FIRST AMENDMENT AGREEMENT (JAIC - CROSBY)
Execution
Copy
(XXXX
- XXXXXX)
This
FIRST
AMENDMENT AGREEMENT
(this
“Amendment”)
is
entered into as of this 4th day of October, 2007 by and among Omnia Luo Group
Limited, a British Virgin Islands company (the “Company”),
Luo
Zheng (PRC Identity Card No. 420102700621032) (the “Guarantor”),
and
XXXX-XXXXXX Greater China Investment Fund Limited, a Cayman Islands company
(the
“Group
A Preferred Share Investor”
or
a
“Shareholder”).
The
Group A Preferred Share Investor and the other holders of the Company’s
Preferred Shares (as such term is defined herein), who shall be signatories
to a
parallel amendment to the Original Agreements (as defined below) relating to
those holders’ rights under the Original Agreements, are each a “Shareholder”
and,
collectively, the “Shareholders.”
This
Amendment shall be effective upon the date and time (the “Effective
Time”)
which
is the last to occur of the consummation of the Reverse Acquisition and 2007
Private Placement (each as defined below). All defined terms used herein and
not
otherwise defined herein have their respective meanings as set forth in the
Original Agreements (as defined below). This Amendment shall terminate and
be of
no force and effect if the Reverse Acquisition and 2007 Private Placement (each
as defined below) shall not both have been consummated by December 31,
2007.
RECITALS
WHEREAS,
the Shareholders,
by
purchase transactions consummated pursuant to individual preferred stock
purchase agreements and a shareholders agreement dated as of December 15, 2006
and December 20, 2006 (the “Original
Agreements”),
are
the holders of an aggregate of 2,147 convertible preferred shares (the
“BVI
Preferred Shares”)
and
detachable warrants to purchase up to $365,940 in ordinary shares (the
“BVI
Warrants”),
of
the Company;
and
WHEREAS,
each
BVI
Preferred Share was to be automatically converted upon the later to occur of
a
“Qualified Listing” and “Qualified Offering”, and each of the BVI Warrants
issued in connection with the issuance of BVI Preferred Shares is exercisable,
at any time, commencing with the later to occur of a Qualified Listing and
Qualified Offering, for a two-year period, in cash for the purchase of the
Company’s ordinary shares, at a per share exercise price equal to the per share
price paid pursuant to the next equity financing round of the Company following
completion of the First Round Financing; and
WHEREAS,
the
issuance of the BVI Preferred Shares constituted a First Round Financing (as
defined in the Original Agreements); and
WHEREAS,
the Company and its shareholders propose to enter into a binding share exchange
agreement with Wentworth II, Inc., a Delaware corporation (the “Parent”)
which
when consummated, concurrently and conditional on the 2007 Private Placement(as
defined herein) will result in a reverse acquisition of the Parent by the
Company, in which the Company shall become a wholly-owned subsidiary of the
Parent, and shareholders of the Company will exchange all of their shares of
the
Company for shares representing 93.75% of the issued and outstanding shares
of
the Parent (the “Reverse
Acquisition”),
and
each of the BVI Warrants will be exchanged for new warrants to purchase common
stock of the Parent, exercisable at any time during a two-year period commencing
with the date on which there is an OTCBB quotation or NASDAQ listing of the
Parent’s common stock, at the price per share of Parent common stock paid by
investors in the 2007 Private Placement (as defined below), and otherwise
containing terms substantially identical to the terms of the BVI Warrants;
and
WHEREAS,
concurrently with and conditional on the consummation of the Reverse
Acquisition, the Parent will issue (i) not less than 3,200,000 shares and not
more than 4,920,000 shares of the Parent’s common stock, and (ii) warrants to
purchase an aggregate of not less than 3,200,000 shares and not more than
4,920,000 of the Parent’s common stock, for an aggregate purchase price of $4 to
$6.15 million, to several accredited investors in a private placement, with
resale registration rights (the “2007 Private Placement”); and
WHEREAS,
the consummation of the proposed 2007 Private Placement will constitute a
“Qualified Offering”;
and
WHEREAS,
the consummation of the Reverse Acquisition and 2007 Private Placement will
confer substantial benefits upon the Shareholders; and
WHEREAS,
it is a condition of the 2007 Private Placement and Reverse Acquisition that
all
BVI Preferred Shares shall have converted to ordinary shares immediately prior
to the consummation of the Reverse Acquisition and 2007 Private Placement;
and
WHEREAS,
the parties acknowledge and agree that although the Company and the Parent
will
have obtained at the time of the closing of the Reverse Acquisition and 2007
Private Placement a firm commitment of a registered market-maker who shall
undertake responsibilities for the quotation of the Parent’s shares on the OTC
