LOCK-UP AGREEMENT
LOCK-UP
AGREEMENT, dated as of November 15, 2006 (this "Agreement"),
by
and among Applied Spectrum Technologies, Inc., a Delaware corporation (the
"Company"),
the
stockholders listed on the signature pages hereto under the heading
"Stockholders"
(each a
"Stockholder"
and
collectively, the "Stockholders")
and
Xxxxxxx Securities, LLC, a Delaware limited liability company, as agent for
the
Investors (as defined below) (the "Investor
Agent").
WHEREAS,
on September 7, 2006, the Company entered into a definitive share exchange
agreement whereby the Company will acquire all of the shares and equity
ownership of Ever Leader Holdings Limited, a company incorporated under the
laws
of Hong Kong SAR, and its direct and indirect subsidiaries in exchange for
Common Stock (the "Exchange").
WHEREAS,
immediately following the consummation of the Exchange, the Stockholders will
own or have the power and authority to vote with respect to collectively
50,418,001 shares of Common Stock, which represent in the aggregate
approximately 71.01% of the total issued and outstanding capital stock of the
Company;
WHEREAS,
the Company and Computershare Trust Company, Inc. have entered into that certain
Make Good Agreement, dated as of the date hereof, by and among the Investor
Agent, the Company, its current and future subsidiaries, Ever Leader Holdings,
Limited, a company incorporated under the laws of Hong Kong SAR, its direct
and
indirect subsidiaries, Xx. Xxxxxx Xxx, Ms. Xxx Xx and Moveup Investments Limited
(the "Make
Good Agreement").
WHEREAS,
as a condition to the willingness of the Investors to enter into the Securities
Purchase Agreement and to consummate the transactions contemplated thereby,
in
the Exchange and in that certain private placement memorandum (as amended and
supplemented prior to the Closing Date, the "Private
Placement Memorandum")
related thereto delivered to the Investors (collectively, the "Transactions"),
the
Investors have required that each Stockholder agree, and in order to induce
the
Investors to enter into the Securities Purchase Agreement, each Stockholder
has
agreed, to enter into this Agreement with respect to all the Common Stock now
owned and which may hereafter be acquired by the Stockholder (the "Common
Shares")
and
any other Restricted Securities (as defined below), if any, which such
Stockholder is currently entitled to vote, or after the date hereof, becomes
entitled to vote, at any meeting of stockholders of the Company.
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE
I
LOCK-UP
AGREEMENT OF THE STOCKHOLDERS
1.1 Lock-Up
Agreement.
(a) Beginning
on the Subscription Date (as defined in the Registration Rights Agreement)
and
until the earlier to occur of (x) the date 180 days after the Additional
Effective Date (as defined in the Registration Rights Agreement) and (y) solely
if the audited FY07 Financial Statements (as defined in the Make Good Agreement)
states that FY07 Net Income (as defined in the Make Good Agreement) exceeded
the
Performance Threshold (as defined in the Make Good Agreement) and the FY07
Financial Statements do not contain any untrue statement of a material fact
or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, March 31, 2008 (the "Lock-Up
Period"),
each
Stockholder will not, and the Company will not permit such Stockholder to,
without the prior written consent of the Required Holders (as defined in the
Registration Rights Agreement), (i) sell, offer to sell, tender, contract or
agree to sell, assign, hypothecate, hedge, pledge, grant any option to purchase,
transfer, grant a proxy or power of attorney with respect to, or otherwise
dispose of or agree to dispose of, or create or permit to exist any security
interest, lien, claim, pledge, option, right of first refusal, agreement,
limitation on such Stockholder's voting rights, charge or other encumbrance
of
any nature whatsoever ("Encumbrance"),
in
each case, directly or indirectly, with respect to any shares of Common Stock,
Options (as defined in the Warrant), Convertible Securities (as defined in
the
Warrant) or any other instrument convertible into or exercisable or exchangeable
for Common Stock, or other rights to purchase shares of Common Stock or to
convert or exercise any such convertible or exercisable instrument (except
as
may be issued pursuant to the terms of an Approved Stock Plan (as defined in
the
Warrant)), or cause the Company to file or cause to be declared effective a
registration statement with the Securities and Exchange Commission (the
"Commission")
relating to the offer and sale of any shares of Common Stock (other than the
Registration Statements contemplated pursuant to the Registration Rights
Agreement), (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership
of
any shares of Common Stock, or warrants or other rights to purchase shares
of
Common Stock, whether any such transaction is to be settled by delivery of
such
securities, in cash or otherwise, owned directly by the undersigned (including
holding as a custodian) or with respect to which the undersigned has beneficial
ownership within the rules and regulations of the Commission or (iii) directly
or indirectly, initiate, solicit or encourage any person to take actions which
could reasonably be expected to lead to the occurrence of any of the foregoing
(any security, instrument or right to acquire securities referred to in this
paragraph, collectively, the "Restricted
Securities").
