreement.

10. Negotiation of the Agreement. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event that an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement.

11. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to any choice of law or conflict of law rules or provisions that would cause the application of the laws of any jurisdiction other than the State of New York.

12. Arbitration. Subject to Section 9, all disputes, actions and proceedings arising out of or relating to this Agreement shall be referred to and finally resolved by arbitration in Hong Kong under the UNCITRAL Arbitration Rules in accordance with the Hong Kong International Arbitration Center (“HKIAC”) Procedures for the Administration of International Arbitration in force at the date of this Agreement, which rules are deemed to be incorporated by reference in this Section 12. The place of arbitration shall be Hong Kong and the language of arbitration shall be English. The appointing authority shall be the HKIAC. There shall be one arbitrator agreed to by the claimant and the respondent, and if they cannot so agree on such arbitrator within five business days of the commencement of the notice of arbitration proceedings, three arbitrators shall be appointed. In such case, two of the arbitrators shall be nominated by the respective parties, and if either party shall abstain from nominating its arbitrator, the HKIAC shall appoint such arbitrator. The two arbitrators so chosen shall select a third arbitrator, provided that if such two arbitrators shall fail to choose a third arbitrator within 20 days after such two arbitrators have been selected, the HKIAC, upon the request of either party, shall appoint a third arbitrator. The third arbitrator shall be the presiding arbitrator. The arbitration shall be conducted in private. Each Party agrees that all documents and evidence submitted in the arbitration (including, without limitation any statements of case and any interim or final award, as well as the fact that an arbitral award has been made) shall remain confidential both during and after any final award that is rendered unless the applicable Parties otherwise agree in writing. The arbitral award is final and binding upon the applicable Parties.

 

4


13. Representation. As of the date of this Agreement, (a) the Shareholder holds (i) of record the number of outstanding Shares set forth under the heading “Shares Held of Record” next to his name on Schedule A hereto, and (ii) the other Securities of the Company set forth under the heading “Other Securities” next to his name on Schedule A hereto, in each case free and clear of any encumbrances or restrictions; and (b) the Shareholder does not own, directly or indirectly, any Shares or other Securities of the Company, other than the Securities set forth on Schedule A hereto. For purposes of this Section 8(c), “owns” means the Shareholder (x) is the record holder of such Security or (y) is the “beneficial owner” (within the meaning of Rule 13d-3 under the Exchange Act) of such Security.

14. Notice. Any notice, request, instruction or other document to be provided hereunder by any Party to another Party shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, or by facsimile, overnight courier or electronic mail, to the address provided under such other Party’s signature page hereto, or to such other address or facsimile number or electronic mail address as such Party may hereafter specify for the purpose by notice to the other Parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding business day in the place of receipt.

15. No Modification. No provision in this Agreement can be waived, modified or amended except by written consent of the Parties, which consent shall specifically refer to the provision to be waived, modified or amended and shall explicitly make such waiver, modification or amendment.

16. No Waiver of Rights. It is understood and agreed that no failure or delay by any Party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

17. Counterparts; Entire Agreement. This Agreement may be signed and delivered by facsimile or portable document format via electronic mail and in one or more counterparts, each of which shall be deemed an original but all of which shall be deemed to constitute a single instrument. This Agreement sets forth the entire agreement and understanding between the Parties and supersedes all prior agreements, discussions and documents relating thereto. No Party hereto will be entitled to punitive, exemplary, special, unforeseen, incidental, indirect or other consequential damages.

18. Severability. If any provision of this Agreement is found to violate any statute, regulation, rule, order or decree of any governmental authority, court, agency or exchange, such invalidity shall not be deemed to affect any other provision hereof or the validity of the remainder of this Agreement, and such invalid provision shall be deemed deleted herefrom to the minimum extent necessary to cure such violation.

 

5


19. Successors. This Agreement shall inure to the benefit of, and be binding upon, the Parties and their respective successors and assigns. Neither Party may assign or transfer, directly or indirectly, its rights or obligations under this Agreement without the prior written consent of the other Parties except as provided herein; provided, however, the Sponsor may assign its rights and obligations under this Agreement, in whole or in part, to any affiliated investment funds of the Sponsor or any investment vehicles of the Sponsor or such funds (other than any portfolio companies of the Sponsor or such funds) and, subject to the prior written consent of the other Party, any other co-investors of the Sponsor (as the case may be). No assignment will relieve the assignor of its obligations hereunder.

20. No Third Party Beneficiaries. Unless otherwise specifically provided herein, the Parties hereto each agree and acknowledge that nothing herein expressed or implied is intended to confer upon or give any rights or remedies to persons not Party to this agreement under or by reason of this Agreement.

21. No Partnership or Agency. The Parties are independent and nothing in this Agreement constitutes a Party as the trustee, fiduciary, agent, employee, partner or joint venturer of the other Party.

22. Termination.

(a) If the Parties are unable to agree either (i) as between themselves upon the material terms of the Transaction for the Transaction, or (ii) with the Special Committee on the material terms of a Transaction which the Special Committee agrees to recommend to the public shareholders of the Company, a Party may cease its participation in the Transaction by delivery of a written notice to the other Party and this Agreement shall terminate with respect to such withdrawing Party.

(b) This Agreement shall also terminate upon the earliest to occur of (i) a written agreement among the Parties to terminate this Agreement, and (ii) the closing of the Transaction.

(c) Upon termination of this Agreement pursuant to Section 22(a) above, Sections 2 and Sections 6, 8 to 23 shall continue to bind the Parties. Upon termination of this Agreement pursuant to Section 22(b) above, Sections 6, 8 to 23 shall continue to bind the Parties. Other than as set forth in the foregoing or in respect of a breach of this Agreement by any Party prior to the termination of this Agreement with respect to such Party, the Parties shall not otherwise be liable to each other in relation to this Agreement.

23. Certain Definitions. In this Agreement:

Competing Transaction” shall mean (i) any direct or indirect acquisition by any person or entity of 10% or more of the Securities of the Company or any of its material subsidiaries or all or significant portion of its assets, and (ii) a recapitalization, restructuring, merger, consolidation or other business combination involving the Company or any of its subsidiaries, in either case other than the Transaction.

 

6


Exclusivity Period” shall mean the period beginning on the date hereof and ending on the first to occur of: (i) the date eight months after the date hereof, and (ii) the mutually agreed termination of this Agreement.

Representatives” shall mean, with respect to a person, such person’s employees, directors, officers, partners, members, nominees, agents, advisors (including but not limited to legal counsel, accountants, consultants and financial advisors), financing sources, and any representatives of the foregoing. The Representatives shall include the Advisors as defined in Section 1(b).

Securities” shall mean Shares, warrants, options and any other securities which are convertible into, exchangeable, or exercisable for Shares in the Company.

Shareholder Shares” shall mean all capital stock of the Company owned by the Shareholder as of the date hereof either directly or indirectly.

Shareholders’ Agreement” shall mean the Memorandum and Articles of Association of Bidco and a shareholders’ agreement among the Parties that would, among other things, govern the relationship of the shareholders in Bidco, following the consummation of the Transaction, and that would contain provisions customary for transactions of this type.

Shares” shall mean the issued and outstanding ordinary shares, par value US$0.01 per share, of the Company.

Sponsor” shall mean FountainVest and any other additional Consortium member(s) added as a “Sponsor” under this Agreement in accordance with Section 3 hereof. Unless the context otherwise requires, and except as may otherwise be agreed by the terms of adherence in accordance with Section 3 hereof, references to “Sponsor” shall refer to “Sponsors” in the event an additional Sponsor is added.

[Signature page to follow]

 

7


IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered as of the date first written above.

 

SHAREHOLDER:
YU CHUAN YIH

/s/ Yu Chuan Yih

ADDRESS:
Unit #12, 12/F, Block A
Focal Industrial Centre
21 Man Lok Street
Hung Hom, Kowloon, Hong Kong
Email: yih@ljintl.com
Fax: 852-2764-3783

[Signature Page to Consortium Agreement]


THE SPONSOR:
URBAN PROSPERITY HOLDING LIMITED
By:  

/s/ Kui Tang

  Name:   Kui Tang
  Title:   Director

 

ADDRESS:
Walker House
87 Mary Street
George Town
Grand Cayman KY1-9005
Cayman Islands
With a copy to:
Suite 705-708 ICBC Tower
3 Garden Road
Central, Hong Kong
Attention: Mr. George Chuang / Mr. Edward Yu / Mr. Brian Lee
Facsimile: 852-3107-2490
Email: georgechuang@fountainvest.com / EdwardYu@fountainvest.com / brianlee@fountainvest.com

[Signature Page to Consortium Agreement]


Schedule A

Share Ownership Schedule

 

     Shares Held of Record      Other Securities

Yu Chuan Yih

     3,390,053       Nil
EX-7.8 9 d512471dex78.htm EX-7.8 EX-7.8

Exhibit 7.8

EXECUTION VERSION

LOAN AGREEMENT

THIS LOAN AGREEMENT (this “Agreement”), dated March 22, 2013, between Urban Prosperity Holding Limited, a company established under the laws of the Cayman Islands (the “Lender”), Mr. Yu Chuan Yih (the “Borrower” or “Chairman”) and Ms. Ka Man Au (the “Secondary Chargor”), establishes the terms and conditions that will govern two fully recourse loans to be provided by the Lender to the Borrower.

