INVESTOR RIGHTS AGREEMENT
EXECUTION
VERSION
THIS
INVESTOR RIGHTS AGREEMENT (this “Agreement”) is
made
and entered into as of December 28, 2007, by and among (i) (a) China Mobile
Media Technology Inc.,
a
Nevada corporation (the “Company”), Magical
Insight Investments Limited (“Magical”), a
British
Virgin Islands corporation and each of Beihai Hi-Tech Wealth Technology
Development Co. Ltd. and Beijing Hi-Tech Wealth Communication Technology Co.,
Ltd., which are incorporated under the laws of the People’s Republic of China
(the “PRC”)
(the
“WFOE”, and,
together with the companies set forth on Schedule
A
hereto,
the “Group Companies”); (b)
Xx.
XXXXX Xxxxxxx, (c) Mr. MA Qing, (d) Xx. XX Ming (collectively, Messrs. ZHANG
and
MA and Xx. XX are referred to herein as the “Controlling
Shareholders” and
individually as the “Controlling
Shareholder”, and
for
purposes of Section
6,
each is
a “Senior
Management Member”); and
(ii)
Abax Lotus Ltd. (the “Investor” or
“Abax”).
Capitalized terms used herein but not otherwise defined herein shall have the
respective meanings set forth in the Purchase Agreement (as defined
below).
WITNESSETH:
WHEREAS,
the Group Companies and the Investor have entered into certain Securities
Purchase Agreement dated as of December 28, 2007 (the “Purchase
Agreement”),
pursuant to which Magical has agreed to issue to the Investor, and the Investor
has agreed to purchase
from Magical, an aggregate of no more than RMB 150,000,000 of its Guaranteed
Senior
Notes
due 2014 (the “Notes”)
and
in
connection therewith purchase from the Company certain warrants (the
“Warrants”)
to
purchase the Company’s common stock, par value $.001 (the “Common
Stock”, and,
together with the Notes, the “Securities”);
WHEREAS,
in consideration of Investor’s entering into the Purchase Agreement,
the
Company, the Group Companies and the Controlling Shareholders have agreed to
provide certain rights to Investor as set forth in this Agreement.
NOW,
THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties
hereto,
intending to be legally bound by this agreement, agree as follows:
1. Representations
and Warranties of the Group Companies and the Controlling
Shareholders.
Each of
the Group Companies and the Controlling Shareholders, jointly and severally,
represents and warrants that:
1.1 Xx.
XXXXX
Zhengyu is the beneficial owner, free and clear of all Liens (other than the
pledge of Common Stock given pursuant to that certain Share Pledge dated
February 28, 2006 in favor of Warburg Pincus Asia LLC to secure certain
non-competition obligations by the stockholder in respect of the Company’s
business (the “Noncompetition
Pledge”), of
21,200,000 shares of Common Stock (of record or through a brokerage firm or
other nominee arrangement), which constitutes 3 5.9% of the outstanding voting
power of the Company’s capital stock.
1.2 Mr.
MA
Qing is the beneficial owner, free and clear of all Liens (other than the
Noncompetition Pledge), of 5,500,000 shares of Common Stock (of record or
through a brokerage firm or other nominee arrangement), which constitutes 9.3%
of the outstanding voting power of the Company’s capital stock.
1.3 Xx.
XX
Ming is the beneficial owner, free and clear of all Liens (other than the
Noncompetition Pledge), of 9,500,000 shares of Common Stock (of record or
through a brokerage firm or other nominee arrangement), which constitutes 16.1%
of the outstanding voting power of the Company’s capital stock.
1.4 Each
of
the Group Companies and the Controlling Shareholders (each of the foregoing,
a
“Warrantor”) has
full
power and authority to make, enter into and carry out the terms of this
Agreement. This Agreement has been duly executed and delivered by each Warrantor
and constitutes the legal, valid and binding obligations of such Warrantor
enforceable against such Warrantor in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally.
1.5 The
execution and delivery of this Agreement by each Warrantor do
not, and
the performance of this Agreement by such Warrantor will not: (i) conflict
with
or violate any law, rule regulation, order, decree or judgment applicable to
such Warrantor or by which such Warrantor or any of the properties of such
Warrantor is or may be bound or affected, or the Charter Documents of any Group
Company; (ii) result in or constitute (with or without notice or lapse of time)
any breach of or default under any contract to which such Warrantor is a party
or by which such Warrantor or any of the affiliates or properties of such
Warrantor is or may be bound or affected, or (iii) result in the creation of
any
encumbrance or restriction on any of the shares of Common Stock or equity
interests in any other Group Company or properties of such Warrantor, other
than
in each of clause (i), (ii) and (iii), such conflicts, violations, breaches
of
defaults that would not, individually or in the aggregate, have a Material
Adverse Effect. The execution and delivery of this Agreement by each Warrantor
do not, and the performance of this Agreement by each Warrantor will not,
require any consent or approval of any Person.
2. Covenants
and Agreements.
Unless
the context requires otherwise, each Group Company hereby covenants and
agrees, and each of the Controlling Shareholders hereby covenants and agrees
to
cause each
Group
Company to do, as follows:
2.1 Business
Plan and Annual Budget.
