-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AvQ8YbBcys9cTh7HQTM3FPkFBIM+rQEE8XjPx7J+TuySP5QxZzVww9bd9Vq3eFY7 muR6GtUoICU+65oPwzklWg== 0000950144-00-014738.txt : 20001208 0000950144-00-014738.hdr.sgml : 20001208 ACCESSION NUMBER: 0000950144-00-014738 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001127 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPPLY CHAIN SERVICES INC CENTRAL INDEX KEY: 0001086239 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 522159951 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-26049 FILM NUMBER: 784651 BUSINESS ADDRESS: STREET 1: C/O STE E 15/F LEE COMMERCIAL BUILDING STREET 2: 40 D AGUILAR STREET CENTRAL CITY: HONG KONG STATE: K3 ZIP: 00000 MAIL ADDRESS: STREET 1: C/O STE E 15/F LEE COMMERCIAL BUILDING STREET 2: 40 D AGUILAR STREET CENTRAL CITY: HONG KONG STATE: K3 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: PADDINGTON INC DATE OF NAME CHANGE: 19990511 8-K 1 u97883e8-k.txt SUPPLY CHAIN SERVICES, INC 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: (Date of earliest event reported): November 27, 2000 Supply Chain Services, Inc. ------------------------------------------------------ (Exact name of Registrant as specified in its charter) 000-26049 ------------------------ (Commission file number) Delaware 59-2159951 - ---------------------------- --------------------------------- (State or other jurisdiction (IRS Employer Identification No.) of incorporation) 8/F Guangdong Textile Centre, 22 Minden Avenue, Tsimshatsui, Kowloon, Hong Kong or c/o Registered Agents, Ltd., 1220 North Market Street, Suite 606, Wilmington, DE 19801 --------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (852) 2366-8312 or (302) 421-5750 ---------------------------------------------------- (Registrant's telephone number, including area code) Paddington Inc. Suite E, 15/F, Ho Lee Commercial Building, 40 D'Aguilar Street, Central, Hong Kong or c/o Registered Agents, Ltd., 1220 North Market Street, Suite 606, Wilmington, DE 19801 ----------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 ITEM 1. CHANGES IN CONTROL OF REGISTRANT. Not applicable. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. The Registrant entered into a Subscription Agreement with Hardy Kung Chin Lok ("Mr. Lok"), dated as of November 27, 2000, in which Mr. Lok received 1,250,000 shares of common stock of the Registrant in exchange for the cash consideration of US$250,000. The Registrant also entered into a Subscription Agreement with Mr. Eddie Chow ("Mr. Chow"), dated December 5, 2000, in which Mr. Chow received 700,000 shares of common stock of the Registrant in exchange for the cash consideration of US$140,000. The above-mentioned transactions represent an acquisition of cash of greater than ten percent (10%) of the total assets of the Registrant. ITEM 3. BANKRUPTCY OR RECEIVERSHIP. Not applicable. ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT. Not applicable. ITEM 5. OTHER EVENTS Not applicable. ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS. Not applicable. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Not applicable. (b) Pro Forma Financial Information. SUPPLY CHAIN SERVICES INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEETS AS OF SEPTEMBER 30, 2000 (AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)
Historical Pro forma Pro forma Balances Note Adjustment Balances ---------- ---- ---------- --------- $ $ ASSETS Current assets: Cash and bank deposits -- (4 a) 390,000 390,000
3 Accounts receivable 58,774 58,774 Other receivable and prepayments 19,953 19,953 Deposits 13,438 13,438 ------- ------- TOTAL CURRENT ASSETS 92,165 482,165 Furniture, fixtures, equipment and capital Lease, net 44,975 44,975 Deferred expenses, net 58,812 58,812 Deferred taxation 12,852 12,852 ------- ------- TOTAL ASSETS 208,804 598,804 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Deficit cash balance 11,073 11,073 Capital lease obligations, current portion 16,129 16,129 Accounts payable 40,941 40,941 Other payable and accrued liabilities 21,514 21,514 Deposits from customers 17,786 17,786 Due to a shareholder 62,945 62,945 Provision for taxation 13,123 13,123 ------- ------- TOTAL CURRENT LIABILITIES 183,511 183,511 Capital lease obligations, non-current portion 36,290 36,290 ------- ------- TOTAL LIABILITIES 219,801 219,801 ------- ------- Shareholders' equity: Share capital 3,333 (4 b) 195 3,528 Additional Paid-in Capital -- (4 c) 389,805 389,805 Retained earnings (deficit) (14,330) (14,330) ------- ------- TOTAL SHAREHOLDERS' EQUITY (10,997) 379,003 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 208,804 598,804 ======= =======