1. Loans. The Lender agrees, upon the terms and subject to the conditions set forth in this Agreement, to make available to the Borrower:

 

  a) within fifteen (15) Business Days after the date of this Agreement, a fully recourse loan (the “First Tranche Loan”) of Two Million Five Hundred Thousand United States Dollars (US$2,500,000). The First Tranche Loan shall be evidenced by a single promissory note (the “First Tranche Note”) substantially in the form attached to Exhibit A hereto in the principal amount of the First Tranche Loan, payable to the Lender, duly executed by the Borrower on the date when the First Tranche Loan is made; and

 

  b) in the event that the Acquisition as defined in that certain proposal letter, dated August 13, 2012, from the Chairman and an affiliate of FountainVest Partners to the board of directors of LJ International Inc. (the “Company”) is completed, upon the completion of such Acquisition, a fully recourse loan (the “Second Tranche Loan” and together with the First Tranche Loan, the “Loans”) of Two Million Five Hundred Thousand United States Dollars (US$2,500,000). The Second Tranche Loan shall be evidenced by a single promissory note (the “Second Tranche Note”; together with the First Tranche Note, the “Notes”; and together with this Agreement and the First Tranche Note, the “Loan Documents”) substantially in the form attached to Exhibit A hereto in the principal amount of the Second Tranche Loan, payable to the Lender, duly executed by the Borrower on the date when the Second Tranche Loan is made.

Each of the Loans shall bear interest on the outstanding principal balance thereof as set forth in Section 3 hereof.

2. Maturity Dates.

 

  a) First Tranche Loan. One Million Two Hundred Fifty Thousand United States Dollars (US$1,250,000) of the principal balance of the First Tranche Loan, together with all accrued and unpaid interest thereon, shall be immediately due and payable by the Borrower in full on the second (2) anniversary of the date when the First Tranche Loan is made; and the remaining One Million Two Hundred Fifty Thousand United States Dollars (US$1,250,000) of the principal balance of the First Tranche Loan, together with all accrued and unpaid interest thereon, shall be immediately due and payable by the Borrower in full on the ninetieth (90) day after the second (2) anniversary of the date when the First Tranche Loan is made.

 

1


  b) Second Tranche Loan. The entire outstanding principal balance of the Second Tranche Loan, together with all accrued and unpaid interest thereon, shall be immediately due and payable by the Borrower in full on the earlier of (i) the completion of an initial public offering of Enzo Jewelry Inc., a company incorporated under the laws of the British Virgin Islands (“Enzo Jewelry”), or any successor entity of all or substantially all of the assets of Enzo Jewelry, and (ii) December 31, 2015.

 

  c) Redemption Event. Notwithstanding Sections 2(a) and 2(b) above, the entire outstanding principal balance of both Loans, together with all accrued and unpaid interest thereon, if not already due and payable pursuant to Sections 2(a) and 2(b) above, shall be immediately due and payable by the Borrower in full upon both (A) the occurrence of a Redemption Event as defined in that certain Amended and Restated Memorandum and Articles of Association of Enzo Jewelry, dated April 29, 2011 and as may be amended and/or restated from time to time (the “Enzo M&A”) (whether or not the redemption rights under the Enzo M&A upon the occurrence of such a Redemption Event has actually been exercised), and (B) the delivery of a payment demand notice from the Lender to the Borrower, provided, however, that, notwithstanding the provisions of the Enzo M&A, any breach by the Company, Enzo Jewelry or any of their affiliates prior to the date hereof under Section 9.1(p) of the Shareholders’ Agreement relating to Enzo Jewelry, dated April 13, 2011, as amended (the “Enzo Shareholders’ Agreement”), shall not constitute a Redemption Event solely for purpose of this Section 2(c); and provided, further, that in the event that the Enzo Shareholders’ Agreement is amended after the date hereof, any breach by the Company, Enzo Jewelry or any of their affiliates after such amendment under Section 9.1(p) of such amended Enzo Shareholders’ Agreement or any other provision thereof covering the same subject matter shall constitute a Redemption Event under the Enzo M&A in accordance with its terms.

3. Interest Rate and Interest Payment Dates.

 

  a) Ordinary Interest. Interest shall accrue on the First Tranche Loan and the Second Tranche Loan from the date of the First Tranche Note and the Second Tranche Note, as applicable, until payment in full thereof at a rate equal to 4.5% per annum, and shall be payable semi-annually in arrears.

 

  b) Default Interest; Maximum Legal Rate. If the Borrower shall fail to pay any principal amount of either of the Loans when due and payable (whether by acceleration or otherwise), the outstanding principal amount of both Loans shall thereafter bear interest, payable on demand from time to time and upon payment in full of such overdue amount, until paid in full, at a rate of 15% per annum. In no event shall the Borrower be obliged or required to pay interest on the Loans at a rate in excess of that permitted by applicable law, and any such excess payments shall be deemed for all purposes a prepayment of principal.

 

2


4. Payments; Application to Interest and Principal. The Borrower shall make all payments of principal and interest and other amounts payable under the Loans not later than 11:00 A.M., Hong Kong time, on the date such payment is due, in lawful money of the United States of America by wire transfer of immediately available funds to the Lender’s account or by such other method as may be designated in writing by the Lender. If any payment of principal of or interest shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest in connection with such payment. Any prepayment pursuant to Section 7 shall be applied to reduce, first, the accrued and unpaid interest on the principal balance of the Loans (first as to interest on the Second Tranche Loan and then the First Tranche Loan) and, then, the unpaid principal balance thereof (first as to the Second Tranche Loan and then the Initial Tranche Loan), in each case outstanding at the time of such prepayment.

5. Use of Proceeds. The Borrower shall use the proceeds of the Loans for personal investment purposes.

6. Pledge of Collateral. (a) Concurrently with the execution of this Agreement, the Borrower, the Secondary Chargor and the Lender shall enter into a Share Charge (the “Share Charge Agreement”), pursuant to which the Borrower and the Secondary Chargor have pledged, assigned and granted to the Lender a security interest in the Charged Shares (as such term is defined in the Share Charge Agreement) (for the avoidance of doubt, being 3,390,053 ordinary shares of the Company beneficially owned by the Borrower of which 1,855,700 ordinary shares are held by the Secondary Chargor on behalf of the Borrower) and all dividends and other distributions, interest and rights thereon as more fully described in the Share Charge Agreement (collectively, the “Collateral”) to secure the prompt payment and performance of the obligations under the Loans.

(b) Immediately after the date hereof and in any event prior to the closing of the Acquisition, the Borrower shall procure that 1,855,700 ordinary shares held by the Secondary Chargor on behalf of the Borrower be removed from The Depositary Trust and Clearing Corporation System and be registered in the name of the Borrower on the share register of the Company.

(c) In the event of the closing of the Acquisition, all of the Charged Shares will be cancelled for nil consideration in the Acquisition and the Borrower will subscribe for 3,390,053 newly issued ordinary shares (“Parent Shares”) of Flora Bloom Holdings, a Cayman Islands exempted company (“Parent”). In such event, the Borrower agrees to pledge, assign, and grant to the Lender a security interest in all of the Parent Shares upon substantially similar terms as the Share Charge Agreement, such that, for all purposes under the Loan Documents, all references to the “Charged Shares” shall refer to the Parent Shares. Immediately prior to the closing of the Acquisition (and as a condition to the draw down of the Second Tranche Loan), the Borrower and the Secondary Chargor (to the extent any Charged Shares are held by the Secondary Chargor on behalf of the Borrower) shall execute and do all such acts as the Lender may reasonably request in order to give effect to the foregoing, including amending the Loan Documents and the Share Charge Agreement and procuring the entry in the share register of the Parent of the details of the Share Charge Agreement.

 

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7. Optional Prepayment. The Borrower may prepay the principal amount of the Loans at any time and from time to time, in whole or in part, together with accrued and unpaid interest on the principal amount being prepaid, without penalty or premium. At the Borrower’s election, the Borrower may make such prepayment by obtaining new financing from a bona fide financial institution (“Replacement Financing”), and Lender will agree to guarantee such Replacement Financing, provided that such guarantee shall be secured by the Collateral on substantially similar terms as the Share Charge Agreement and the Replacement Financing is made on substantially similar terms as or more favorable terms than the Loans.

8. Representations, Warranties and Agreements. The Borrower and the Secondary Chargor (to the extent any Charged Shares are held by the Secondary Chargor on behalf of the Borrower) represent and warrant to and agree with the Lender that:

 

  a) Ownership of Collateral; Encumbrances. The Borrower and the Secondary Chargor (i) are the legal and/or beneficial owner of the Collateral free and clear of any adverse claim or lien except for the security interest created under the Loan Documents and the Share Charge Agreement and (ii) have full right, power and authority to pledge, assign and grant a security interest in the Collateral to the Lender.

 

  b) Legality; Enforceability. The execution, delivery and performance by the Borrower and the Secondary Chargor of the Loan Documents and the Share Charge Agreement, the consummation of the transactions contemplated by the Loan Documents and the Share Charge Agreement, and compliance with the provisions of the Loan Documents and the Share Charge Agreement do not, and will not, contravene or conflict with any law, statute or regulation whatsoever to which the Borrower or the Secondary Chargor (as applicable) is subject or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or result in the breach of, any indenture, mortgage, deed of trust, charge, lien, or any contract, agreement or other instrument to which the Borrower or the Secondary Chargor (as applicable) is a party or which may be applicable to the Borrower or his properties. Each of the Loan Documents and the Share Charge Agreement is a legal and binding obligation of the Borrower and the Secondary Chargor and is enforceable in accordance with their respective terms.