As long
as Abax holds in aggregate 10% of the Notes it purchased under the Purchase
Agreement, or at least 3.5 % of the Company’s issued and outstanding common
stock (in either case, the “Minimum
Holding”, such
Investor being referred to herein as an “Eligible Investor”), to
the
extent permitted by applicable laws and regulations, the Company shall prepare
and submit to the Investor for its approval (such approval is referred to herein
as “Investor
Approval”, whether
approved by Abax or any other Eligible Investor) at least thirty (30) days
prior
to the beginning of the next financial year or period
the annual budget (“Annual
Budget”) of
the
Company and its Subsidiaries on a
consolidated basis setting out in reasonable detail the planned annual capital
and operating budgets in reasonable detail, projected revenues, a projected
financial statement for such fiscal year on a quarterly basis, and promptly
after preparation from time to time, any revisions to the forecasts contained
therein of the Company and its Subsidiaries and attaching thereto such notes
as
are necessary, desirable or customary, together with a business plan setting
forth in reasonable detail the operating goals of the Company and its
Subsidiaries for the following year (the “Business
Plan”), accompanied
by such qualifications and disclaimers as management shall deem appropriate
in
the circumstances.
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2.2 Other
Covenants.
As long
as the Investor holds the Minimum Holding, each Group Company hereby covenants
and agrees, and the Controlling Shareholders hereby covenant and agree to cause
each Group Company to do, as follows, unless the Investor otherwise provides
prior Investor Approval in its sole discretion:
(a) No
Group
Company shall change the substantive responsibilities of any member of the
senior management of such Group Company and its Subsidiaries, or substitute
any other Person to perform the substantive responsibilities of such members
of
senior
management as they are performed as of the date hereof, other than in the case
of incapacity of such member of senior management (which for purposes of this
paragraph shall mean Ma Qing, Li Ming and Xxxxx Xxxxxxx).
(b) No
Group
Company or its Subsidiaries shall issue any securities, create any security
interest or enter into any transaction or a series of related transactions
the
completion of which will result in a Change of Control of the Company.
“Change
of Control” shall
have the meaning as defined in the Indenture.
(c) No
Group
Company or its Subsidiary shall change the number of members
of the board of directors (“Board”)
of
such
Group Company or its Subsidiaries, or the
composition or structure of the board or board committees of the Group Company
or its Subsidiaries or establish board committees of such Group Company or
its
Subsidiaries, or delegate powers of any Board to a committee, or change the
powers, duties or responsibilities delegated to any committee of the Board
of
such Group Company in a manner adverse to the Investors.
(d) No
Group
Company shall amend, alter, waive or repeal any provision of such Group
Company’s or its Subsidiaries’ certificate of incorporation, memorandum and
articles of association or any other organizational or constitutional documents
of such Group Company or its Subsidiaries in a manner adverse to the
Investors.
(e) The
Company shall retain a firm of independent public accountants (the “Accountants”) of
recognized international standing (from those listed on Schedule
B
hereto)
that is acceptable to the Investors (as determined by Investor Approval), who
shall certify the Company’s consolidated financial statements each at the end of
each fiscal year. The Company shall not terminate the services of the
Accountants without prior written Investor Approval. In the event that the
Accountants elect to terminate their services to the Company, the Company shall
provide Eligible Investors with a written notice prior to such resignation
if
reasonably practicable and if not, promptly thereafter notify Eligible
Investors, and in any event shall
request the Accountants to deliver to Eligible Investors a letter from the
Accountants setting
forth
the reasons for the termination of their services. In the event of such
termination, the Company shall promptly thereafter engage another firm of
independent public accountants of recognized international standing (from those
listed on Schedule
B
hereto)
that is acceptable to the Investors (as determined by Investor Approval) to
be
the new Accountants. In its notice to the Investors, the Company shall state
whether the change of Accountants was recommended or approved by the Company’s
Board or any committee thereof.
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(f) Without
prior written Investor Approval, no Group Company shall expend
any money in any financial year or period that deviates in amount by more than
20% of
the
amount in the Approved Budget.
(g) No
Group
Company or its Subsidiaries shall enter into any activities which
are
not in the Ordinary Course of Business of such Group Company or such Subsidiary,
as
the case
may be. For the purposes of this paragraph, the term “Ordinary
Course of Business” means
the
ordinary course of business presently engaged in by the Group Company or its
Subsidiaries as consistent with the past custom and practice of the Company
and
permitted under the all necessary licenses, consents, authorizations, approvals,
orders, certificates and permits duly obtained by the Group
Companies.
3. Right
of First Refusal for Future Securities Offerings.
3.1 Issuance
Notice.