Bulletin Board in the United States, and that such quotation shall extend to
shares of common stock of the Parent representing at least 10% of the Company
once such shares are registered for resale with the United States Securities
and
Exchange Commission or otherwise saleable under SEC Rule 144 or another
available exemption from registration, nonetheless, they have a bona fide
disagreement as to whether the Reverse Acquisition under such circumstances
would or would not constitute a “Qualified Listing” under the terms of the
Original Agreements, and wish to resolve such disagreement in a mutually
beneficial manner; and
WHEREAS,
in exchange for good and valuable consideration, the Company and the Group
A
Preferred Share Investor are willing to modify certain provisions of the
Original Agreements in order to facilitate mutually beneficial
transactions.
AGREEMENT
NOW,
THEREFORE, in consideration of the promises and mutual covenants contained
herein, and in exchange for value received, the receipt and sufficiency of
which
is hereby acknowledged, the parties hereto hereby agree as follows, effective
as
of the Effective Time:
1. Amendment.
(a) Deemed
Qualified Listing and Qualified Exit.
The (i)
consummation of the Reverse Acquisition shall be deemed to constitute a
“Qualified Listing”
under
the Original Agreements,
notwithstanding
the absence of a public market price quotation for the common stock
of the
Parent immediately after the closing of such transactions, and (ii) the
concurrent consummation of the Reverse Acquisition and the 2007 Private
Placement shall be collectively
deemed to constitute the closing of a “Qualified Exit” under the Original
Agreements, except
that the provisions of Section 7.7 (Put Right) of the Shareholders Agreement
shall remain in effect, as modified hereby.
(b) Put
Right of Group A Preferred Share Investor.
Section
7.7 of the Shareholders Agreement shall be amended and restated in its entirety
as follows:
2
“Put
Right of Group A Preferred Share Investor to the Guarantor.
If, at
any time after June 30, 2008:
(i)
the
Parent (as
defined in the First Amendment Agreement dated as of October 2, 2007 by and
among the Company, the Guarantor and the Group A Preferred Share Investor (the
“Amendment
Agreement”)) shall
have failed to obtain either an OTCBB quotation or NASDAQ listing of the
Parent’s common stock, or
a
registration statement covering the Put Shares (as defined below) has not been
declared effective by the Securities and Exchange Commission on or before
180th
day
following the closing of the Reverse Acquisition and 2007 Private Placement
(the
“Effectiveness
Date”);
(ii)
the
Company is in material breach of its obligations hereunder, under the Stock
Purchase Agreement or under any other agreement that may be entered into between
the Company and the Group A Preferred Share Investor hereafter; or
(iii)
at
any time after the Effectiveness Date, the Group A Preferred Share Investor
shall not be able to sell all or part of the Put Shares either (A) pursuant
to
an effective registration statement under the Securities Act or (B) within
the
limitation of the exemption provided by Rule 144 under the Securities Act in
a
single 90-day period (or any similar rule or rules then in effect) (each of
the
foregoing events described in clause (i), (ii) and (iii) being a “Default
Event”);
then,
the
Group A Preferred Share Investor shall have the right (the “Put
Right”),
to
require
the Guarantor to purchase from the Group A Preferred Share Investor, and the
Guarantor shall purchase from the Group A Preferred Share Investor if so
required by the Group A Preferred Share Investor, all of the Preferred Shares
or
all of the shares of common stock of the Parent that may be issued or are
issuable to the Group A Preferred Share Investor following conversion of the
Preferred Shares into Ordinary Shares of the Company and the exchange of such
Ordinary Shares for shares of common stock of the Parent in the Reverse
Acquisition (as defined in the Amendment Agreement) held
by
the
Group A Preferred Share Investor, less any portion of such securities that
the
Group A Preferred Share Investor is able to sell pursuant to an effective
registration statement or without registration pursuant to Rule 144 under
the
Securities Act (or any similar rule or rules then in effect)
(the
“Put
Shares”),
at
the price equal to one hundred percent (100%) of the total purchase price paid
by the Group A Preferred Share Investor hereunder for the Put Shares plus all
declared but unpaid dividends thereon to the date of the earlier of conversion
or purchase (adjusted for share splits, share dividends, share combinations,
recapitalizations and the like) plus interest equal to the prevailing US prime
interest rate quoted by HSBC on the date of purchase, less all dividends
received and less any Registration Delay Payments (as defined in the Amendment
Agreement) received (the “Put
Price”).