 

  c) Security Interest. By virtue of the execution and delivery of the Share Charge Agreement and, in the case of the perfection of the lien and security interest, the completion of the registration procedures as set forth in Section 8.4 of the Share Charge Agreement, the Lender will obtain a legal, valid and perfected first-priority lien upon and security interest in the Collateral securing the obligations under the Loan Documents and the Share Charge Agreement. The obligations of the Borrower under the Loan Documents shall rank senior to all other indebtedness of the Borrower, whether now or hereinafter existing.

 

4


9. Certain Agreements.

 

  a) Voting Power. Unless and until an Event of Default (as defined below) occurs, the Borrower shall be entitled to exercise all voting powers in all corporate matters pertaining to the Charged Shares.

 

  b) Sale, Disposition or Encumbrance of Collateral. Except as otherwise provided in the Loan Documents and the Share Charge Agreement, the Borrower and the Secondary Chargor (to the extent any Charged Shares are held by the Secondary Chargor on behalf of the Borrower) shall be the registered holder (in the register of members of the Company) and/or the beneficial owner of the Charged Shares and will not in any way encumber any of the Collateral (or permit or suffer any of the Collateral to be encumbered) or sell, pledge, assign, lend or otherwise dispose of or transfer any of the Collateral to or in favor of any person or entity other than as may be required by law or as contemplated in the Share Charge Agreement. Except for restrictions imposed under the Loan Documents and the Share Charge Agreement, the Collateral is and will continue to be fully transferable and assignable, and not subject to any contractual or other restrictions (other than as may be required by law) that might affect the pledge, sale or disposition thereof pursuant to the provisions of the Loan Documents and the Share Charge Agreement.

 

  c) Distributions. Unless and until an Event of Default occurs, the Borrower and/or the Secondary Chargor shall be entitled to receive any and all distributions and allocations paid in respect of the Collateral. Upon the occurrence of an Event of Default, all rights of the Borrower and/or the Secondary Chargor to receive such distributions, which it would otherwise be entitled to receive pursuant to this clause (c) shall cease, and all such rights shall thereupon become vested in the Lender who shall thereupon have the sole right to receive and hold as Collateral such distributions, but the Lender shall have no duty to receive and hold such distributions and shall not be responsible for any failure to do so or delay in so doing.

10. Conditions Precedent. It shall be a condition precedent to the Lender’s making of any Loan that:

 

  a) Documents. The Lender shall have received counterpart originals of this Agreement and the First Tranche Note or the Second Tranche Note, as applicable, duly executed by the Borrower;

 

  b) Representations and Warranties. The representations and warranties contained in Section 8 are true and correct on and as of the date of the First Tranche Note or the Second Tranche Note, as applicable, as if made on such date;

 

  c) No Event of Default. No event has occurred or is continuing or would result from the making of either of the Loans which would constitute an Event of Default or an event, act or condition which with the passage of time or notice, or both, would constitute an Event of Default; and

 

  d) In the case of the Second Tranche Loan, all documents and actions contemplated by Section 6(b) of this Agreement shall have been executed and/or completed prior to the drawdown of the Second Tranche Loan.

 

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11. Events of Default. If any of the following events (each, an “Event of Default”) shall occur and be continuing:

 

  a) Payment of Principal and Interest. The Borrower fails to pay any principal of, or interest on, either of the Loans when the same shall be due;

 

  b) Breach of Covenant. The Borrower or the Secondary Chargor breaches any covenant or other term or condition of the Loan Documents or the Share Charge Agreement and such breach, if subject to cure, continues for a period of fifteen (15) Business Days after the earlier of its occurrence or written notice to the Borrower from the Holder;

 

  c) Breach of Representations and Warranties. Any material representation or warranty of the Borrower or the Secondary Chargor made in the Loan Documents or in the Share Charge Agreement shall become false or misleading;

 

  d) Judgments. Any money judgment, writ or similar final process shall be entered or filed against Borrower or any of his property or other assets for more than $1,000,000, and shall remain unvacated, unbonded, unappealed, unsatisfied, or unstayed for a period of thirty (30) days;

 

  e) Security Interest. The Share Charge Agreement or any of the security provided for therein shall, at any time, cease to be in full force and effect for any reason other than the satisfaction in full of all obligations under the Loan Documents and discharge of the Loan Documents or any security interest created thereunder shall be declared invalid or unenforceable or the Borrower or the Secondary Chargor shall assert, in any pleading in any court of competent jurisdiction, that any such security interest is invalid or unenforceable;

 

  f) Cross Default. A default by the Borrower of a material term, covenant, warranty or undertaking of any other agreement to which the Borrower is a party, other than guaranties pursuant to which the Borrower provides personal guarantee for any credit facilities extended to any entity within the retail business group of the Company;

 

  g) Bankruptcy. If any proceeding shall be instituted by or against the Borrower seeking to adjudicate him bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, protection, relief, or composition of his debts under any law relating to bankruptcy, insolvency or relief or the appointment of a receiver, trustee, or other similar official for him or for any substantial part of his property;

then the Borrower shall promptly notify the Lender of any such Event of Default, and in any such event, the Lender may, by written notice to the Borrower (except in the case of any event described in clause (g) above, in which case the outstanding principal and accrued and unpaid interest under both Loans shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are expressly waived by the Borrower), declare the entire unpaid principal amount of both Loans and all interest thereon to be forthwith due and payable, whereupon the entire unpaid principal amount of both Loans and all such interest shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower.

 

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The Borrower hereby irrevocably appoints the Lender as the Borrower’s attorney-in-fact, with full authority in the place and stead of the Borrower and in the name of the Borrower or otherwise, from time to time during the continuance of an Event of Default to take any action and to execute any assignment, certificate, financing statement, notification, document or instrument that the Lender may deem reasonably necessary to accomplish the purposes of the Loan Documents, including, without limitation, to receive, endorse and collect all instruments made payable to the Lender representing any interest payment or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same.

The Lender may enforce its rights under the Loan Documents without prior judicial process or judicial hearing, and to the extent permitted by law, the Borrower expressly waives any and all legal rights which might otherwise require the Lender to enforce its rights by judicial process.

12. Notices. All notices and other communications given or made pursuant to the Loan Documents shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next Business Day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) Business Day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next Business Day delivery, with written verification of receipt. All communications shall be addressed as follows, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 12:

 

If to the Lender, to:   Urban Prosperity Holding Limited
  190 Elgin Avenue
  George Town, Grand Cayman KY1-9005
  Cayman Islands
  Attention: Neil Gray & Kareen Watler
With a copy to:   FountainVest Partners (Asia) Limited
  Suite 705-708, ICBC Tower
  3 Garden Road
  Central, Hong Kong
  Attention: Mr. George Chuang / Mr. Edward Yu / Mr. Brian Lee
  Email: georgechuang@fountainvest.com / edwardyu@fountainvest.com / brianlee@fountainvest.com
  Fax: +852 3107 2490
If to the Borrower, to:   Mr. Yu Chuan Yih
  Unit #12, 12/F, Block A
  Focal Industrial Centre
  21 Man Lok Street
  Hung Hom, Kowloon, Hong Kong
  Email: yih@ljintl.com
  Fax: +86 755 2526 0329

 

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13. Confidentiality. Except as provided by law including rules and regulations of any stock exchange, the Borrower will not disclose the existence and the terms of the Loan Documents or the Share Charge Agreement with any person other than to his advisors or attorneys without the prior written consent of the Lender. In the event the Borrower is required by law to disclose any such information, the Borrower (a) shall (if permissible under applicable law) promptly notify the Lender of such requirement and shall cooperate with the Lender to the extent practicable to limit the information disclosed to only such information that the Borrower, as advised by counsel, is required by law to disclose and (b) will, to the extent practicable and at the request and expense of the Lender, seek to obtain a protective order over, or confidential treatment of, such information.

14. Amendment. None of the Loan Documents may be amended or otherwise modified except by a written instrument signed by the Borrower and the Lender.

15. Indemnity. The Borrower shall pay on demand all reasonable out-of-pocket expenses incurred or sustained by the Lender in connection with the enforcement or protection of rights of the Lender under the Loan Documents, including all reasonable costs of collection and the reasonable fees and disbursements of counsel. The Borrower agrees to indemnify the Lender and its affiliates and their respective directors, officers, employees, attorneys, agents and advisors (each such person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related reasonable expenses (including, but not limited to, the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee) arising out of, in connection with, or as a result of the Loan Documents or either of the Loans or any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related reasonable expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee.

16. Assignment. The Borrower may not assign, transfer, delegate, sell or convey any of his rights or obligations under the Loan Documents without the prior written consent of the Lender. The Lender shall have the right to assign or transfer its rights or obligations under the Loan Documents to any of its affiliates, the terms of which shall be binding upon and inure to the benefit of the Lender’s successors, assigns, administrators and transferees.