The accompanying notes are an integral part of these financial statements. 4 SUPPLY CHAIN SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED) 1 ORGANIZATION AND PRINCIPAL ACTIVITIES Supply Chain Services Inc. (formerly Paddington Inc., the "Company") was incorporated in the State of Delaware, United States of America, on March 29, 1999 to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition, or other business combination with a domestic or foreign private business. On August 28, 2000, the Company acquired 100% equity interest in Supply Chain Services Limited ("SCSL") and its wholly-owned subsidiary, Leader Industrial Group Limited ("LIGL"), in a transaction which is described below in this Note. With effect from August 31, 2000, the Company changed its name from Paddington Inc. to Supply Chain Services Inc., the present one. During the period from March 29, 1999 (date of incorporation) to August 28, 2000 (date of acquisition of SCSL and its wholly-owned subsidiary, LIGL by the Company), the Company's sole asset was cash on hand in the amount of $600 and the Company was considered as a development stage enterprise. ACQUISITION OF SCSL AND ITS WHOLLY-OWNED SUBSIDIARY LIGL On August 28, 2000, the Company consummated a stock-for-stock merger transaction whereby the Company acquired, for an aggregate price of $2,733.33, 10,000 shares of common stock, par value HK$1 each, representing all of the issued and outstanding shares of SCSL in exchange for the issuance by the Company of 27,333,333 shares of its common stock to Gi-Tech Developments Limited ("Gi-Tech") and Miss Pauline Wai Man Chu ("the SCSL shareholders"), and a designee of Gi-Tech pursuant to the Share Exchange Agreement signed on the same date by and amongst the Company, SCSL and the SCSL shareholders. Gi-Tech is a company incorporated in the British Virgin Islands and Mr. Thomas Yan Chuen Chu ("Mr. Chu") is the beneficial owner of all of its issued and outstanding common stock, and as such is the beneficial owner of all 25,299,999 shares of the Company now owned by Gi-Tech. In connection with the transaction, Gi-Tech designated Mr. Tze Tat Fung to receive 666,667 shares of common stock of the Company. Miss Pauline Wai Man Chu received 1,366,667 shares of the Company in connection with the transaction. LIGL was incorporated in Hong Kong on September 10, 1997 and commenced business mainly in the trading of toys in April 1998. All the then issued and outstanding common shares of LIGL were owned by Gi-Tech which was 100% beneficially owned by Mr. Chu. On March 12, 1999, SCSL was incorporated in Hong Kong. 95% of the issued and outstanding common shares of SCSL were owned by Gi-Tech and were therefore beneficially owned by Mr. Chu. 5% of the issued and outstanding common shares of SCSL were owned by Miss Pauline Wai Man Chu. SCSL commenced business as a supply chain management services 5 provider in April 1999. In April 1999, SCSL acquired the entire issued and outstanding common shares of LIGL. After the acquisition, Gi-Tech, which remained to be 100% beneficially owned by Mr. Chu, owned directly 95% of the issued and outstanding common shares of SCSL and Miss Pauline Wai Man Chu became a 5% beneficial shareholder of SCSL. The headquarters of SCSL is situated in Hong Kong and it also maintains representative offices in the People's Republic of China ("PRC") and Taiwan. 2 BASIS OF PRESENTATION ON HISTORICAL BALANCES The acquisition of SCSL and its wholly-owned subsidiary, LIGL, by the Company on August 28, 2000 has been treated as a reverse acquisition since SCSL is the continuing entity in substance as a result of the stock-for-stock merger transaction as described above in Note 1 to the accompanying financial statements. On this basis, the historical financial statements prior to August 28, 2000 represent the consolidated condensed financial statements of SCSL and LIGL. The historical shareholders' equity accounts of the Company as of December 31, 1999 has been retroactively restated to reflect the issuance of 27,333,333 shares of common stock of par value $0.0001 each in connection with the acquisition. 