(a) So
long
as an Investor owns the Minimum Holding, if the Company proposes to issue or
sell any securities to a purchaser that is not an Affiliate of the Company
(the
“Proposed
Third Party Purchaser”), the
Company shall, not less than twenty (20) days prior to
the
consummation of such issuance or sale, offer such securities to each Eligible
Investor by sending written notice (an “Issuance
Notice”)
to
Eligible Investors, which Issuance Note shall state (a) a description of the
securities to be issued or sold, including detailed terms of such securities,
(b) the amount of the securities proposed to be issued to the Proposed Third
Party Purchaser (the “Offered
New Securities”); (c)
the
proposed purchase price for the Offered Securities (the “Issuance
Price”); and
(d)
the terms and conditions of such proposed sale. For purposes of this Agreement,
an “Affiliate” shall
refer to: (i) any Person directly or indirectly controlling, controlled by
or
under common control with another Person, (ii) any Person owning or controlling
50% or more of the outstanding voting securities of such other Person, (iii)
any
officer, director or partner of such Person, (iv) a trust for the benefit of
such Person referred to in the foregoing clause (ii) of this
definition.
(b) The
Issuance Notice shall also include a copy of any written proposal, term sheet
or
letter of intent or other agreement or understanding relating to the Offered
New
Securities. Upon delivery of the Issuance Notice, such offer shall be
irrevocable unless and until the rights of first refusal provided for herein
shall have been waived or shall have expired.
3.2 Option;
Exercise.
By
notification to the Company within fifteen (15) days after the Issuance Notice
is given, each Eligible Investor may elect to purchase or otherwise acquire,
at
the price and on the terms specified in the Issuance Notice, an amount equal
to
the proportion of Offered New Securities that bears the same
proportion as such Eligible Investor’s Securities bears to the Securities owned
by all
such
Eligible Investors who may elect to purchase Offered New Securities (all
such
Securities being valued as the aggregate principal amount of Notes held by
such
Eligible Investors, and for purposes of such calculation, any Warrant Shares
held by such Eligible Investors valued at the aggregate amount equal to the
product of the number of such shares and the exercise price thereof, hereinafter
referred to as the “Investor’s
Pro Rata Share”);
provided,
however, that
if
transaction set forth in the Issuance Notice involves a registered public
offering of securities by the Company, then in such event, in lieu of its right
to purchase of its Investor’s Pro Rata Share of the Offered New Securities, each
Eligible Investor may elect to purchase or otherwise acquire up to that portion
of the Offered New Securities which equals the proportion that the Common Stock
issued and held, or issuable (directly or indirectly) upon conversion and/or
exercise, as applicable, of the Warrants and any other securities exercisable
for or convertible into Common Stock (the “Derivative
Securities”) then
held
by
such Eligible Investor bears to the total number of shares of Common Stock
of
the
Company then outstanding (assuming full conversion and/or exercise, as
applicable, of all Warrants and other Derivative Securities). The closing of
any
sale pursuant to this Section
3.2
shall
occur within thirty (30) days after the date on which such notification is
first
given by such Eligible Investor. Each Eligible Investor (or its assignees)
shall
be entitled to apportion the rights of first refusal hereby granted to it among
itself and its Affiliates in such proportions as it deems
appropriate.
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3.3 Right
to Sell to Proposed Third Party Purchaser.
If less
than all of the Offered New Securities entitled to be purchased or acquired
by
the Eligible Investors are elected to be purchased or acquired as provided
in
Section
3.2,
the
Company may, during the thirty (30) day period following the expiration of
the
fifteen (15) day period provided in Section
3.2,
offer
and sell the remaining unsubscribed portion of such securities to the Proposed
Third Party Purchaser in the Issuance Notice at a price not less than, and
upon
terms not materially more favorable to the Proposed Third Party Purchaser than,
those specified in the Issuance Notice. If the Company does not enter into
an
agreement for the sale of such securities within such period, or if such
agreement is not consummated within thirty (30) days after the execution
thereof, the right of first refusal provided hereunder shall be deemed to be
revived and such securities shall not be offered to a third party unless first
reoffered to all Eligible Investors in accordance with this
Section.
4. Right
of First Refusal for the Controlling Shareholders’ Transfer and Tag-Along
Right.
4.1 Securities
Notice.
As long
as an Investor holds the Minimum Holding, subject to Section
4.8
of this
Agreement, if any Controlling Shareholder proposes to sell or transfer any
securities of the Company held by it or any other Permitted Holder (as defined
below) to a third party purchaser (the “Third
Party Purchaser”)
other
than as otherwise agreed by Investor Approval in writing prior to such sale
or
transfer, or in the case of any Exempt Transfer (as defined in Section
4.7
below),
such Controlling Shareholder shall, within twenty (20) days prior to the
consummation of such transfer or sale, offer such securities to Eligible
Investors by sending written notice (an “Offering
Notice”) to
Eligible Investors, which shall state (a) the identity of the Third Party
Purchaser, (b) the type and number of such securities proposed
to be transferred (the “Offered
Securities”), including
detailed terms of such
securities (if other than Common Stock); (c) the proposed purchase price per
share for the Offered Securities (the “Offer
Price”); and
(d)
the terms and conditions of such sale. The Offering Notice shall also include
a
copy of any written proposal, term sheet or letter of intent or other agreement
or understanding relating to the Offered Securities. Upon delivery of the
Offering Notice, such offer shall be irrevocable unless and until the rights
of
first refusal provided for herein shall have been waived or shall have
expired.
5
4.2 Option;
Exercise.