17. No Set-Off, Etc. The Borrower agrees that it shall not assert any right of set-off or counterclaim that it might have against the Lender in connection with the enforcement by the Lender of its rights under any of the Loan Documents.

18. Waiver of Presentment, Demand and Dishonor. The Borrower hereby waives presentment for payment, protest, demand, notice of protest, notice of nonpayment and diligence with respect to the Loan Documents, and waives and renounces all rights to the benefits of any

 

8


statute of limitations or any moratorium, appraisement, exemption, or homestead now provided or that hereafter may be provided by any federal or applicable state statute, both as to himself and as to all of his property, whether real or personal, against the enforcement and collection of the obligations evidenced by the Loan Documents and any and all extensions, renewals, and modifications of the Loan Documents. No failure or delay on the part of the Lender in exercising any of its rights, powers or privileges under any of the Loan Documents shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The remedies provided in the Loan Documents are cumulative and are not exclusive of any remedies provided by law.

19. Severability. Whenever possible, each provision of the Loan Documents shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Loan Documents 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 provision or the remaining provisions of the Loan Documents.

20. Entire Agreement. The Loan Documents and the Share Charge Agreement constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled.

21. Headings. Section headings herein shall have no legal effect.

22. Business Day. For purposes of the Loan Documents, “Business Day” means any day other than a Saturday, Sunday or public holiday in the British Virgin Islands or New York, USA.

23. Execution in Counterparts. Each of the Loan Documents may be executed in counterparts each of which when executed and delivered shall constitute an original but all such counterparts together shall constitute one and the same instrument.

24. Governing Law. THIS AGREEMENT SHALL BE DEEMED MADE UNDER, AND BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS RULES.

 

9


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

 

/s/ Yu Chuan Yih

Yu Chuan Yih, as Borrower

[Signature Page – Loan Agreement]


/s/ Ka Man Au

Ka Man Au, as Secondary Chargor

 

[Signature Page – Loan Agreement]


Urban Prosperity Holding Limited
By:  

/s/ Kui Tang

  Name:   Kui Tang
  Title:   Director

 

[Signature Page – Loan Agreement]


EXHIBIT A

FORM OF NOTE

 

US$2,500,000   March 22, 2013

FOR VALUE RECEIVED, the undersigned, Mr. Yu Chuan Yih (the “Borrower”), hereby agrees and promises to pay to Urban Prosperity Holding Limited, a company established under the laws of the Cayman Islands (the “Lender”), the principal sum of Two Million Five Hundred Thousand United States Dollars (US$2,500,000), on such due and payable date(s) as required by the Loan Agreement (as defined below), and to pay interest on the unpaid principal amount from time to time outstanding hereunder, in lawful money of the United States of America in immediately available funds, at such office and at such time as set forth in said Loan Agreement.

The Borrower and any and all sureties, guarantors and endorsers of this Note and all other parties now or hereafter liable hereon severally waive grace, demand, presentment for payment, protest, notice of any kind (including, but not limited to, notice of dishonor, notice of protest, notice of intention to accelerate or notice of acceleration) and diligence in collecting and bringing suit against any party hereto and agree to the extent permitted by applicable law (i) to all extensions and partial payments, with or without notice, before or after maturity, (ii) to any substitution, exchange or release of any security now or hereafter given for this Note, (iii) to the release of any party primarily or secondarily liable hereon, and (iv) that it will not be necessary for any holder of this Note, in order to enforce payment of this Note, to first institute or exhaust such holder’s remedies against the Borrower or any other party liable hereon or against any security for this Note. The non-exercise by the holder of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.

This Note is the [First/Second] Tranche Note referred to in that certain Loan Agreement, dated as of March 22, 2013 (as the same may be amended, supplemented or otherwise modified, renewed or replaced from time to time, the “Loan Agreement”), between the Borrower, Ka Man Au and the Lender and is entitled to the benefits of, and is secured by the security interests granted in, the Loan Documents and the Share Charge Agreement (each, as defined in the Loan Agreement).

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.


BORROWER SIGNATURE:  
 

 

BORROWER NAME:   Yu Chuan Yih
ADDRESS  
 

 

 

 

 

 

 

 

EX-7.9 10 d512471dex79.htm EX-7.9 EX-7.9

Exhibit 7.9

EXECUTION VERSION

Made on the March 22, 2013

BY:

YU CHUAN YIH

and

KA MAN AU

IN FAVOUR OF:

URBAN PROSPERITY HOLDING LIMITED

 

 

SHARE CHARGE

 

 


TABLE OF CONTENTS

 

1.   

INTERPRETATION

     4   
2.   

CHARGORS’ REPRESENTATIONS AND WARRANTIES

     6   
3.   

CHARGORS’ COVENANTS

     7   
4.   

SECURITY

     8   
5.   

DEALINGS WITH CHARGED PROPERTY

     9   
6.   

PRESERVATION OF SECURITY

     10   
7.   

ENFORCEMENT OF SECURITY

     13   
8.   

FURTHER ASSURANCES

     16   
9.   

INDEMNITIES

     17   
10.   

POWER OF ATTORNEY

     18   
11.   

EXPENSES

     19   
12.   

NOTICES

     20   
13.   

ASSIGNMENTS

     21   
14.   

MISCELLANEOUS

     21   
15.   

LAW AND JURISDICTION

     22   

 

SCHEDULE A

  

SHARE TRANSFER FORM

SCHEDULE B

  

PROXY

SCHEDULE C

  

UNDERTAKING FROM THE COMPANY


THIS SHARE CHARGE is made on March 22, 2013

BY:

Mr. Yu Chuan Yih, an individual (HKID number K768853(9)) (the “Primary Chargor”), and Ms. Ka Man Au, an individual (HKID number G035771(4)) (the “Secondary Chargor” and together with the “Primary Chargor”, the “Chargors” and each, a “Chargor”);

IN FAVOUR OF:

Urban Prosperity Holding Limited, a company incorporated under the laws of the Cayman Islands and having its registered office at 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands (the “Chargee”)

WHEREAS:

 

(A) Reference is hereby made to that certain Loan Agreement, dated as of March 23, 2013 (the “Loan Agreement”), between the Chargee and the Primary Chargor, as the borrower, in relation to two fully recourse loans provided, or to be provided, by the Chargee to the Primary Chargor and evidenced, or to be evidenced, by a promissory note each, each under the terms and conditions of the Loan Agreement. Capitalized terms used herein but not defined shall have the meaning given to them in the Loan Agreement.

 

(B) As security for the obligations of the Primary Chargor under the Loan Documents, the Chargors have agreed to charge, inter alia, their interest in 3,390,053 ordinary shares of LJ International, Inc., a company incorporated under the laws of the British Virgin Islands (the “Company”), which represent all of the ordinary shares of the Company legally and/or beneficially owned by the Primary Chargor, of which 1,534,353 are registered in the name of the Primary Chargor in the register of members of the Company and 1,855,700 are held by the Secondary Chargor on behalf of the Primary Chargor.

NOW THIS CHARGE WITNESSES as follows:


  1. INTERPRETATION

 

  1.1 In this Charge, unless the context otherwise requires, the following words and expressions shall have the following meanings:

 

“Business Day”    means any day other than a Saturday, Sunday or public holiday in the British Virgin Islands or New York, USA;
“Charge”    means this share charge;
“Charged Property”    means all 3,390,053 ordinary shares of the Company as described in Recital (B), of which 1,534,353 ordinary shares relate to the First Tranche Loan (the “First Tranche Loan Charged Shares”) and the remaining 1,855,700 ordinary shares relate to the Second Tranche Loan (the “Second Tranche Charged Shares”) (the First Tranche Loan Charged Shares and the Second Tranche Loan Charged Shares are collectively referred to as the “Charged Shares”) and all dividends or other distributions, interest and other moneys paid or payable after the date hereof in connection therewith and all interests in and all rights accruing at any time to or in respect of all or any of the Charged Shares and all and any other property that may at any time be received or receivable by or otherwise distributed to the Chargors in respect of or in substitution for, or in addition to, or in exchange for, or on account of, any of the foregoing, including, without limitation, any shares or other securities resulting from the division, consolidation, change, conversion or reclassification of any of the Charged Shares, or the reorganization, merger or consolidation of the Company with any other body corporate, or the occurrence of any event which results in the substitution or exchange of the Charged Shares. For purposes of this Charge, and for the avoidance of doubt, “Charged Shares” shall refer only to the First Tranche Loan Charged Shares in the event the Second Tranche Loan, and all interest and other amounts payable in respect thereof, has been timely paid in full accordance with the Loan Documents, or, as applicable, shall refer only to the Second Tranche Loan Charged Shares in the event the First Tranche Loan, and all interest and other amounts payable in respect thereof, has been timely paid in full in accordance with the Loan Documents.

 

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“Charged Shares”    has the meaning assigned thereto in the definition of Charged Property;
“Event of Default”    has the meaning assigned thereto in the Loan Agreement;
“Parties”    means the parties to this Charge collectively; and a “Party” means any one of them;
“Secured Obligations”    means all of the present and future payments and other obligations of the Chargors to the Chargee under the terms of this Charge and the Loan Documents;
“Security Interest”    means any charge, mortgage, pledge, lien, security interest or other encumbrance; and
“Security Period”    means the period commencing on the date of execution of this Charge and terminating upon discharge of the security created by this Charge by payment in full of the Secured Obligations.