3 BASIS OF PRO FORMA PRESENTATION On November 27, 2000, the Company entered into a Share Subscription Agreement with Mr. Hardy Kung Chin Lok ("Mr. Lok") under which Mr. Lok subscribed for 1,250,000 shares of the Company's restricted common stock, par value US$0.0001, at US$0.20 per share for a cash consideration of US$250,000. Mr. Lok was a director and a holder of 2,000,000 common shares of the Company at the time he entered into the Share Subscription Agreement. On December 5, 2000, the Company entered into a Share Subscription Agreement with Mr. Eddie Chow ("Mr. Chow") under which Mr. Chow subscribed for 700,000 shares of the Company's restricted common stock, par value US$0.0001, at US$0.20 per share for a cash consideration of US$140,000. The execution of the Share Subscription Agreements by Mr. Lok and Mr. Chow has in effect made Mr. Lok a 9.21% shareholder of the Company and Mr. Chow a 1.98% shareholder of the Company. The pro forma balance sheet was presented in a manner as if the Company had executed the Share Subscription Agreements with Mr. Lok and Mr. Chow as of September 30, 2000. Unaudited pro forma statements of income were not presented because the share subscription transactions as described above had no effect on the Company's statements of income. 4 PRO FORMA ADJUSTMENTS 6 (a) Represents cash to be received from Mr. Lok and Mr. Chow in accordance with the Share Subscription Agreement dated November 27, 2000 and December 5, 2000. (b) Represents the par value of the Company's common stock subscribed by Mr. Lok and Mr. Chow. (c) Represents excess of the subscription price of US$0.20 over the par value of US$0.0001 on the shares of the Company's common stock subscribed by Mr. Lok and Mr. Chow. (c) Exhibits 2.1. Subscription Agreement dated as of November 27, 2000, between the Registrant and Mr. Lok 2.2 Subscription Agreement dated December 5, 2000 between the Registrant and Mr. Chow ITEM 8. CHANGES IN FISCAL YEAR. Not applicable. ITEM 9. REGULATION FD DISCLOSURE. Not applicable. 7 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: December 7, 2000 SUPPLY CHAIN SERVICES, INC. By: /s/ Thomas Y.C. Chu ------------------------------------- Name: Thomas Y.C. Chu Title: President EX-2.1 2 u97883ex2-1.txt SUBSCRIPTION AGREEMENT DATED 11/27/00 1 EXHIBIT 2.1: SUBSCRIPTION AGREEMENT SUBSCRIPTION AGREEMENT dated as of November 27, 2000 ARTICLE I SUBSCRIPTION THIS SUBSCRIPTION AGREEMENT is dated as of November 27, 2000, between Hardy Kung Chin Lok (the "Subscriber") and Supply Chain Services Inc., a Delaware corporation (the "Company"). Section 1.01 Subscription. The Subscriber hereby subscribes to the immediate acquisition of 1,250,000 shares (the "Shares") of Common Stock, $0.0001 par value ("Common Stock") of the Company. Such shares of Common Stock are referred to herein as the "Securities". Promptly upon the execution hereof and receipt by the Company of US Dollars two hundred fifty thousand (US$250,000), the Company shall deliver the Securities to the undersigned at the address indicated below. ARTICLE II PRESENTATIONS AND WARRANTIES Section 2.01 In connection with the purchase of the Securities, the Subscriber acknowledges, warrants and represents to the Company as follows: (a) He is acquiring the Securities for investment for his own account and without the intention of participating, directly or indirectly, in a distribution of the Securities, and not with a view to resale or any distribution of the Securities, or any portion thereof. (b) He has knowledge and experience in financial and business matters and has consulted with his own professional representatives as he has considered appropriate to assist in evaluating the merits and risks of this investment. He has reviewed the Company's Registration Statement on Form 10SB12G dated May 12, 1999, Form 10SB12G/A dated June 1, 1999, the Company's Current Reports on Form 8K dated September 11, 2000 and on Form 8K/A on November 9, 2000, the Company's Annual Report on Form 10KSB for the year ended December 31, 1999, the Company's Quarterly Reports on Form 10QSB for the quarter ended June 30, 1999, September 30, 1999, December 31, 1999, March 31, 2000, June 30, 2000 and September 30, 2000. He has had access to and an opportunity to question the officers of the Company, or persons acting on their behalf, with respect to material information about the Company and, in connection with his evaluation of this investment, has, to the best of his knowledge, received all information and data with respect to the Company that he has requested. He is acquiring the Securities based solely upon his independent examination and judgment as to the prospects of the Company. (c) The Securities were not offered to the Subscriber by means of publicly disseminated advertisements or sales literature. 