2
(b) Section
1.1(a) shall not, with respect to Restricted Securities, apply to (a) bona
fide
gifts, whether to charitable organizations or otherwise, provided the recipient
thereof agrees in writing with each of the Company and the Investor Agent to
be
bound by the terms of this Agreement, (b) dispositions to any foundation, trust,
partnership or the limited liability company, as the case may be, for the direct
or indirect benefit of the undersigned and/or the immediate family of the
undersigned, provided that such trust agrees in writing with each of the Company
and the Investor Agent to be bound by the terms of this Agreement, (c) transfers
as required by law provided that after such transfer, the terms of this
Agreement continue to apply to the Restricted Securities and (d) to dispositions
by a partnership to a partner of such partnership, provided such partner agrees
in writing with each of the Company and the Investor Agent to be bound by the
terms of this Agreement. For purposes of this Agreement, “immediate family”
shall mean any relationship by blood, marriage or adoption, not more remote
than
first cousin.
1.2 Voting
Agreement.
Each
Stockholder hereby agrees that at any meeting of the stockholders of the
Company, however called, and in any action by written consent of the Company's
stockholders, each of the Stockholders shall vote the Common Shares and the
Restricted Securities: (a) in favor of the Transactions; and (b) against any
proposal or any other corporate action or agreement that would result in a
breach of any covenant, representation or warranty or any other obligation
or
agreement of the Company under the Securities Purchase Agreement or which could
result in any of the conditions to the Company's obligations under the
Securities Purchase Agreement not being fulfilled. Each Stockholder acknowledges
receipt and review of a copy of the Private Placement Memorandum, the Securities
Purchase Agreement and the other Transaction Documents (as defined in the
Securities Purchase Agreement).
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE STOCKHOLDER
Each
Stockholder hereby represents and warrants, severally but not jointly, to each
of the Investors as follows:
2.1 Authority
Relative to This Agreement.
Each
Stockholder has all necessary power and authority to execute and deliver this
Agreement, to perform his or its obligations hereunder and to consummate the
transactions contemplated hereby. Each Stockholder has taken whatever steps
necessary, including without limitation, moving the Restricted Securities from
a
margin account to a cash account and/or delivering any voting instructions
or
legal proxy to any necessary broker or agent, to ensure that such Stockholder
has the necessary power and authority to vote all of the Restricted Securities
held by such Stockholder or has properly empowered such broker or agent to
vote
in accordance herewith. This Agreement has been duly executed and delivered
by
such Stockholder and constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
except (a) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or similar laws
now or hereafter in effect relating to, or affecting generally the enforcement
of creditors' and other obligees' rights, (b) where the remedy of specific
performance or other forms of equitable relief may be subject to certain
equitable defenses and principles and to the discretion of the court before
which the proceeding may be brought, and (c) where rights to indemnity and
contribution thereunder may be limited by applicable law and public
policy.
3
2.2 No
Conflict.
i)
The
execution and delivery of this Agreement by such Stockholder does not, and
the
performance of this Agreement by such Stockholder shall not, (i) conflict with
or violate any federal, state or local law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to any Stockholder or by which
the Common Shares or the Restricted Securities owned by such Stockholder are
bound or affected or (ii) result in any breach of or constitute a default (or
an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any
of
the Common Shares or the Restricted Securities owned by such Stockholder
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which such
Stockholder is a party or by which such Stockholder or the Restricted Securities
owned by such Stockholder are bound.
(b) The
execution and delivery of this Agreement by such Stockholder does not, and
the
performance of this Agreement by such Stockholder shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental entity by such Stockholder.
2.3 Title
to the Stock.
(a) As
of the
date hereof, each Stockholder is the owner of the number of shares of Restricted
Securities set forth opposite its name on Appendix A attached hereto, entitled
to vote, without restriction, on all matters brought before holders of capital
stock of the Company, which Restricted Securities represent on the date hereof
the percentage of the outstanding stock and voting power of the Company set
forth on such Appendix. Such Restricted Securities are all the securities of
the
Company owned, either of record or beneficially, by such Stockholder. Such
Restricted Securities are owned free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations
on
such Stockholder's voting rights, charges and other encumbrances of any nature
whatsoever. No Stockholder has appointed or granted any proxy, which appointment
or grant is still effective, with respect to the Restricted Securities owned
by
such Stockholder.