 

  1.2 In this Charge unless the context otherwise requires:

 

  (a) references to statutory provisions shall be construed as references to those provisions as amended or re-enacted or as their application is modified by other provisions from time to time and shall include references to any provisions of which they are re-enactments (whether with or without modification);

 

  (b) references to clauses and schedules are references to clauses hereof and schedules hereto; references to sub-clauses or paragraphs are, unless otherwise stated, references to sub-clauses of the clauses hereof or paragraphs of the schedule in which the reference appears;

 

  (c) references to the singular shall include the plural and vice versa and references to the masculine shall include the feminine and/or neuter and vice versa;

 

5


  (d) references to persons shall include companies, partnerships, associations and bodies of persons, whether incorporated or unincorporated;

 

  (e) references to assets include property, rights and assets of every description; and

 

  (f) references to any document are to be construed as references to such document as amended or supplemented from time to time.

 

  2. CHARGORS’ REPRESENTATIONS AND WARRANTIES

Each Chargor hereby represents and warrants to the Chargee that:

 

  2.1 The Charged Shares are beneficially owned and registered as described in Recital (B);

 

  2.2 As of the date hereof, the Charged Shares comprise approximately 10.7% of the total outstanding ordinary shares of the Company (using 31,776,672 for purspoes hereof) and have been duly authorised and validly issued by the Company and are fully paid and non-assessable;

 

  2.3 The obligations of such Chargor under this Charge shall rank senior to all other indebtedness of such Chargor, whether now or hereinafter existing;

 

  2.4 Entry into this Charge by such Chargor and enforcement hereof by the Chargee will not contravene the terms of any agreement to which such Chargor is bound or to which the Charged Property are subject or the memorandum of association and articles of the Company;

 

  2.5 The Chargors are the legal and/or beneficial owners of all of the Charged Property free from any Security Interest (other than those created by this Charge) and any options or rights of pre-emption;

 

  2.6 The Chargors have full power and authority (i) to be the legal and/or beneficial owners of the Charged Property, (ii) to execute and deliver this Charge and (iii) to comply with the provisions of, and perform all his obligations under, this Charge;

 

  2.7 This Charge constitutes such Chargor’s legal, valid and binding obligations enforceable against such Chargor in accordance with its terms except as such enforcement may be limited by any relevant bankruptcy, insolvency, administration or similar laws affecting creditors’ rights generally;

 

6


  2.8 The entry into and performance by such Chargor of this Charge does not violate (i) any law or regulation of any governmental or official authority, or (ii) any agreement, contract or other undertaking to which such Chargor is a party or which is binding upon such Chargor or any of his or her assets; and

 

  2.9 All consents, licences, approvals and authorisations required in connection with the entry into, performance, validity and enforceability of this Charge, if any, have been obtained and are in full force and effect.

 

  3. CHARGORS’ COVENANTS

The Primary Chargor hereby covenants with the Chargee:

 

  3.1 To pay all amounts, interests, expenses, claims, liabilities, losses, costs, duties, fees, charges or other moneys as are stated in the Loan Documents and this Charge to be payable by the Chargors or to be recoverable from the Chargors by the Chargee (or in respect of which the Primary Chargor agrees in the Loan Documents and this Charge to indemnify the Chargee) at the times and in the manner specified in the Loan Documents and this Charge; and

 

  3.2 To pay interest on any such amounts, interests, expenses, claims, liabilities, losses, costs, duties, fees, charges or other moneys referred to in Sub-Clause 3.1 from the date on which the relevant amount, interest, expense, liability, loss, cost, duty, fee, charge or other money is paid or discharged by the Chargee until the date of reimbursement thereof to the Chargee (both before and after any relevant judgment) at the rate described in Section 3 of the Loan Agreement such interest to be compounded in accordance with Section 3 of the Loan Agreement and payable on demand.

Each Chargor (with respect to the Secondary Chargor, to the extent any Charged Shares are held by the Secondary Chargor on behalf of the Primary Chargor) hereby covenants with the Chargee:

 

  3.3 That such Chargor will not, without the prior written consent of the Chargee:

 

  (a) permit any person other than the Chargors, the Chargee or any transferee nominated by the Chargee on enforcement of this Charge to be the registered holder of any of the Charged Shares; or

 

  (b) permit any variation of the rights attaching to the Charged Shares.

 

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  4. SECURITY

 

  4.1 In consideration of the Chargee making the Loan available to the Borrower and as continuing security for the Secured Obligations, the Chargors as legal and/or beneficial owners hereby assign and agree to assign to the Chargee all benefits present and future, actual and contingent accruing in respect of the Charged Property and all the Chargors’ right, title and interest to and in the Charged Property including (without limitation) all voting and other consensual powers pertaining to the Charged Shares and hereby charge and agree to charge in favour of the Chargee all of their interest in the Charged Property by way of a first fixed charge.

 

  4.2 The Chargors hereby agree to deliver, or cause to be delivered, to the Chargee, the following documents on the date of the execution of this Charge:

 

  (a) duly executed undated share transfers in respect of the Charged Shares in favour of the Chargee or its nominees in the form set out in Schedule A;

 

  (b) all share certificates (if any) representing the Charged Shares;

 

  (c) an executed undated irrevocable proxy made in respect of the Charged Shares in favour of the Chargee in respect of all general meetings of the Company in the form set out in Schedule B; and

 

  (d) an executed undertaking from the Company to procure entry in the share register of the Company of the details of this Charge and register transfers of the Charged Shares to the Chargee or its nominee in the form set out in Schedule C.

 

  4.3 Subject to the transfer of certain Charged Shares held in Secondary Chargor’s name on behalf of the Primary Chargor from the Secondary Chargors to the Primary Chargor, the Chargors hereby covenant that during the Security Period they will remain the legal and/or beneficial owners of the Charged Property (subject only to the Security Interests hereby created) and that they will not:

 

  (a) create or suffer the creation of any Security Interests (other than those created by this Charge) on or in respect of the whole or any part of the Charged Property or any of their interest therein; or

 

  (b) sell, assign, transfer or otherwise dispose of any of their interest in the Charged Property (other than with respect to the dividend or distribution payments described in Paragraph 5.1(b));

in any such case without the prior consent in writing of the Chargee.

 

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  4.4 In the event of the closing of the Acquisition (as defined in the Loan Agreement), all the Charged Shares will be cancelled for nil consideration in the Merger and the Primary Chargor will subscribe for 3,390,053 newly issued ordinary shares (“Parent Shares”) of Flora Bloom Holdings, a Cayman Islands exempted company (“Parent”). In such event, the Primary Chargor agrees to pledge, assign, and grant to the Chargee a security interest in all of the Parent Shares upon substantially similar terms as this Charge, such that, for all purposes under this Charge and the Loan Agreement, all references to the “Charged Shares” shall refer to the Parent Shares. Immediately prior to the closing of the Acquisition (and as a condition to the draw down of the Second Tranche Loan), the Primary Chargor and the Secondary Chargor (to the extent any Charged Shares are held by the Secondary Chargor on behalf of the Primary Chargor) shall execute and do all such acts as the Chargee may reasonably request in order to give effect to the foregoing, including amending the Loan Documents and this Charge and procuring the entry in the share register of the Parent of the details of this Charge.

 

  4.5 The Chargors shall remain liable to perform all the obligations assumed by them in relation to the Charged Property and the Chargee shall be under no obligation of any kind whatsoever in respect thereof or be under any liability whatsoever in the event of any failure by any of the Chargors to perform their obligations in respect thereof.

 

  4.6 Upon the Chargee being satisfied that the Secured Obligations have been unconditionally and irrevocably paid and discharged in full, and following a written request therefor from the Primary Chargor, the Chargee will, subject to being indemnified to its reasonable satisfaction for the costs and expenses incurred by the Chargee in connection therewith, release the security constituted by this Charge. The Chargee will execute such release documentation as the Primary Chargor may reasonably request in connection with such release.

 

  5. DEALINGS WITH CHARGED PROPERTY

 

  5.1 Unless and until an Event of Default has occurred (with respect to the Secondary Chargor, to the extent any Charged Shares are held by the Secondary Chargor on behalf of the Primary Chargor):

 

  (a) the Chargors shall be entitled to exercise all voting and/or consensual powers pertaining to the Charged Property or any part thereof for all purposes not inconsistent with the terms of this Charge and/or the Loan Documents;

 

  (b) the Chargors shall be entitled to receive and retain any distributions, interest or other moneys or assets accruing on or in respect of the Charged Property or any part thereof; and

 

  (c) the Chargors shall be entitled to receive all notices pertaining to the Charged Shares.

 

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  5.2 The Chargors shall pay all calls, instalments or other payments, and shall discharge all other obligations, which may become due in respect of any of the Charged Property and, in an Event of Default, the Chargee may if it reasonably thinks fit make such payments or discharge such obligations on behalf of the Chargors. Any sums so paid by the Chargee in respect thereof shall be repayable on demand and pending such repayment shall constitute part of the Secured Obligations.

 

  5.3 The Chargee shall not have any duty to ensure that any distributions, interest or other moneys and assets receivable in respect of the Charged Property are duly and punctually paid, received or collected as and when the same become due and payable or to ensure that the correct amounts (if any) are paid or received on or in respect of the Charged Property or to ensure the taking up of any (or any offer of any) stocks, shares, rights, moneys or other property paid, distributed, accruing or offered at any time by way of redemption bonus, rights, preference, or otherwise on or in respect of, any of the Charged Property.