2 (d) Subject to the provisions of Section 3.01, he acknowledges that an investment in the Securities is speculative and he may have to continue to bear the economic risk of the investment in the Securities for an indefinite period. He acknowledges that the Securities are being sold to the undersigned without registration under any state, or federal or Hong Kong law requiring the registration of securities for sale, and accordingly will constitute "restricted securities" as defined in Rule 144 of the U.S. Securities and Exchange Commission. The transferability of the Securities is therefore restricted by applicable United States Federal and state securities laws and may be restricted under the laws of other jurisdictions. (e) The Subscriber is an "accredited investor" as such term is defined in Appendix A. (f) In consideration of the acceptance of this subscription, the Subscriber agrees that the Securities will not be offered for sale, sold or transferred by the undersigned other than pursuant to (i) an effective registration under the Securities Act of 1933, as amended (the "Act"), an exemption available under the Act or a transaction that is otherwise in compliance with the Act; and (ii) an effective registration under the securities law of any state or other jurisdiction applicable to the transaction, an exemption available under such laws, or a transaction that is otherwise in compliance with such laws. (g) He understands that no U.S. federal or state agency has passed upon the offering of the Securities or has made any finding or determination as to the fairness of any investment in the Securities. Section 2.02 Representations and Warranties of the Company. As an inducement to the Subscriber to enter into this Agreement and to consummate the transactions contemplated herein, the Company hereby represents and warrants to the Subscriber and agrees as follows: (a) Organization; Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has full power and authority to enter into this Agreement and to perform its obligations hereunder. This Agreement constitutes, and any other agreements and instruments required to be delivered by the Company hereunder, when duly executed and delivered by the Company, will constitute, valid and binding obligations of the Company and will be enforceable in accordance with their respective terms. The Company has previously provided to the Subscriber true copies of all resolutions of the Company's Board of Directors necessary to authorize the transactions described herein, and all such resolutions are in full force and effect and have not been revoked. (b) Capitalization. As of October 30, 2000, the authorized share capital of the Company consists of 100,000,000 common shares, par value US$0.0001 per share, of which 33,333,333 are fully issued and remain outstanding, and 20,000,000 preferred shares, par value US$0.0001 per share, none of which are issued and outstanding. Except as set forth above, no other shares or equity securities of the Company have been issued and remain outstanding, and there are no outstanding options, warrants or other rights to purchase or acquire any share capital of the Company, whether granted by the Company or otherwise, and there are no existing contracts by which the Company is or may become bound to issue any additional shares. The Company 3 has never reduced, repaid, redeemed or purchased any of its share capital. The Securities shall, upon issuance, shall be fully paid and non-assessable. (c) No Consents. Neither the consummation of the transactions contemplated hereby, nor compliance with nor fulfillment of the terms and provisions hereof, will (i) require the consent of any governmental authority or any person under any contract to which the Company is a party or to which the Company is subject or (ii) give any party with rights under any material contract to which the Company or any subsidiary of the Company is a party the right to terminate, modify or otherwise change the material rights or obligations of any party under such contract. (d) Compliance with Laws. The Company is in compliance, and there exists no alleged material noncompliance, with all applicable laws relating in any material respect to the Company and the operation or conduct of its business, except where the failure to so comply would not have a material adverse effect on the Company. The Company has not received any notice of alleged violation of any such applicable law. ARTICLE III MISCELLANEOUS Section 3.01 Miscellaneous. If the Company at any time files a Registration Statement under the Securities Act of 1933 with respect to its Common Stock after the date hereof, the Company shall so notify the undersigned and shall include such of the Securities as the Subscriber may request on such Registration Statement. Section 3.02 Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Section 3.03 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, applicable to contracts executed in and to be performed entirely within that state. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined in any Delaware state or federal court sitting in the State of Delaware and, to the extent permitted by Law, the parties hereto expressly consent to the jurisdiction of such courts, agree to venue in such courts and hereby waive any defense or claim of forum non conveniens they may have with respect to any such action or proceeding. IN WITNESS WHEREOF, the Subscriber and the Company have executed this Agreement or caused this Agreement to be executed as of the date first written above. SUBSCRIBER: /s/ Hardy Kung Chin Lok ------------------------------------------------ Name: Hardy Kung Chin Lok Address: C/O 8/F Guangdong Textile Centre, 4 22 Minden Avenue, Tsimshatsui, Kowloon, Hong Kong COMPANY: Supply Chain Services Inc. By: /s/ Thomas Y.C. Chu ------------------------------ Thomas Y.C. Chu, President 8/F Guangdong Textile Centre, 22 Minden Avenue, Tsimshatsui, Kowloon, Hong Kong 5 APPENDIX A An "accredited Investor" within the meaning of Regulation D under the Securities Act of 1933 includes the following: Organizations (1) A bank as defined in section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act, whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; insurance company as defined in section 2(13) of the Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that act; a Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors. (2) A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940. (3) A trust (i) with total assets in excess of $5,000,000, (ii) not formed for the specific purpose of acquiring the Securities, (iii) whose purchase is directed by a person who, either alone or with his Subscriber representative, has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the proposed investment. (4) A corporation, business trust, partnership, or an organization described in section 501(c)(3) of the Internal Revenue Code, which was not formed for the specific purpose of acquiring the Securities, and which has total assets in excess of $5,000,000. Individuals (5) Individuals with income from all sources for each of the last two full calendar years whose reasonably expected income for this calendar year exceeds either of: (i) $200,000 individual income; or (ii) $300,000 joint income with spouse. NOTE: Your "income" for a particular year may be calculated by adding to your adjusted gross income as calculated for Federal income tax purposes any deduction for long term capital gains, any deduction for depletion allowance, any exclusion for tax exempt interest and any losses of a partnership allocated to you as a partner. 6 (6) Individuals with net worth as of the date hereof (individually or jointly with your spouse), including the value of home, furnishings, and automobiles, in excess of $1,000,000. (7) Directors, executive officers or general partners of the Issuer. EX-2.2 3 u97883ex2-2.txt SUBSCRIPTION AGREEMENT AND STATEMENT 1 EXHIBIT 2.2: SUBSCRIPTION AGREEMENT AND STATEMENT OF A SOPHISTICATED PRIVATE INVESTOR SUBSCRIPTION AGREEMENT SUPPLY CHAIN SERVICES INC. 8/F Guangdong Textile Centre 22 Minden Avenue Tsimshatsui, Kowloon Hong Kong Ladies and Gentlemen: The undersigned is writing to advise you of the following terms and conditions under which the undersigned hereby offers to subscribe 700,000 shares of common stock, par value $.0001 ("Common Stock"), of Supply Chain Services Inc. (the "Company") for $140,000 USD (the "Offer"). The undersigned understands that the shares are being issued pursuant to the exemption from regulation requirements of the Securities Act of 1933, as amended (the "Act"), provided by Section 4(2) or Rule 505 of such Act promulgated hereunder. As such, the shares are "restricted securities". 1. Subscription. Subject to the terms and conditions hereinafter set forth in this Subscription Agreement, the undersigned hereby offers to purchase 700,000 shares of common stock for an aggregate purchase price of $140,000. If the Offer is accepted, the shares shall be paid for by the delivery of $140,000 by cash, check or money order payable to the order of the Company (or to such account or entity as may be designated by the Company), which is being delivered contemporaneously herewith. 2. Conditions to Offer. The Offer is made subject to the following conditions: (i) that you shall have the right to accept or reject this Offer, in whole or in part, for any reason whatsoever; and (ii) that the undersigned agrees to comply with the terms of this Subscription Agreement and to execute and deliver any and all further documents necessary to become a shareholder in the Company. Acceptance of this Offer shall be deemed given by the countersigning of this Subscription Agreement on behalf of the Company. 