For a
period of fifteen (15) days after the giving of the Offering Notice pursuant
to
Section
4.1
(the
“Option
Period”), each
Eligible Investor shall have the right to purchase its Investor’s Pro Rata Share
of the Offered Securities at a purchase price equal to the Offer Price and
upon
terms and conditions no less favorable than those set forth in the Offering
Notice; provided,
however,
that
if
transaction set forth in the Offering Notice involves a registered public
offering of securities by the Controlling Shareholder, then in such event,
in
lieu of its right to purchase all of the Offered Securities, each Eligible
Investor may elect to purchase or otherwise acquire that portion of the Offered
Securities which equals the proportion that the Common Stock issued and held,
or
issuable (directly or indirectly) upon conversion and/or exercise, as
applicable, of the Warrants and any other Derivative Securities then held,
by
such Eligible Investor bears to the total Common Stock of the Company then
outstanding (assuming full conversion and/or exercise, as applicable, of all
Warrants and other Derivative Securities). Each Eligible Investor (or its
assignees) may assign to any of its Affiliates (other than a Person engaged
in
the Business) all or any portion of its rights pursuant to this
Section.
4.3 The
right
of an Eligible Investor to purchase all or any part of the Offered Securities
under Section
4.2
above
shall be exercisable by delivering written notice
of
the exercise thereof (the “ROFR
Exercise Notice”),
prior
to the expiration of
the
Option Period, to the Controlling Shareholder. The failure of such Eligible
Investor to respond within the Option Period to such Controlling Shareholder
shall be deemed to be a waiver of that Eligible Investor’s rights under
Section
4.1
above,
provided
that
any
other Eligible Investor that is eligible to tender a ROFR Exercise Notice may
elect to exercise its Investor’s Pro Rata Share of such waived rights under
Section
4.2
above
prior to the expiration of the Option Period by giving written notice to the
Controlling Shareholder.
4.4 Closing.
The
closing of the purchases of Offered Securities subscribed for by such Investors
under Section
4.3
shall be
held at the executive office of
the
Company at 11:00 a.m., local time, on the 30th day after the giving of the
ROFR Exercise
Notice pursuant to Section
4.3
or at
such other time and place as the parties to
the
transaction may agree. At such closing, such Controlling Shareholder shall
deliver certificates representing such Offered Securities, duly endorsed for
transfer and accompanied by all requisite transfer taxes, if any, and such
Offered Securities shall be free and clear of any Liens (other than those
arising hereunder and those attributable to actions by the purchasers thereof)
and the Controlling Shareholder shall so represent and warrant, and shall
further represent and warrant that it is the sole beneficial and record owner
of
such Offered Securities. Such Eligible Investors shall deliver at the closing
payment in full in immediately available funds for the Offered Securities
purchased by them or their respective Affiliates. At such closing, all of the
parties to the transaction shall execute such additional documents as are
otherwise necessary or appropriate.
6
4.5 Sale
to a Third Party Purchaser.
Unless
Eligible Investors elect to purchase all of the Offered Securities under
Section
4.2,
the
Controlling Shareholder may, subject to Section
4.8,
sell
the remaining Offered Securities not purchased by such
Eligible Investors to the Third Party Purchaser identified in the Offering
Notice at
a price
not less than the Offer Price, and on terms not materially more favorable than
the terms set forth in the Offering Notice; provided,
however, that
such
sale is bona fide and made pursuant to a contract entered into within thirty
(30) days after the earlier to occur of (i) the waiver by Eligible Investors
of
their respective rights to purchase the Offered Securities and (ii) the
expiration of the Option Period (the “Contract
Date”); and
provided
further, that
such
sale shall not be consummated unless prior to the purchase by such Third Party
Purchaser of any of such Offered Securities, such Third Party Purchaser shall
become a party to this Agreement and agree to be bound by the terms and
conditions hereof that are applicable to the Controlling Shareholder,
provided
that
if
such Third Party Purchaser, together with any other Third Party Purchasers
and
on an aggregated basis, owns less than 10% of the Company’s outstanding capital
stock on an as-converted, fully diluted basis following such sale, then such
Third Party Purchaser shall not be bound by Sections
1,
2, 3 and
6 of this Agreement. If such sale is not consummated within thirty (30) days
after the earlier to occur of (i) the waiver by Eligible Investors of their
respective options to purchase the offer and (ii) the Contract Date for any
reason, then the restrictions provided for herein shall again become effective,
and no transfer of such Offered Securities may be made thereafter by such
Controlling Shareholder without again offering the same to Eligible Investors
in
accordance with this Section.
4.6 Tag-Along
Right.
(a) If
the Controlling Shareholder is directly or indirectly transferring Offered
Securities to a Third Party Purchaser pursuant to Section
4.5,
then
each Eligible Investor shall have the right to sell to such Third Party
Purchaser that number of Shares equal to that percentage of the Offered
Securities determined by dividing (i) the total number of outstanding shares
of
the Common Stock of the Company (the “Shares”)
(on an
as-converted basis) then owned by such Eligible Investor by (ii) the sum of
(x)
the total number of Shares (on an as-converted basis) then owned by such
Eligible Investor and (y) the total number of Shares then owned by the
Controlling Shareholder, at a price equal to the Offer Price, with other terms
set forth in the Offering Notice. The Controlling Shareholder and Eligible
Investors shall effect the sale of the Offered Securities and Eligible Investors
shall sell the number of Offered Securities to be sold by them pursuant to
this
Section, and the number of Offered Securities to be sold to such Third Party
Purchaser by the Controlling Shareholder shall be reduced
accordingly.