(b) As
of the
date of the consummation of the Exchange, each Stockholder will be the owner
of
the number of shares of Restricted Securities set forth opposite its name on
Appendix B attached hereto, entitled to vote, without restriction, on all
matters brought before holders of capital stock of the Company, which Restricted
Securities represent on the date hereof the percentage of the outstanding stock
and voting power of the Company set forth on such Appendix. Such Restricted
Securities will be all the securities of the Company owned, either of record
or
beneficially, by such Stockholder as of the date of the consummation of the
Exchange. Such Restricted Securities will be owned free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on such Stockholder's voting rights, charges and other
encumbrances of any nature whatsoever. No Stockholder has appointed or granted
any proxy, which appointment or grant is still effective, with respect to the
Restricted Securities owned by such Stockholder.
ARTICLE
III
COVENANTS
4
3.1 Company
Cooperation.
The
Company hereby covenants and agrees that it will not, and each Stockholder
irrevocably and unconditionally acknowledges and agrees that the Company will
not (and waives any rights against the Company in relation thereto), recognize
any Encumbrance or agreement on any of the Restricted Securities subject to
this
Agreement unless the provisions of Section 1.1 have been complied with. The
Company agrees, with respect to any stockholder vote or consent with respect
to
the Transactions, to use its reasonable best efforts to cause holders of
Restricted Securities representing the percentage of outstanding capital stock
required to vote in favor of the Transactions to become party to, comply with
and be bound by the terms and conditions of this Agreement and the Restricted
Securities held by such holders to be subject to the terms and conditions of
this Agreement.
3.2 Stop
Transfer Instructions.
Each
Stockholder also agrees and consents to the entry of stop transfer instructions
with the Company’s transfer agent and registrar against the transfer of the
Restricted Securities of such Stockholder except in compliance with the
foregoing restrictions.
ARTICLE
IV
MISCELLANEOUS
4.1 Further
Assurances.
Each
Stockholder will execute and deliver such further documents and instruments
and
take all further action as may be reasonably necessary in order to consummate
the transactions contemplated hereby.
4.2 Specific
Performance.
The
parties hereto agree that irreparable damage would occur in the event any
provision of this Agreement was not performed in accordance with the terms
hereof and that any Investor (without being joined by any other Investor) shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or in equity. Any Investor shall be entitled to its
reasonable attorneys' fees in any action brought to enforce this Agreement
in
which it is the prevailing party.
4.3 Entire
Agreement.
This
Agreement constitutes the entire agreement among the Company, the Investor
Agent
and the Stockholders (other than the Securities Purchase Agreement and the
other
Transaction Documents and the ancillary documents related thereto) with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, among the Company, the Investor Agent
and
the Stockholders with respect to the subject matter hereof.
4.4 Amendment.
This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
4.5 Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of this Agreement is not affected
in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the
parties hereto shall negotiate in good faith to modify this Agreement so as
to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the terms of this Agreement remain as originally
contemplated to the fullest extent possible.
5
4.6 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. The parties hereby agree that all actions or proceedings arising
directly or indirectly from or in connection with this Agreement shall be
litigated only in the Supreme Court of the State of New York or the United
States District Court for the Southern District of New York located in New
York
County, New York. The parties consent to the jurisdiction and venue of the
foregoing courts and consent that any process or notice of motion or other
application to any of said courts or a judge thereof may be served inside or
outside the State of New York or the Southern District of New York by registered
mail, return receipt requested, directed to the party being served at its
address set forth on the signature ages to this Agreement (and service so made
shall be deemed complete three (3) days after the same has been posted as
aforesaid) or by personal service or in such other manner as may be permissible
under the rules of said courts. Each of the Company, the Investor Agent and
each
Stockholder irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of
any
such suit, action, or proceeding brought in such a court and any claim that
suit, action, or proceeding has been brought in an inconvenient forum.
EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
4.7 Third-Party
Beneficiaries.
The
Investors shall be intended third party beneficiaries of this Agreement to
the
same extent as if they were parties hereto, and shall be entitled to enforce
the
provisions hereof.
4.8 Termination.
This
Agreement shall terminate immediately following the expiration of the Lock-Up
Period or upon the mutual consent of each Stockholder and the
Investors.
4.9 Notices.
Any
communication, notice or document required or permitted to be given under this
Agreement shall be given in writing and shall be deemed received (i) when
personally delivered to the relevant party at such party's address as set forth
on the signature pages attached hereto, (ii) if sent by mail (which must be
certified or registered mail, postage prepaid) or overnight courier, when
received or rejected by the relevant party at such party's address indicated
below, or (iii) if sent by facsimile, when confirmation of delivery is
received by the sending party.