 

  5.4 The Chargors hereby authorise the Chargee to arrange, upon and only upon the occurrence of an Event of Default, for the Charged Property or any part thereof to be registered in the name of the Chargee (or its nominee) thereupon to be held as so registered subject to the terms of this Charge.

 

  6. PRESERVATION OF SECURITY

 

  6.1 It is hereby agreed and declared that:

 

  (a) the Security Interest created by this Charge shall be held by the Chargee as a continuing security for the payment and discharge of the Secured Obligations and the security so created shall not be satisfied by any intermediate payment or satisfaction of any part of the Secured Obligations;

 

  (b) the Chargee shall not be bound to enforce any other security before enforcing the security created by this Charge;

 

  (c) no delay or omission on the part of the Chargee in exercising any right, power or remedy under this Charge shall impair such right, power or remedy or be construed as a waiver thereof nor shall any single or partial exercise of any such right, power or remedy preclude any further exercise thereof or the exercise of any other right, power or remedy. The rights, powers and remedies herein provided are cumulative and not exclusive of any rights, powers and remedies provided by law and may be exercised from time to time and as often as the Chargee may deem expedient; and

 

  (d) any waiver by the Chargee of any terms of this Charge shall only be effective if given in writing and then only for the purpose and upon the terms for which it is given.

 

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  6.2 Any settlement or discharge under this Charge between the Chargee and the Chargors shall be conditional upon no security or payment to the Chargee by the Chargors or any other person being avoided or set-aside or ordered to be refunded or reduced by virtue of any provision or enactment relating to bankruptcy, insolvency, administration or liquidation for the time being in force and, if such condition is not satisfied, the Chargee shall be entitled to recover from the Chargors on demand the value of such security or the amount of any such payment as if such settlement or discharge had not occurred.

 

  6.3 The rights of the Chargee under this Charge and the Security Interest hereby constituted shall not be affected by any act, omission, matter or thing which, but for this provision, might operate to impair, affect or discharge such rights and security, in whole or in part, including without limitation, and whether or not known to or discoverable by the Chargors, the Chargee or any other person:

 

  (a) any time or waiver granted to or composition with any person;

 

  (b) the taking, variation, compromise, renewal or release of or refusal or neglect to perfect or enforce any rights, remedies or securities against or any person;

 

  (c) any legal limitation, disability, incapacity or other circumstances relating to any person;

 

  (d) any amendment or supplement to the Loan Documents, or any other document or security;

 

  (e) the dissolution, liquidation, merger, consolidation, reconstruction or reorganisation of any person; or

 

  (f) the unenforceability, invalidity or frustration of any obligations of any person under the Loan Documents, or any other document or security.

 

  6.4

Until the Secured Obligations have been unconditionally and irrevocably satisfied and discharged in full to the satisfaction of the Chargee, neither Chargor shall by virtue of any payment made hereunder on account of the Secured Obligations or

 

11


  by virtue of any enforcement by the Chargee of its rights under, or the security constituted by, this Charge or by virtue of any relationship between or transaction involving, such Chargor and the Company (whether such relationship or transaction shall constitute such Chargor a creditor of the Company, a guarantor of the obligations of the Company or a party subrogated to the rights of others against the Company or otherwise howsoever and whether or not such relationship or transaction shall be related to, or in connection with, the subject matter of this Charge):

 

  (a) exercise any rights of subrogation in relation to any rights, security or moneys held or received or receivable by the Chargee or any person;

 

  (b) exercise any right of contribution from any co-surety liable in respect of such moneys and liabilities under any other guarantee, security or agreement;

 

  (c) exercise any right of set-off or counterclaim against the Company or any such co-surety;

 

  (d) receive, claim or have the benefit of any payment, distribution, security or indemnity from the Company or any such co-surety; or

 

  (e) unless so directed by the Chargee (when such Chargor will prove in accordance with such directions), claim as a creditor of the Company or any such co-surety in competition with the Chargee.

 

  6.5 The Primary Chargor shall hold in trust for the Chargee and forthwith pay or transfer (as appropriate) to the Chargee any such payment (including an amount equal to any such set-off), distribution (other than such dividend or distribution payments described in Paragraph 5.1(b)) or benefit of such security, indemnity or claim in fact received by him.

 

  6.6 Until the Secured Obligations have been unconditionally and irrevocably satisfied and discharged in full, or the aggregate amount held by the Chargee in any account or accounts as described below is sufficient to satisfy and discharge the outstanding amount of the Secured Obligations in full, in each case, to the satisfaction of the Chargee, the Chargee may at any time keep in a separate account or accounts (without liability to pay interest thereon) in the name of the Chargee for as long as it reasonably thinks fit, any moneys received, recovered or realised under this Charge or under any other guarantee, security or agreement relating in whole or in part to the Secured Obligations without being under any immediate obligation to apply the same or any part thereof in or towards the discharge of such amount.

 

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  7. ENFORCEMENT OF SECURITY

 

  7.1 Upon and only upon the occurrence of an Event of Default, the Security Interest hereby constituted shall become immediately enforceable and the Chargee may, at any time upon a written notice to the Chargors (except in the case of any event described in clause (g) of Section 11 of the Loan Agreement, in which case no such written notice is required) and without further notice to, or consultation with, or the consent of, the Chargors:

 

  (a) solely and exclusively exercise all voting and/or consensual powers pertaining to the Charged Property or any part thereof and may exercise such powers in such manner as the Chargee may think fit; and/or

 

  (b) receive and retain all dividends, interest, distributions or other moneys or assets accruing on or in respect of the Charged Property or any part thereof, such dividends, interest, distributions or other moneys or assets to be held by the Chargee, until applied in the manner described in Sub-Clause 7.4, as additional security charged under and subject to the terms of this Charge and any such dividends, interest, distributions or other moneys or assets received by the Primary Chargor after such time shall be held in trust by the Primary Chargor for the Chargee and paid or transferred to the Chargee on demand; and/or

 

  (c) appoint by instrument any person to be a receiver of the Charged Property (the “Receiver”) and remove any Receiver so appointed and appoint another or others in his stead; and/or

 

  (d) sell, transfer, grant options over or otherwise dispose of the Charged Property or any part thereof at such place and in such manner and at such price or prices as the Chargee may deem fit, and thereupon the Chargee shall have the right to deliver, assign and transfer in accordance therewith the Charged Property so sold, transferred, granted options over or otherwise disposed of; and/or

 

  (e) complete any undated blank share transfer forms of all or any part of the Charged Property by dating the same and/or inserting its name or the name of its nominee as transferee.

 

  7.2 The Chargee shall not be obliged to make any enquiry as to the nature or sufficiency of any payment received by it under this Charge or to make any claim or to take any action to collect any moneys assigned by this Charge or to enforce any rights or benefits assigned to the Chargee by this Charge or to which the Chargee may at any time be entitled hereunder.

 

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  7.3 Upon any sale of the Charged Property or any part thereof by the Chargee the purchaser shall not be bound to see or enquire whether the Chargee’s power of sale has become exercisable in the manner provided in this Charge and the sale shall be deemed to be within the power of the Chargee, and the receipt of the Chargee for the purchase money shall effectively discharge the purchaser who shall not be concerned with the manner of application of the proceeds of sale or be in any way answerable therefor.

 

  7.4 All moneys received by the Chargee pursuant to this Charge shall be held by it upon trust in the first place to pay or make good all such expenses, liabilities, losses, costs, duties, fees, charges or other moneys whatsoever as may have been paid or incurred by the Chargee in exercising any of the powers specified or otherwise referred to in this Charge and the balance shall be applied in the following manner:

 

  (a) FIRSTLY: in or towards satisfaction of any amounts in respect of any accrued and unpaid interest on any principal and other Secured Obligations (other than principal) due to the Chargee;

 

  (b) SECONDLY: in or towards satisfaction of any principal due to the Chargee;

 

  (c) THIRDLY: in or towards satisfaction of any amounts in respect of any remaining balance of the Secured Obligations as are then accrued due and payable or are then due and payable by virtue of payment demanded;

 

  (d) FOURTHLY: in retention of an amount equal to any part or parts of the Secured Obligations as are or are not then due and payable but which (in the reasonable opinion of the Chargee) will or may become due and payable in the future and, upon the same becoming due and payable, in or towards satisfaction thereof in accordance with the foregoing provisions of this Sub-Clause 7.4; and

 

  (e) FIFTHLY: the surplus (if any) shall be repaid promptly to the Primary Chargor or whosoever else may be entitled thereto.

 

  7.5 Neither the Chargee nor its agents, managers, officers, employees, delegates or advisers shall be liable for any claim, demand, liability, loss, damage, cost or expense incurred or arising in connection with the exercise or purported exercise of any rights, powers and discretions hereunder, except to the extent that such claim, demand, liability, loss, damage, cost or expense have resulted from the bad faith or willful misconduct of the Chargee or its agents, managers, officers, employees, delegates or advisers.

 

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  7.6 The Chargee shall not by reason of the taking of possession of the whole or any part of the Charged Property or any part thereof be liable to account as mortgagee-in-possession or for anything except actual receipts or be liable for any loss upon realisation or for any default or omission for which a mortgagee-in-possession might be liable.