(a) Each
Controlling Shareholder shall give notice to Eligible Investors of each proposed
sale by it, or any other Permitted Holder of Offered Securities which gives
rise
to the rights of Eligible Investors set forth in this Section, at least thirty
(30) days prior to the proposed consummation of such sale, setting forth the
type and number of Offered Securities, including detailed terms of such
securities (if other than Common Stock), the name and address of the proposed
Third Party Purchaser, the proposed amount and form of consideration and terms
and conditions of payment offered by such Third Party Purchaser, the percentage
of shares of Common Stock that Eligible Investors may sell to such Third Party
Purchaser (determined in accordance with Section
4.6(a)),
and a
representation that such Third Party Purchaser has been informed of the
“tag-along” rights provided for in this Section and has agreed to purchase
Offered Securities in accordance with the terms hereof. The tag-along rights
provided by this Section must be exercised by Eligible Investors within thirty
(30) days following receipt of the notice required by the preceding sentence,
by
delivery of a written notice to the Controlling Shareholder indicating such
Eligible Investor’s election to exercise its rights and specifying the number of
shares of Common Stock (up to the maximum number of shares of Common Stock
owned
by such Eligible Investor required to be purchased by such Third Party
Purchaser) it elects to sell (the “Tag-along
Exercise Notice”), provided that
any
Eligible Investor may waive its rights under this Section prior to the
expiration of such thirty (30) day period by giving written
notice to the Controlling Shareholder, with a contemporaneous copy to the
Company and
any
other Eligible Investors, upon which any other Eligible Investor may elect
to
exercise its share of such waived rights (determined in accordance with
Section
4.6(a))
prior
to the expiration of the allotted time period therefor by giving written notice
to the Controlling Shareholder. The failure of an Eligible Investor to respond
within such thirty (30) day period shall be deemed to be a waiver of such
Eligible Investor’s rights under this Section. If a Third Party Purchaser fails
to purchase shares of Common Stock from any Eligible Investor, notwithstanding
such Eligible Investor’s proper exercise of its tag-along rights pursuant to
this Section
4.6(b),
then
such Controlling Shareholder shall either contemporaneously purchase
from
such
Eligible Investor at the Offer Price such number of shares of Common Stock
as
the Third Party Purchaser failed to purchase from such Eligible Investor, or
if
the Controlling Shareholder does not so purchase, it shall not be permitted
to
consummate the proposed sale of the Offered Securities, the Company shall not
register the transfer of such Offered Securities on its share register, and
any
such attempted sale shall be null and void ab
initio.
7
4.7 Exempt
Transfers. The
right
of first refusal and tag-along rights set forth in this Section
4
shall
not apply to any of (i) any transfer to a Permitted Holder; provided that
adequate documentation therefor is provided to Eligible Investors to their
satisfaction and that any such Permitted Holder agrees in writing to be bound
by
this Agreement in place of the relevant transferor; provided,
further, that
such
transferor shall remain liable for any breach by such Permitted Holder of any
provision hereunder, (ii) the sale in an unsolicited broker’s transaction
pursuant to Rule 144 under the Securities Act of 1933, as amended, or (iii)
the
Transfer (as defined below) by the Controlling Shareholder of no more than
10%
(on an aggregated basis over the term of the Notes) of the total equity interest
beneficially owned by the Controlling Shareholder in the Company (the
“Exempt
Transfers”).
“Transfer” shall
mean sell, transfer, assign, pledge, hypothecate, dispose of, mortgage, enter
into any voting trust or other agreement, option or other arrangement or
understanding with respect thereto, whether directly or indirectly and whether
voluntarily or involuntarily. “Permitted
Holder” means
the
Controlling Shareholder’s parents, children or spouse or trusts for the benefit
of such persons, and any legal entity in which such Controlling Shareholder
holds a majority of the equity interests and “controls” such
entity.
4.8 Prohibited
Transfers.
(a) Notwithstanding
anything to the contrary contained herein, to the extent permitted under
applicable law, each Controlling Shareholder shall not, and each Controlling
Shareholder shall cause the Permitted Holder not to, without prior written
Investor Approval, which shall not be unreasonably withheld, Transfer through
one or a series of transactions
more than 10% of the equity securities of the Company beneficially owned by
such Controlling
Shareholder to any Person, so long as one or more Investors own 5% or more
of
the
total
outstanding equity interest in the Company on a fully diluted basis,
provided
that
the
foregoing provision shall not apply to any Exempt Transfer.
8
(b) Each
Controlling Shareholder shall ensure that no other Permitted Holder shall sell
or transfer equity securities of the Company that were received from a
Controlling Shareholder and are held by such Permitted Holder, other than as
provided in this Agreement.