3. Representations and Warranties of the Undersigned. The undersigned, hereby represents and warrants to and covenants with the Company and to each officer, director, principal, controlling person, employee and agent of the Company that: (a) he is a "sophisticated investor" for purposes of U.S. common law, which may include, but is not limited to, the following criteria: (i) the undersigned has significant knowledge and experience in financial matters, and is thus able to personally evaluate 2 the merits and risks involved in making the Offer for subscription; (ii) the undersigned has had access to such financial and other information, including the EDGAR filings by the Company and has had an opportunity to discuss any questions or concerns with the Company and receive answers thereto, as he deems necessary in connection with his decision to participate in the Subscription Agreement; and (iii) the undersigned has a significant personal net worth. (b) he is purchasing the Common Stock pursuant to the Offer as "restricted securities," and as such, the undersigned represents and warrants that he will offer, resell, pledge or otherwise transfer the Common Stock pursuant to the Offer only (A) pursuant to an exemption from, or in a transaction not subject to the registration requirements under, the Securities Act (and based upon an opinion of counsel if the Company so requests) or (B) pursuant to an effective registration statement under the Securities Act, in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction; and (c) he is purchasing the shares for its own account, and will not purchase the shares with a view to, or for resale in connection with, any distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction. 4. Registration and Resale of Common Stock. The undersigned understands that the shares shall contain the following legend: "THE SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). BY ITS ACCEPTANCE HEREOF, THE HOLDER OF THESE SHARES REPRESENTS THAT HE IS A "SOPHISTICATED INVESTOR" FOR PURPOSES OF THE SECURITIES ACT, ACKNOWLEDGES THAT HE IS AWARE THAT THE SELLER MAY RELY ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY SECTION 4(2) OR RULE 505 THEREUNDER AND AGREES THAT THE SHARES ARE NOT BEING ACQUIRED WITH A VIEW TO DISTRIBUTION. THE SHARES NOR ANY INTEREST HEREIN MAY BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT EXCEPT (1) IN THE CASE OF THE INITIAL ACQUIROR HEREOF FROM THE ISSUER, ONLY TO THE ISSUER, AND (2) IN ALL OTHER CASES, PURSUANT TO AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND IN NO EVENT UNDER CIRCUMSTANCES WHICH WOULD RESULT IN A VIOLATION OF THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT." 5. Lock-Up of Shares. If the Company proposes a public offering of shares, and the Company gives notice to the undersigned prior to the anticipated date of such offering, the undersigned agrees to enter into a lock-up agreement for such 3 appropriate time as agreed by the Company and the undersigned and as may not affect the public offering of the Company's shares. 6. Indemnification. The undersigned understands that the shares acquired as a result of the subscription right provided in Section 1 hereof is being offered without registration under the Act and applicable state securities laws and in reliance upon the exemption for transactions by an issuer not involving any public offering; that the availability of such exemption is, in part, dependent upon the truthfulness and accuracy of the representations made by the undersigned herein; that the Company will rely on such representations in accepting any subscriptions for the shares and that the Company may take such steps as it considers reasonable to verify the accuracy and truthfulness of such representations in advance of accepting or rejecting the undersigned's subscription. The undersigned agrees to indemnify and hold harmless the Company against any damage, loss, expense or cost, including reasonable attorneys' fees, sustained as a result of any misstatement or omission on the undersigned's part herein or in the Registration Statement. 