The
Put Right shall be exercised as follows
(a) Notice.
The
Group A Preferred Share Investor shall exercise the Put Right under this Section
7.7 by giving written notice (the “Put
Right Notice”)
to the
Guarantor and the Company indicating that it is requiring the Guarantor to
purchase all of the Put Shares held by it. The Put Right Notice may be given
at
any time after June 30, 2008, but shall not be effective if on the date such
notice is given one or more of the Default Events shall not have occurred and
be
continuing. The Put Right Notice shall be irrevocable once given.
(b) Payment
and Delivery of Shares.
Within
ten (10) business days following its receipt of the Put Right Notice, the
Guarantor shall pay to the Group A Preferred Share Investor the aggregate Put
Price for all the Put Shares held by the Group A Preferred Share Investor by
wire transfer or check as directed by the Group A Preferred Share Investor.
Upon
receipt of such payment from the Guarantor, the Investor shall cause the
certificate(s) representing such Put Shares being purchased by the Guarantor
to
be surrendered to the Company and the Company shall promptly issue to the
Guarantor new certificates representing such Put Shares.”
3
(c) New
Registration Rights.
In lieu
of and in substitution for all existing registration rights, each of the
Shareholders shall be granted registration rights with respect to the shares
of
common stock and the shares of common stock issuable upon exercise of the
warrants (collectively, the “Shareholder
Shares”),
to be
issued to them in the Reverse Acquisition substantially identical to those
to be
granted to, and pari
passu
with,
purchasers of the Parent’s common stock and warrants in the 2007 Private
Placement (including that any cutbacks due to SEC Rule 415 limits shall be
borne
pro
rata
among
all Shareholders and investors in the 2007 Private Placement based on the number
of shares sought to be registered), including
that the
initial registration statement covering the Shareholder Shares shall be filed
at
the expense of the Parent within 30 days following the closing of the 2007
Private Placement, and that if the initial registration
statement does not become effective by the Effectiveness Date, for any reason
other than by reason of SEC staff comments limiting the number of Shareholder
Shares to be registered for resale as a result of the application of Rule 415,
or if the Company fails to maintain the effectiveness of such initial
registration statement for any reason, the Company will be required to pay
Shareholders an amount equal to 1% of the original purchase price of each BVI
Preferred Share represented by shares of common stock held by Shareholders
on
the Effectiveness Date or the first day of such failure to maintain the
effectiveness of the initial registration statement, as the case may be, and
for
every 30 day period (or part) after the relevant date, in each case until the
initial registration statement is declared effective or the failure to maintain
the effectiveness of the initial registration statement is cured, up to a
maximum of 10% (the “Registration
Delay Payments”),
and in
the event that any Registration Delay Payments are not made on time, such
Registration Delay Payments shall bear interest at a rate of 1.5% per month
until paid in full. The Shareholders and the Parent shall enter into a
counterpart copy of the form of registration rights agreement between the Parent
and purchasers in the 2007 Private Placement (the “Registration
Rights Agreement”)
no
later than the closing of Reverse Acquisition, at which time such registration
rights agreement shall supersede the provisions of this subsection (c) of this
Amendment.
(d) No
Lock-Up Agreements.
The
Group A Preferred Share Investor shall not be subject to any post-underwritten
offering lock-up restrictions contained in the Original Agreements or which
may
be contained in the registration rights agreement between the Parent and
purchasers in the 2007 Private Placement.