Any attempt by any Controlling Shareholder or any other Permitted Holders to
sell
or
transfer any equity securities of the Company held by it or any other Permitted
Holder in violation of this Section shall be void and the Company hereby agrees
it will not effect such a transfer on its share register nor will it treat
any
alleged transferee as the holder of such shares.
5. Board
Representation.
5.1 Number
of Board Members.
The
Company shall, effective upon Closing and until the termination of this
Agreement, take all appropriate actions to fix and maintain a Board of no more
than nine (9) voting members and the Company shall not change the number of
voting members of its Board without Abax’s prior written approval.
5.2 Abax
Nominees.
Upon
the Abax Election (as defined below), as long as Abax continues to hold more
than 5% of the outstanding shares of Common Stock on an as exercised
and fully-diluted basis, it shall be entitled to appoint one (1) of the voting
members of
the
Company’s Board (the “Abax
Nominee”).
5.3 Board
Committees.
The
Company shall not, without the prior written consent of Abax, establish any
committee of its Board, delegate powers of its Board to a committee, or change
the powers, duties or responsibilities delegated to any committee of the Board
of the Company. To the extent permitted by applicable law and exchange listing
rules, the
Abax
Nominee shall be entitled to be members of all committees of the boards of
directors of the
Company and its Subsidiaries, if any, it being understood that the Abax Nominee
shall not be
a member
of the Audit Committee until he or she is an independent director.
5.4 Abax
Election.
If Abax
provides written notice to the Company informing the
Company of (i) its election (the “Abax
Election”) to
be
represented on the Board and (ii) the
name of
the Abax Nominee, then, as soon as practicable after its receipt of such notice
from Abax, but in no event later than thirty (30) business days after such
receipt, the Company shall:
(a) provide
notice of the Abax Election to the Company’s Board and the Controlling
Shareholders, and
(b) to
the
extent permissible under applicable laws and regulations (including rules of
any
relevant listing exchange), take all necessary actions so as to permit the
Abax
Nominee to be duly appointed or elected as members of the Company’s Board as
soon as
practicable.
Subject
to the conditions and limitations set forth herein, the Abax Election may be
exercised by Abax at any time in its sole discretion.
9
5.5 Voting
Agreement.
Upon
the Abax Election, each of the Controlling Shareholders agrees to vote, or
cause
to be voted, all of the Company’s Shares owned by such Controlling Shareholder
or any other Permitted Holder (of record or through a brokerage firm or other
nominee arrangement), or over which such Controlling Shareholder has voting
control, from time to time and at all times, in whatever manner as shall be
necessary to ensure that at each annual or special meeting of shareholders
at
which an election of directors is held or pursuant to any written consent of
the
shareholders, the Abax Nominee is duly elected to the Board. Each Controlling
Shareholder further covenants not to frustrate the purpose of the immediately
preceding sentence by any means, including through entering into any agreement
or commitment
inconsistent with such purpose, including but not limited to any inconsistent
pledge,
charge,
hypothecation, voting agreement, voting trust or other disposition of voting
rights of the Common Stock over which such Controlling Shareholder retains
beneficial ownership or the economic benefits and risks attendant
thereto.
5.6 Vacancies.
Any
vacancies created by the resignation, removal or death of the Abax Nominee
appointed or elected to the Board shall be filled pursuant to the provisions
of
this Section.
5.7 Quorum.
Following the Abax Election, the Company’s by-laws shall provide
that a quorum for any meeting of the Board shall require the attendance of
the
Abax
Nominee,
provided that
the
Abax Nominee may participate in such meetings by telephone conference
call.
5.8 Reimbursement.
Each
time the Abax Nominee attends a face-to-face meeting
of the Board, the Company shall reimburse such director for reasonable travel
expenses
on the
same basis as the other members of the Board.
6. Mandatory
Exercise of Warrants.
Upon
the
occurrence of, and simultaneously with, (i) the consummation of the listing
of
the Common Stock of the Company on the Nasdaq Capital Market, Global Market,
Global Select Market or the New York Stock Exchange and (ii) the Company’s
filing of a registration statement with the U.S. Securities and Exchange
Commission (the “SEC”) to
register all the Warrant Shares issuable upon exercise of the Warrants, which
registration statement has been declared effective by the SEC, if (x) the volume
weighted average closing price per share of Common Stock for a 20-trading day
period exceeds $7.00, then Abax shall within 5 trading days thereafter exercise
not less than 50% of the outstanding Warrants at the price
and
in accordance with the terms provided in this Warrant Agreement, and (y) the
volume weighted
average closing price per share of Common Stock for a 20-trading day period
exceeds
$9.00,
then Abax shall within 5 trading days thereafter exercise the outstanding
Warrants at the price and in accordance with the terms provided in this Warrant
Agreement.
7. Redemption
of Abax’s Warrants
7.1 If
on
January 1, 2014, any Warrant remains unexercised, or if any Event of
Default
shall occur under the Indenture (the fifteenth Business Day following January
1,
2014, or
the
fifteenth Business Day following the date of any Event of Default under the
Indenture, the “Redemption
Date”), then
on
the Redemption Date the Company agrees to and shall, redeem the Warrants
tendered by Abax for a redemption price of $1.00 per Warrant Share.