7. Specific State Legends. FOR RESIDENTS OF ALL STATES: FOR CALIFORNIA RESIDENTS ONLY: THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF THESE SECURITIES. IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THE SECURITIES OR ANY INTEREST THEREIN OR TO RECEIVE ANY CONSIDERATION THEREFOR WITHOUT THE PRIOR CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES. FOR FLORIDA RESIDENTS ONLY: EACH FLORIDA RESIDENT WHO SUBSCRIBES FOR THE PURCHASE OF SECURITIES HEREIN HAS THE RIGHT, PURSUANT TO SECTION 517.061(11)(A)(5) OF THE FLORIDA SECURITIES ACT, TO WITHDRAW HIS SUBSCRIPTION FOR THE PURCHASE AND RECEIVE A FULL REFUND OF ALL MONIES PAID WITHIN THREE BUSINESS DAYS AFTER THE EXECUTION OF THE SUBSCRIPTION AGREEMENT OR PAYMENT FOR THE PURCHASE HAS BEEN MADE, WHICHEVER IS LATER. WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY PERSON. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR TELEGRAM TO THE COMPANY AT THE ADDRESS SET FORTH IN THIS CONFIDENTIAL TERM SHEET INDICATING HIS INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE SET AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED THIRD BUSINESS DAY. IT IS ADVISABLE TO SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME IT WAS MAILED. IF THE REQUEST IS MADE ORALLY, IN PERSON OR BY TELEPHONE TO AN OFFICER OF THE COMPANY, A WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED. FOR ILLINOIS RESIDENTS ONLY: THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECRETARY OF STATE OF ILLINOIS OR THE STATE OF ILLINOIS BASED UPON THE ACCURACY OR ADEQUACY OF THIS CONFIDENTIAL TERM SHEET. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 4 FOR MICHIGAN RESIDENTS ONLY: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE MICHIGAN SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT REGISTRATION UNDER THAT ACT OR EXEMPTION THEREFROM. THE COMPANY SHALL PROVIDE ALL MICHIGAN INVESTORS WITH A DETAILED WRITTEN STATEMENT OF THE APPLICATION OF THE PROCEEDS OF THE OFFERING WITHIN SIX (6) MONTHS AFTER COMMENCEMENT OF THE OFFERING OR UPON COMPLETION, WHICHEVER OCCURS FIRST, AND WITH ANNUAL CURRENT BALANCE SHEETS AND INCOME STATEMENTS THEREAFTER. FOR NEW JERSEY RESIDENTS ONLY: THIS CONFIDENTIAL TERM SHEET HAS NOT BEEN FILED WITH OR REVIEWED BY THE ATTORNEY GENERAL OF THE STATE OF NEW JERSEY PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF NEW JERSEY HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. FOR NEW YORK RESIDENTS ONLY: THIS CONFIDENTIAL TERM SHEET HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL OF THE STATE OF NEW YORK PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. FOR RESIDENTS OF ALL STATES: THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. 8. No Waiver. Notwithstanding any of the representations, warranties, acknowledgments or agreements made herein by the undersigned, the undersigned does not thereby or in any manner waive any rights granted to the undersigned under federal or state securities laws. 9. Revocation. The undersigned agrees that he shall not cancel, terminate or revoke this Subscription Agreement or any agreement of the undersigned made hereunder other than as set forth herein above, and that this Subscription Agreement shall survive the death or disability of the undersigned. 5 10. Termination of Subscription Agreement. If the Company elects to cancel this Subscription Agreement, provided that it returns to the undersigned, without interest and without deduction, all sums paid by the undersigned, this Offer shall be null and void and of no further force and effect, and no party shall have any rights against any other party hereunder. 11. Miscellaneous. (A) All notices or other communications given or made hereunder shall be in writing and shall be mailed by registered or certified mail, return receipt requested, postage prepaid, to the undersigned at his address set forth below, to the Company and the Placement Agent at the addresses set forth herein. (B) This Subscription Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by all parties. (C) The provisions of this Subscription Agreement shall survive the execution thereof. 12. Certification. The undersigned certifies that he has read this entire Subscription Agreement and that every statement on his part made and set forth herein is true and complete [Remainder of page intentionally left blank.] 6 IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement on the date his signature has been subscribed below. By: /s/ Eddie Chow ------------------------------------------- Name: Mr. Eddie Chow ----------------------------------------- Title: ---------------------------------------- DATE: 5th December, 2000 ----------------------------------------- Taxpayer I.D. Number 7 ACCEPTANCE OF SUBSCRIPTION The foregoing subscription is hereby accepted this 5th day of December, 2000, for 700,000 shares. SUPPLY CHAIN SERVICES INC. By: /s/ Thomas Y.C. Chu ---------------------------------------- Name: Thomas Y. C. Chu Title: President -----END PRIVACY-ENHANCED MESSAGE-----