 

  7.7 In addition to all other rights or powers vested in the Chargee hereunder or by statute or otherwise, the Receiver may take such action in relation to the enforcement of this Charge to:

 

  (a) take possession of, redeem and collect all or any part of the Charged Property;

 

  (b) raise or borrow money and grant security therefor over all or any part of the Charged Property;

 

  (c) appoint an attorney or accountant or other professionally qualified person to assist him in the performance of his functions in relation to the Charged Property;

 

  (d) do all acts and to execute in the name and on behalf of the Chargors any document or deed in respect of all or any part of the Charged Property;

 

  (e) in the name of either Chargor or in his or her own name, bring, prosecute, enforce, defend and abandon applications, claims, disputes, actions, suits and proceedings in connection with all or any part of the Charged Property and to submit to arbitration, negotiate, compromise and settle any such applications, claims, disputes, actions, suits or proceedings;

 

  (f) sell, call in, collect and convert to money the Charged Property or any of it at such place and in such manner and at such price or prices as he shall reasonably think fit;

 

  (g) exercise any powers, discretion, voting or other rights or entitlements in relation to the Charged Property and generally to carry out any other action which he reasonably thinks appropriate in relation to the enforcement of this Charge;

 

  (h) make any arrangement or compromise which he shall think expedient in relation to the Charged Property; and

 

  (i) do all such other acts and things as may be considered to be incidental or conducive to any of the matters or powers aforesaid and which the Receiver lawfully may or can do as agent for either Chargor in relation to the Charged Property.

 

15


  7.8 Every Receiver shall, so far as he concerns responsibility for his acts, be deemed to be an agent of either Chargor in relation to the Charged Property, which shall be solely responsible for his acts and defaults and for the payment of his remuneration and no Receiver shall at any time act as agent for the Chargee.

 

  7.9 Every Receiver shall be entitled to remuneration for his services at a commercially reasonable rate to be fixed by agreement between him and the Chargee (or, failing such agreement, to be fixed by the Chargee) appropriate to the work and responsibilities involved, upon the basis of current industry practice.

 

  7.10 Any remedies referred to in Section 66 of the BVI Business Companies Act, 2004 (British Virgin Islands), including the right to sell the shares and the right to appoint a receiver to vote the shares, receive distributions, and exercise any other rights in respect of the shares, shall not be exercisable upon the occurrence of an Event of Default until:

 

  (a) such Event of Default has occurred and has continued for a period of not less than five (5) Business Days; and

 

  (b) such Event of Default has not been rectified within five (5) Business Days from service of a notice specifying such Event of Default and requiring rectification thereof.

 

  7.11 The Conveyancing and Law of Property Act shall not apply to this Charge.

 

  8. FURTHER ASSURANCES

 

  8.1 The Chargors (with respect to the Secondary Chargor, to the extent any Charged Shares are held by the Secondary Chargor on behalf of the Primary Chargor) shall execute and do all such assurances, acts and things as the Chargee may reasonably require for:

 

  (a) perfecting, protecting or ensuring the priority of the Security Interest hereby created (or intended to be created);

 

  (b) preserving or protecting any of the rights of the Chargee under this Charge;

 

16


  (c) ensuring that the security constituted by this Charge and the covenants and obligations of the Chargors under this Charge shall inure to the benefit of any permitted assignee of the Chargee;

 

  (d) facilitating the appropriation or realisation of the Charged Property or any part thereof; or

 

  (e) exercising any power, authority or discretion vested in the Chargee under this Charge,

in any such case, forthwith upon demand by the Chargee and at the expense of the Primary Chargor.

 

  8.2 Without limitation to the generality of Sub-Clause 8.1, the Primary Chargor covenants with the Chargee that he will on demand of the Chargee use his best efforts to procure any amendment to the memorandum of association or articles of association of the Company reasonably necessary or, in the opinion of the Chargee reasonably desirable, in order to give effect to the terms of this Charge or any documents or transactions provided for herein.

 

  8.3 The Chargors shall provide such assurances and do all acts and things the Receiver may reasonably require for the purpose of exercising the powers (or giving effect to the exercise of the powers) conferred on the Receiver hereunder and the Chargors hereby irrevocably appoints the Receiver to be the lawful attorney in fact of the Chargors to do any act or thing and to exercise all the powers of the Chargors for the purpose of exercising the powers (or giving effect to the exercise of the powers) conferred on the Receiver hereunder.

 

  8.4 The Chargors shall (a) procure the entry in the share register of the Company pursuant to section 66(8) of the BVI Business Companies Act, 2004 (British Virgin Islands) of the details of this Charge and have the Company submit its share register for registration by the Registrar of Corporate Affairs pursuant to section 231 of the BVI Business Companies Act, 2004 (British Virgin Islands), in each case, within ten (10) Business Days from the date of this Charge, and (b) have the Company not amend the same or inform the Registrar of Corporate Affairs that it ceases to register any changes in the register, without the consent of the Chargee.

 

  9. INDEMNITIES

 

  9.1 The Primary Chargor will indemnify and hold harmless the Chargee, the Receiver and each agent or attorney appointed under or pursuant to this Charge from and against any and all expenses, claims, liabilities, losses, taxes, costs, duties, fees and charges properly and reasonably suffered, incurred or made by the Chargee, the Receiver or such agent or attorney:

 

  (a) in the exercise or purported exercise of any rights, powers or discretions vested in them pursuant to this Charge;

 

17


  (b) in the preservation or enforcement of the Chargee’s rights under this Charge or the priority thereof; or

 

  (c) on the release of any part of the Charged Property from the security created by this Charge,

and the Chargee, the Receiver or such agent or attorney may retain and pay all sums in respect of the same out of money received under the powers conferred by this Charge. All amounts recoverable by the Chargee, the Receiver or such agent or attorney or any of them shall be recoverable on a full indemnity basis.

 

  9.2 If, under any applicable law or regulation, and whether pursuant to a judgment being made or registered against the Primary Chargor or the bankruptcy or liquidation of the Primary Chargor or for any other reason any payment under or in connection with this Charge is made or falls to be satisfied in a currency (the “Payment Currency”) other than the currency in which such payment is due under or in connection with this Charge (the “Contractual Currency”), then to the extent that the amount of such payment actually received by the Chargee when converted into the Contractual Currency at the rate of exchange, falls short of the amount due under or in connection with this Charge, the Primary Chargor, as a separate and independent obligation, shall indemnify and hold harmless the Chargee against the amount of such shortfall. For the purposes of this Clause, “rate of exchange” means the rate at which the Chargee is able on or about the date of such payment to purchase the Contractual Currency with the Payment Currency and shall take into account any premium and other costs of exchange with respect thereto.

 

  10. POWER OF ATTORNEY

 

  10.1 The Chargors (with respect to the Secondary Chargor, to the extent any Charged Shares are held by the Secondary Chargor on behalf of the Primary Chargor), by way of security and in order more fully to secure the performance of their obligations hereunder, hereby irrevocably appoints the Chargee and the persons deriving title under it jointly and also severally to be their attorney:

 

  (a) to execute and complete in favour of the Chargee or its nominees or of any purchaser any documents which the Chargee may from time to time require for perfecting its title to or for vesting any of the Charged Property in the Chargee or its nominees or in any purchaser and to give effectual discharges for payments;

 

18


  (b) to take and institute on non-payment (if the Chargee reasonably thinks fit) all steps and proceedings in the name of the Chargors or of the Chargee for the recovery of the Charged Property and to agree accounts;

 

  (c) to make allowances and give time or other indulgence to any surety or other person liable;

 

  (d) otherwise generally to act for them and in their names and on their behalf; and

 

  (e) to sign, execute, seal and deliver and otherwise perfect and do any such legal assignments and other assurances, charges, authorities and documents over the moneys, property and assets hereby charged, and all such deeds, instruments, acts and things (including, without limitation, those referred to in Clause 8) which may be required for the full exercise of all or any of the powers conferred or which may be deemed proper on or in connection with any of the purposes aforesaid.

Notwithstanding the foregoing, prior to the occurrence of an Event of Default, the Chargee (and the persons deriving title under it) shall not exercise its rights under the power of attorney under this Clause 10.1 unless the Chargee has requested the Chargors to perform the relevant obligations and the Chargors have failed to promptly perform such obligations.

 

  10.2 The power hereby conferred shall be a general power of attorney and the Chargors hereby ratify and confirm and agree to ratify and confirm any instrument, act or thing which any such attorney may execute or do. In relation to the power referred to herein, the exercise by the Chargee of such power shall be conclusive evidence of its right to exercise the same.

 

  11. EXPENSES

 

  11.1 The Primary Chargor shall pay to the Chargee on demand all costs, fees and reasonable expenses (including, but not limited to, reasonable legal fees and expenses) and taxes thereon incurred by the Chargee or for which the Chargee may become liable in connection with:

 

  (a) the preserving or enforcing of, or attempting to preserve or enforce, any of its rights under this Charge or the priority hereof;

 

19


  (b) any variation of, or amendment or supplement to, any of the terms of this Charge; and/or

 

  (c) any consent or waiver required from the Chargee in relation to this Charge,

and in any case referred to in Paragraphs (b) and (c) regardless of whether the same is actually implemented, completed or granted, as the case may be.