10
7.2 Any
Warrants redeemed by the Company pursuant to Section
7.1
shall be
cancelled and no rights shall thereafter exist with respect to such
Warrants.
7.3 The
Company shall not have any redemption rights with respect to the Warrants except
as expressly set forth in Section
7.1.
8. Indemnification.
(a) In
addition to all rights and remedies available to any Investor at law or in
equity, each Group Company and each Controlling Shareholder shall jointly and
severally indemnify each Investor, and its Affiliates, stockholders, officers,
directors, employees, agents, representatives, successors and permitted assigns
(collectively, the “Indemnified
Parties”) and
save
and hold each of them harmless against and pay on behalf of or reimburse such
party as and when incurred for any loss (including, without limitation,
diminutions in value), liability, demand, claim, action, cause of action, cost,
damage, deficiency, tax, penalty, fine or expense, whether or not arising out
of
any claims by or on behalf of any third party, including interest, penalties,
reasonable attorneys’ fees and expenses and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing (collectively,
“Losses”) which
any
such party may suffer, sustain or become subject to, as a result of, in
connection with, relating or incidental to or by virtue of:
(i) any
misrepresentation or breach of a representation or warranty on the part of
any
Warrantor herein;
(ii) any
nonfulfillment or breach of any covenant or agreement herein on the part of
any
Group Company or any Controlling Shareholder, or of any Senior Management Member
pursuant to the Noncompetition and Non-Solicitation Agreement entered into
the
date hereof between the Investors and each such Senior Management Member;
or
(iii) any
action, demand, proceeding, investigation or claim by any third party
(including, without limitation, governmental agencies) against or affecting
any
Group Company and/or its Affiliates or Subsidiaries which, if successful, would
give rise to or evidence the existence of or relate to a breach of (A) any
of
the representations or warranties at the time made or (B) covenants of such
Group Company or the Controlling Shareholders.
(b) Notwithstanding
the foregoing, and subject to the following sentence, upon judicial
determination, which is final and no longer appealable, that the act or omission
giving rise to the indemnification hereinabove provided resulted primarily
out
of or was based primarily upon the Indemnified Party’s gross negligence, fraud
or willful misconduct (unless such action was based upon the Indemnified Party’s
reliance in good faith upon any of the representations, warranties, covenants
or
promises made by any Warrantor herein) by the Indemnified Party, neither any
Group Company nor any Controlling Shareholder shall be responsible for any
Losses sought to be indemnified in connection therewith, and each Group Company
and the Controlling Shareholders shall be entitled to recover from the
Indemnified Party all amounts previously paid in full or partial satisfaction
of
such indemnity, together with all costs and expenses of such Group Company
and
the Controlling Shareholders reasonably incurred in effecting such recovery,
if
any.
11
(c) All
indemnification rights hereunder shall survive indefinitely, regardless of
any
investigation, inquiry or examination made for or on behalf of, or any knowledge
of any Investor and/or any of the other Indemnified Parties.
(d) The
indemnity obligations that each Group Company and the Controlling
Shareholders have under this Section shall be in addition to any liability
that
such
Group
Company and the Controlling Shareholders may otherwise have.
9. Miscellaneous.
9.1 Termination.
Except
for Sections
8
and 9,
which shall survive the termination of this Agreement, or as otherwise expressly
provided herein, this Agreement will be automatically terminated with no further
effect with respect to an Investor at such time that such Investor no longer
holds any Securities (including the Warrant Shares issued upon exercise of
the
Warrants).
9.2 Specific
Enforcement.
Upon a
breach by any Controlling Shareholder or any Group Company of this Agreement,
in
addition to any such damages as any Investor is entitled to, directly or
indirectly, by reason of said breach, each Investor shall be entitled to
injunctive relief against such Controlling Shareholder or such Group Company
if
such relief is applicable and available, as a remedy at law would be inadequate
and insufficient. Nothing in this Section shall be construed as limiting any
Investor’s remedies in any way.
9.3 Notices.
All
notices, requests, consents and other communications hereunder shall be in
writing and shall be personally delivered or delivered by overnight courier
or
mailed by first-class registered or certified mail, postage prepaid, return
receipt requested, or by facsimile transmission. Every notice hereunder shall
be
deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged, upon transmission by facsimile and
confirmed facsimile receipt, or two (2) days after the same shall have been
deposited with a reputable international overnight courier.
(a) If
to an
Investor, at its address as set forth in the Purchase Agreement, or at such
other address as may have been furnished to the Company by it in
writing.
(b) If
to the
Controlling Shareholders, at the address set forth on Schedule
C to
this Agreement, or at such other address as may have been furnished to the
Company by it in writing.
(c) If
to the
Company at:
China
Mobile Media Technology Inc.
0xx
Xxxxx, Xxxxx X, Xxxxxx-Xxxxxx
Xx.00
Xxxxxxxxxxxx Xxxx Xxxx
Xxxxxxx
Xxxxxxxx
Xxxxxxx,
Xxxxx 000000
Fax:
+ 00
00 0000 0000
Attention:
Chief Financial Officer
12
with
a
copy to:
Loeb
& Loeb LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxxxx X. Xxxxxxxx, Esq.