(e) Reporting
Obligations.
The
Registration Delay Payments shall also apply to any failure by the Parent to
comply with the reporting obligations of the US federal securities laws such
as
to make Rule 144 under the Securities Act (or any similar rule or rules then
in
effect) unavailable to a Shareholder, to the extent that a Shareholder’s
Shareholders Shares cannot be resold except in reliance on such
Rule.
(f) Adjustment
for Group A Preferred Share Investor for Retroactive Adjustment to 2007 Private
Placement Valuation.
Notwithstanding
the conversion of the Preferred Shares of Group A Preferred Share Investors,
until the date on which there is both an
OTCBB
quotation or NASDAQ listing of the Parent’s Common Stock, and
a
registration statement covering the Put Shares (as defined above) has been
declared effective by the Securities and Exchange Commission, if there
shall occur prior to such date an issuance or transfer of shares of the Parent’s
common stock pursuant to either (a) Section 4.13 of the Securities Purchase
Agreement relating to the 2007 Private Placement (the “SPA”),
or (b)
Section 4.11 of the SPA, the effect of which is, had such issuances or transfers
occurred simultaneous with the closing of the 2007 Private Placement, caused
the
Actual Pre-Money Offering Valuation calculated pursuant to Sub-Clause 7A(i)(1)
of Schedule 2 of the Preferred Stock Purchase Agreement or Clause 7A of the
Memorandum to be an amount (the “Adjusted
Valuation”)
less
than US$22.4 million, then the Parent shall issue to the Group A Preferred
Share
Investor such additional shares of common stock as would have been issued in
the
Reverse Acquisition had the Adjusted Valuation been applied for purposes of
adjusting the Preferred Share Conversion Price pursuant to Sub-Clause
7A(i)(1).
4
The
parties agree that that the obligation of the Parent to issue shares of common
stock to the
Group
A Preferred Share Investor
pursuant to this Section 1(f) shall continue to run to the benefit of
the
Group
A Preferred Share Investor,
notwithstanding that the
Group
A Preferred Share Investor
may have transferred or sold all or any portion of its shares of common stock,
but that the
Group
A Preferred Share Investor
shall not have the right to assign its rights to receive all or any such shares
of common stock to other Persons in conjunction with negotiated or open-market
sales or transfers of any of its shares of common stock.
The
delivery to the Group A Preferred Share Investor of the additional shares of
common stock required by Section 1(f) shall be not later than 15 business days
from the closing date of the transaction giving rise to the requirement to
issue
additional shares of common stock. The Parent shall use its reasonable best
efforts, consistent with applicable federal and state securities law and
regulation and subject to any requirements of its transfer agent, to cause
any
shares issued pursuant to this Section 1(f) to be deemed issued as of the
closing of the Reverse Acquisition for purposes of SEC Rule 144 holding periods.
The
Group
A Preferred Share Investor acknowledges
and agrees that it is not and shall not be entitled to the benefit of the
anti-dilution provisions and make good provisions relating to the Parent’s
common stock to be issued in the 2007 Private Placement provided to the
purchasers of Parent common stock, except to the extent reflected in this
Section 1(f).
(g) Additional
shares of Common Stock to be transferred or issued to the Group A Preferred
Share Investor.
As
additional consideration for the Group
A
Preferred Share Investor entering
into this Amendment, consenting to the Reverse Acquisition and the transactions
contemplated thereby, waiving any rights to obtain a make good adjustment and
antidilution rights being provided to the purchasers of Parent common stock,
and
having due regard to the Group A Preferred Share Investor’s rights under
Sub-Clause 7(A)(j) of the Articles, the Guarantor, the Parent and Xxx Xxxx
(the
latter’s obligation limited to up to 8,993 shares of Parent common stock issued
to her) jointly and severally agree to cause to be transferred or issued to
the
Group A Preferred Share Investor an additional 149,884 shares of common stock
of
the Parent (the “Additional
Shares”)
for no
additional consideration. Such shares shall be deemed to be transferred or
issued as of, and in connection with, the closing of the Reverse Acquisition.