 

  11.2 The Primary Chargor shall pay promptly any stamp, documentary and other like duties and taxes to which this Charge may be subject or give rise and shall indemnify the Chargee on demand against any and all liabilities with respect to or resulting from any delay or omission on the part of the Primary Chargor to pay any such duties or taxes.

 

  12. NOTICES

Any notice required to be given hereunder shall be in writing in the English language and shall be served by sending the same by prepaid recorded post, facsimile or by delivering the same by hand to the address of the Party or Parties in question as set out below (or such other address as such Party or Parties shall notify the other Parties of in accordance with this Clause). Any notice sent by post as provided in this Clause shall be deemed to have been served five (5) Business Days after despatch and any notice sent by facsimile as provided in this Clause shall be deemed to have been served at the time of despatch and in proving the service of the same it will be sufficient to prove in the case of a letter that such letter was properly stamped, addressed and placed in the post; and in the case of a facsimile that such facsimile was duly despatched to a current facsimile number of the addressee.

Chargors:

Mr. Yu Chuan Yih

Unit #12, 12/F, Block A

Focal Industrial Centre

21 Man Lok Street

Hung Hom, Kowloon, Hong Kong

Fax: +86 755 2526 0329

Chargee:

Urban Prosperity Holding Limited

190 Elgin Avenue

George Town, Grand Cayman KY1-9005

Cayman Islands

Attention: Neil Gray & Kareen Watler

 

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With a copy to:

FountainVest Partners (Asia) Limited

Suite 705-708, ICBC Tower

3 Garden Road

Central, Hong Kong

Attention: Mr. George Chuang / Mr. Edward Yu / Mr. Brian Lee

Email:

  georgechuang@fountainvest.com / edwardyu@fountainvest.com / brianlee@fountainvest.com

Fax: +852 3107 2490

 

  13. ASSIGNMENTS

 

  13.1 This Charge shall be binding upon and shall inure to the benefit of the Chargors and the Chargee and each of their respective successors and (subject as hereinafter provided) assigns and references in this Charge to any of them shall be construed accordingly.

 

  13.2 Neither Chargor may assign or transfer all or any part of his or her rights and/or obligations under this Charge except the transfer between the Chargors.

 

  14. MISCELLANEOUS

 

  14.1 The Chargee, at any time and from time to time, may delegate by power of attorney or in any other manner to any person or persons all or any of the powers, authorities and discretions which are for the time being exercisable by the Chargee under this Charge in relation to the Charged Property or any part thereof. Any such delegation may be made upon such terms and be subject to such regulations as the Chargee may reasonably think fit. The Chargee shall not be in any way liable or responsible to the Chargors for any loss or damage arising from any act, default, omission or misconduct on the part of any such delegate provided the Chargee has acted reasonably in selecting such delegate.

 

  14.2 This Charge, including its Schedules / together with any documents referred to herein, contains the whole agreement between the Parties in respect of the subject matter of this Charge and supersedes and replaces any prior written or oral agreements, representations or understandings between them relating to such subject matter. The Parties confirm that they have not entered into this Charge on the basis of any representation that is not expressly incorporated into this Charge. Without limiting the generality of the foregoing, neither party shall have any remedy in respect of any untrue statement made to him upon which he may have relied in entering into this Charge, and a Party’s only remedy is for breach of contract. However, nothing in this Charge purports to exclude liability for any fraudulent statement or act.

 

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  14.3 No variations of this Charge shall be effective unless made in writing and signed by each of the Parties.

 

  14.4 The headings in this Charge are inserted for convenience only and shall not affect the construction of this Charge.

 

  14.5 This Charge may be executed in counterparts each of which when executed and delivered shall constitute an original but all such counterparts together shall constitute one and the same instrument.

 

  14.6 If any of the clauses, sub-clauses, paragraphs, conditions, covenants or restrictions of this Charge or any deed or document emanating from it shall be found to be void but would be valid if some part thereof were deleted or modified, then such clause, sub-clause, paragraph, condition, covenant or restriction shall apply with such deletion or modification as may be necessary to make it valid and effective.

 

  15. LAW AND JURISDICTION

This Charge shall be governed by and construed in accordance with the laws of the British Virgin Islands and the Parties hereby irrevocably submit to the non-exclusive jurisdiction of the courts of the British Virgin Islands, provided that nothing in this Clause shall affect the right of the Chargee to serve process in any manner permitted by law or limit the right of the Chargee to take proceedings with respect to this Charge against the Chargors in any jurisdiction nor shall the taking of proceedings with respect to this Charge in any jurisdiction preclude the Chargee from taking proceedings with respect to this Charges in any other jurisdiction, whether concurrently or not.

 

22


IN WITNESS whereof the Parties hereto have caused this Charge to be duly executed as a Deed the day and year first before written.

 

EXECUTED as a Deed    )    /s/ Yu Chuan Yih
by YU CHUAN YIH and delivered    )   
on the date first written above in the    )   
presence of:    )   
EXECUTED as a Deed    )    /s/ Ka Man Au
by KA MAN AU and delivered    )   
on the date first written above in the    )   
presence of:    )   
The Common Seal of    )   
the Chargee    )   
was hereunto affixed    )   
in the presence of:    )   

 

23


SCHEDULE A

SHARE TRANSFER FORM

LJ INTERNATIONAL, INC.

(the “Company”)

TRANSFER OF SHARES

YU CHUAN YIH DOES HEREBY SELL, TRANSFER AND ASSIGN to URBAN PROSPERITY HOLDING LIMITED the following:

3,390,053 ordinary shares in the Company, a company incorporated under the laws of the British Virgin Islands.

In the event that any of the aforementioned 3,390,053 ordinary shares of the Company are held in the name of the KA MAN AU as of the date of this Share Transfer, KA MAN AU does hereby sell, transfer and assign to URBAN PROSPERTIY HOLDING LIMITED such number of ordinary shares.

[Signature Page follows]


DATED  

 

 

 

YU CHUAN YIH

 

KA MAN AU

Agreed and Accepted this                             

 

URBAN PROSPERITY HOLDING LIMITED
By:  

 

  Name:
  Title:

[Share Charge – Signature Page to Share Transfer Form]


SCHEDULE B

LJ INTERNATIONAL, INC.

(the “Company”)

P R O X Y

I, YU CHUAN YIH, beneficial owner of 3,390,053 of the issued and outstanding ordinary shares in the Company (the “Shares”) hereby irrevocably appoint URBAN PROSPERITY HOLDING LIMITED as my proxy to vote the Shares on my behalf at any meeting of shareholders or to execute on my behalf any written resolution of the shareholders of the Company.

[Signature Page follows]


EXECUTED AS A DEED on this                             

 

 

YU CHUAN YIH

[Share Charge – Signature Page to Proxy]


SCHEDULE C

UNDERTAKING FROM THE COMPANY

LJ INTERNATIONAL, INC. (the “Company”) hereby irrevocably UNDERTAKES and COVENANTS with URBAN PROSPERITY HOLDING LIMITED (the “Transferee”) as follows:

 

  (a) (i) to procure the entry in the share register of the Company pursuant to section 66(8) of the BVI Business Companies Act, 2004 (British Virgin Islands) of the details of the Share Charge (as defined below) as set out in Attachment A attached hereto and submit the Company’s share register for registration by the Registrar of Corporate Affairs pursuant to section 231 of the BVI Business Companies Act, 2004 (British Virgin Islands), in each case, within ten (10) Business Days from the date of the Share Charge, and (ii) not to amend the same or inform the Registrar of Corporate Affairs that it cease to register any changes in the register, without the consent of the Chargee;

 

  (b) not to recognize or register any transfer of any of the Charged Shares during the Security Period without the consent of the Chargee;

 

  (c) (i) to deliver, concurrently or as soon as reasonably practicable (and in any event within two (2) Business Days of the Share Charge), a “stop transfer” notice in the form provided by the Transferee or its representatives to Computershare, the Company’s transfer agent, in respect of the First Tranche Charged Shares, and (ii) not to revoke or amend such notice to Computershare during the Security Period without the consent of the Chargee; and

 

  (d) to register all transfers of Charged Shares submitted to the Company for registration by the Transferee pursuant to the due exercise of rights under the Share Charge as soon as practical following the submission of such transfers.

This Undertaking is given pursuant to Paragraph 4.2(d) of the Share Charge (the “Share Charge”) dated March 22, 2013 among Yu Chuan Yih, Ka Man Au, and the Transferee, and any capitalised terms used herein and not otherwise defined herein shall have the meanings given such terms in the Share Charge.

[Signature Page follows]


EXECUTED AS A DEED on behalf of the Company on                             

 

 

Director
Director/Secretary

[Share Charge – Signature Page to Undertaking from the Company]


Attachment A to Schedule C

The following notation shall be made to the share register of the Company:

“All of the 3,390,053 ordinary shares of the Company legally and beneficially owned by Yu Chuan Yih (the “Primary Chargor”), of which 1,855,700 ordinary shares of the Company are held by Ka Man Au (the “Secondary Chargor”) on behalf of the Primary Chargor, have been mortgaged or charged in favour of Urban Prosperity Holding Limited (the “Chargee”) pursuant to a share charge dated March 22, 2013 made by the Primary Chargor and the Secondary Charger in favour of the Chargee.”