Facsimile
No.: x0 000 000 0000
9.4 Amendments
and Waiver.
Unless
otherwise specifically stated herein, any term of this Agreement may be amended
with the written consent of the party against whom enforcement may be sought
and
the observance of any term of this Agreement may be waived (either generally
or
in a particular instance and either retroactively or prospectively) by the
Company and the Controlling Shareholders, in the case of an Investor’s
obligations, and by the Investors entitled to rights hereunder in the case
of
the obligations of any other parties hereto. No waivers of or exceptions to
any
term, condition or provision of this Agreement, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
9.5 Entire
Agreement.
This
Agreement embodies the entire agreement and understanding between the parties
hereto and supersedes all prior agreements and understandings relating to the
subject matter hereof.
9.6 Severability.
The
invalidity or unenforceability of any provision of
this
Agreement shall not affect the validity or enforceability of any other
provisions
of this
Agreement to the extent permitted by law.
9.7 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York. Each Group Company and Controlling Shareholder agrees that
any suit, action or proceeding against
it arising out of or based upon this Agreement or the transactions
contemplated
hereby
may be instituted in any State or U.S. federal court in The City of New York
and
County of New York, and waives any objection which it may now or hereafter
have
to the laying of venue of any such proceeding, and irrevocably submits to the
non-exclusive jurisdiction of such courts in any suit, action or
proceeding.
9.8 Successors
and Assigns.
Except
as otherwise provided herein, the terms
and
conditions of this Agreement shall be binding upon, and inure to the
benefit
of, the
respective representatives, successors and assigns of the parties hereto;
provided,
however, any
right
of Abax under this Agreement (except for Abax’s right granted under Section
7)
shall
only be assignable or transferable to any person who holds the Minimum Holding
(in the case of rights granted to Abax under Section
2,
Section
3
and Section
4)
or holds
more than 5% of the outstanding shares of Common
Stock on
an as exercised and fully-diluted basis (in the case of right granted to Abax
under Section
5),
provided,
further, that rights,
obligations and other duties set forth in Section
7
hereof
shall be exercisable and assumed by Abax only and shall not be assignable or
transferable to any other person, including without limitation, the successors
or assigns of Abax.
13
9.9 Counterparts.
This
Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together
shall
constitute one and the same instrument.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
14
|
IN
WITNESS WHEREOF, the undersigned have executed
this Investor Rights Agreement as of the
day and year written above.
|
||
| GROUP COMPANIES | ||
| CHINA MOBILE MEDIA TECHNOLOGY INC. | ||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
| MAGICAL INSIGHT INVESTMENTS LIMITED | ||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
| BEIHAI HI-TECH WEALTH TECHNOLOGY DEVELOLPMENT CO. LTD. | ||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
|
BEIJING
HI-TECH WEALTH COMMUNICATION TECHNOLOGY CO.,
LTD.
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
[SIGNATURE
PAGE TO INVESTOR RIGHTS AGREEMENT]
| CONTROLLING SHAREHOLDERS: | ||
| |
|
|
| By: | ||
|
Xx.
XXXXX Zhengyu
as
the Controlling Shareholder
|
||
| By: | ||
|
Mr.
MA Qing
as
the Controlling Shareholder
|
||
| By: | ||
|
Xx.
XX Ming
as
the Controlling Shareholder
|
||
[SIGNATURE
PAGE TO INVESTOR RIGHTS AGREEMENT]
Accepted
and Agreed to:
ABAX
LOTUS LTD.
By:
By:
Name:
Title:
Authorized Signatory
[SIGNATURE
PAGE TO INVESTOR RIGHTS AGREEMENT]
Schedule
A
List
of Group Companies
1. China
Mobile Media Technology Inc.
2. Magical
Insight Investments Limited
3. Beihai
Hi-Tech Wealth Technology Development Co., Ltd.
4. Beijing
Hi-Tech Wealth Communication Technology Co., Ltd.
Schedule
B
List
of
Top 15 Accounting Firms
1. PricewaterhouseCoopers
2. Deloitte
Touche Tohmatsu
3. Ernst
& Young
4. KPMG
5. BDO
International
6. Xxxxx
Xxxxxxxx International
7. RSM
International
8. Xxxxx
Xxxxx International
9. Xxxxxxx
International
10. Xxxxxx
Xxxxxxx International
11. Xxxx
Xxxxx
12. X.X.
Xxxx
13. Xxxxx
Xxxxxx and Co. LLC
14. Xxxxxx
& Xxxxx PLLC
15. BKD
LLP
Schedule
C
Addresses
of Controlling Shareholders:
x/x
Xxxxx
Mobile Media Technology Inc.
0xx
Xxxxx, Xxxxx X, Xxxxxx-Xxxxxx
Xx.00
Xxxxxxxxxxxx Xxxx Xxxx
Xxxxxxx
Xxxxxxxx
Xxxxxxx,
Xxxxx 000000
Fax:
+ 00
00 0000 0000