The
delivery to the Group A Preferred Share Investor of certificates representing
the Additional Shares required by this Section 1(g) shall be as soon as
reasonably practicable after the closing of the Reverse Acquisition but not
later than the earliest of (i) 20 business days after delivery to any former
Company shareholder of certificates for shares of Parent common stock issued
to
such former shareholder in the Reverse Acquisition, (ii) six months from the
closing date of the Reverse Acquisition and (iii) the initial registration
statement becoming effective. As additional security for the performance of
such
obligation, as
soon as
reasonably practicable, but no later than the Effective Time, the Guarantor
and
Xxx Xxxx shall each deliver to the Group A Preferred Share Investor an original,
completed (but undated) and executed irrevocable (unless the Group A Preferred
Share Investor has not otherwise received the Additional Shares) stock power
to
transfer an aggregate of 149,884 shares of common stock of the Parent to the
Group A Preferred Share Investor and to irrevocably appoint and constitute
the
Group A Preferred Share Investor as attorney-in-fact to transfer said shares
of
common stock on the books of the Parent with full power of substitution. The
Guarantor and Xxx Xxxx shall each grant to the Group A Preferred Share Investor,
under the stock powers or otherwise, the right and power to execute all
documents and take all actions that the Group A Preferred Share Investor deems
necessary to effectuate the transfer of the shares of common stock of the Parent
represented by each such stock power if the Group A Preferred Share Investor
has
not otherwise received the Additional Shares. A new share certificate for
149,884 shares of common stock of Parent shall be issued to the Group A
Preferred Share Investor within 3 business days after the presentation of such
stock power on the earliest of (i), (ii) and (iii) above if the Group A
Preferred Share Investor has not otherwise received the Additional Shares.
Such
stock power shall be promptly returned to the granting party if the Group A
Preferred Share Investor has otherwise received the Additional
Shares.
The
Parent shall use its reasonable best efforts, consistent with applicable federal
and state securities law and regulation and subject to any requirements of
its
transfer agent, to cause any shares issued or transferred to the Group A
Preferred Share Investor pursuant to this Section 1(g) to be deemed issued
or
transferred as of and as part of the closing of the Reverse Acquisition for
purposes of SEC Rule 144 holding periods, the parties shall report such
transaction for tax and US securities law purposes consistent with such
treatment, and these Additional Shares shall not be subject to any lock-up
requirements and shall be entitled to the same rights and benefits as the shares
of common stock issued by the Parent to the Group A Preferred Share Investor
in
the Reverse Acquisition.
5
(h) Termination
of Certain Shareholder Agreement Provisions.
All of
the terms and conditions of the Shareholder Agreement, other than Section 7.7
(Put Right) and Sections 10 and 11 as they may relate to Section 7.7, shall
be
terminated in all respects, including, without limitation, Sections 3.3
(Pre-emptive Rights), 5 (Governance), 6 (Information Rights), 7.2 (Rights of
First Offer), 7.3 (Tag-Along Rights), 7.4 (Company Sale Rights), 7.6 (Redemption
Right), and 8 (Registration Rights).
(i) Termination
of Certain Preferred Stock Purchase Agreement Provisions. The
following terms and provisions of each Preferred Stock Purchase Agreement shall
be terminated in all respects: Sections 4.2, 4.3 and 5.14.
(j) Termination
of Undertaking.
The
individual undertaking dated December 2006 issued by Luo Zheng in favor of
the
Group A Preferred Share Investor shall terminate in its entirety upon the Parent
obtaining
an OTCBB quotation or NASDAQ listing of the Parent’s common stock.
(k) No
Guarantor Right of Reimbursement, Indemnification or
Contribution.
As
between the Company and the Guarantor, the Guarantor acknowledges and agrees
that she shall not be entitled to seek reimbursement, indemnity or contribution
from the Company or the Parent for any amounts paid by her or on her behalf
with
respect to any exercise of the Put Right.
2.
Implementation;
Assumption by Parent. Each
of
the Group A Preferred Share Investor and the Company hereby agree (i) that
upon
the Effective Time, the Group A Preferred Share Investor shall be deemed to
have
consented to any amendment of the Memorandum and Articles and its individual
Purchase Agreement as of the closing of the Reverse Acquisition required or
appropriate to conform to and fully reflect this Amendment, and (ii) to take
such action and execute such agreements, documents and filings as may be
necessary under applicable law or regulation to implement the foregoing, such
that the Memorandum and Articles and the Group A Preferred Share Investor’s
Purchase Agreement shall, to the extent required or appropriate, conform to
and
fully reflect this Amendment. The Company further agrees that it will not
consummate the Reverse Acquisition unless the Parent no later than the closing
of the Reverse Acquisition enters into an Assignment and Assumption Agreement
substantially in the form attached hereto as Exhibit A pursuant to which the
Company will assign and transfer to the Parent, and the Parent will assume,
at
the Effective Time, all of the obligations of the Company under the Original
Agreements, as modified by this Amendment.
6
3. Entry
into Exchange and Reverse Acquisition; Exchange of Warrants; Conversion
Notice.
(a) The
Group
A
Preferred Share Investor agrees
that it will enter into a definitive Share Exchange Agreement (the “SEA”)
effectuating the Reverse Acquisition in the form of the draft SEA attached
to
this Amendment, provided all other Shareholders enter into the SEA and the
terms
of the definitive SEA (i) do not adversely affect the terms of this Amendment,
and (ii) provide for (x) conversion of each BVI Preferred Share into ordinary
shares of the Company immediately prior to the closing of the Reverse
Acquisition without further action or consent of the Group
A
Preferred Share Investor (but
including reflecting in such conversion, as applicable to the Group A Preferred
Share Investor, the price adjustment mechanism set forth in the applicable
Preferred Stock Purchase Agreement), and exchange without further action or
consent of the Group
A
Preferred Share Investor of
each
such ordinary share of the Company into 319.8294 shares of common stock of
the
Parent (before taking into account the additional shares of Parent common stock
to be issued or transferred under Section 1(g)), and (y) exchange, in the
closing of the Reverse Acquisition, without further action or consent of the
Group
A
Preferred Share Investor, of
all
BVI Warrants issued to the Group
A
Preferred Share Investor
for
warrants to purchase an aggregate of 200,000 shares of common stock of the
Parent, exercisable
at any time during a two-year period commencing with the date on which there
is
an OTCBB quotation or NASDAQ listing of the Parent’s common stock, at the price
per share of Parent common stock paid by investors in the 2007 Private
Placement.
(b) The
Group
A
Preferred Share Investor further waives any other requirement of prior notice
of
conversion of its Preferred Shares into the Company’s ordinary shares and
agrees
that this Amendment and the SEA shall together constitute any required notice
or
agreement of conversion of its Preferred Shares into ordinary shares, provided,
however, that the Group A Preferred Share Investor shall deliver such notice
of
conversion, not inconsistent with this Amendment and the SEA, as may reasonably
be required by the Company, its corporate service agent or its counsel to fully
and properly reflect such conversion on the books and records of the Company.
4. Counterparts.
This
Amendment may be executed in several counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
5. Governing
Law. This
Amendment shall be governed by and construed in accordance with the laws of
the
Hong Kong Special Administrative Region of the People’s Republic of China,
without giving effect to the conflicts of laws rules thereof.
[Remainder
of Page Intentionally Left Blank]
7
IN
WITNESS WHEREOF, each of the undersigned has duly executed this Amendment as
of
the date first written above.
OMNIA
LUO GROUP LIMITED
By:
Name:
Title:
LUO
ZHENG
By:
Name:
XXXX-XXXXXX
GREATER CHINA INVESTMENT FUND LIMITED
By:
Name:
Title:
The
undersigned Parent hereby joins in this Amendment, solely with respect to
Section 1(f) and Section 1(g) hereof, with effect from and after the closing
of
the Reverse Acquisition:
WENTWORTH
II, INC.
By:
Name:
Title:
The
undersigned hereby joins in this Amendment, solely with respect to Section
1(g)
hereof, with effect from and after the closing of the Reverse Acquisition,
but
shall be obligated hereunder only with respect to up to 8,993 shares of Parent
common stock:
KONG
XXX XXX XXX XX
By:
Name:
Title:
8
EXHIBIT
A
Form
of Assignment and Assumption Agreement
9