6
Each
Stockholder that is not a current citizen and resident of the Unites States
of
America or an entity organized under the laws of any state of the United States
of America (the "Foreign
Parties")
hereby
irrevocably appoints National Corporate Research, Ltd., of 000
Xxxx
00xx
Xxxxxx,
Xxxxx 000, Xxx Xxxx, X.X. 00000, X.X.X. ("NCR")
as its
agent for the receipt of service of process in the United States. Each Foreign
Party agrees that any document may be effectively served on it in connection
with any action, suit or proceeding in the United States by service on its
agents. The Investor Agent consents and agrees that each Foreign Party may,
in
its reasonable discretion, irrevocably appoint a substitute agent for the
receipt of service of process located within the Untied States, and that upon
such appointment, the appointment of NCR may be revoked.
Any
document shall be deemed to have been duly served if marked for the attention
of
the agent at its address as set forth in this Section 8(b) or such other address
in the United States as may be notified to the party wishing to serve the
document and (a) left at the specified address if its receipt is acknowledged
in
writing; or (b) sent to the specified address by post, registered mail return
receipt requested. In the case of (a), the document will be deemed to have
been
duly served when it is left and signed for. In the case of (b), the document
shall be deemed to have been duly served when received and
acknowledged.
If
any
Foreign Party's agent at any time ceases for any reason to act as such, such
Foreign Party shall appoint a new Investor Agent having an address for service
in the United States and shall notify the Investor Agent of the name and address
of the new Investor Agent. Failing such appointment and notification, the
holders of a majority of the Common Shares (as defined in the Securities
Purchase Agreement) shall be entitled by notice to such Foreign Party to appoint
a new Investor Agent to act on such Foreign Party's behalf. The provisions
of
this Section 8(b) applying to service on an agent apply equally to service
on a
new Investor Agent.
[The
remainder of the page is intentionally left blank]
7
IN
WITNESS WHEREOF, each Stockholder, the Company and the Investor Agent has duly
executed this Agreement.
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THE
COMPANY:
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|
APPLIED
SPECTRUM TECHNOLOGIES, INC.
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||||
|
By:
|
/s/
Xx. Xxxxxx Xxx
|
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|
Name:
Xx. Xxxxxx Xxx
|
||||
|
Title:
Chief Executive Officer
|
||||
|
Dated:
November 15, 2006
|
||||
|
Address:
|
23/F,
Xxxxxxxxxx Xxxxx, 0 Xxxxxxxx Xx
Xxxxx
000000, P.R. China
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IN
WITNESS WHEREOF, each Stockholder, the Company and the Investor Agent has duly
executed this Agreement.
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THE
INVESTOR AGENT:
|
||||
|
XXXXXXX
SECURITIES, LLC
|
||||
|
By:
|
/s/
Xxxxxxx X. Xxxxxxx
|
|||
|
Name:
Xxxxxxx X. Xxxxxxx
|
||||
|
Title:
President
|
||||
|
Dated:
November 15, 2006
|
||||
|
Address:
|
0000
XXX Xxxxxxx, Xxxxx 0000
Xxxxxxxxx
Xxxxxxx, XX 00000
|
|||
IN
WITNESS WHEREOF, each Stockholder, the Company and the Investor Agent has duly
executed this Agreement.
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STOCKHOLDER:
|
|||
|
/s/
Xx. Xxxxxx Xxx
|
|||
|
Xx.
Xxxxxx Xxx
|
|||
|
Dated:
November 15, 2006
|
|||
|
Address:
|
Xxxxxxxxxx
Xxxxx, 00xx
Xxxxx
Xx.
0 XxxxxxxXxxx
|
||
|
Xxxxx,
Xxxxx Xxxxxxxx, P.R.C.
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IN
WITNESS WHEREOF, each Stockholder, the Company and the Investor Agent has duly
executed this Agreement.
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STOCKHOLDER:
|
|||
|
/s/
Ms. Xxx Xx
|
|||
|
Ms.
Xxx Xx
|
|||
|
Dated:
November 15, 2006
|
|||
|
Address:
|
Xxxxxxxxxx
Xxxxx, 00xx
Xxxxx
Xx.
0 XxxxxxxXxxx
|
||
|
Xxxxx,
Xxxxx Xxxxxxxx, P.R.C.
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IN
WITNESS WHEREOF, each Stockholder, the Company and the Investor Agent has duly
executed this Agreement.
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STOCKHOLDER:
|
||||
|
MOVEUP
INVESTMENTS LIMITED
|
||||
|
By:
|
/s/
Xxxxxxxx Xx
|
|||
|
Name:
Xxxxxxxx Xx
|
||||
|
Title:
Director
|
||||
|
Dated:
November 15 , 2006
|
||||
|
Address:
|
X-00
Xxxxx Xxxxx Xxxxx
0
Xxxxxx Xxxx
Shenzhen
518033 P.R.C.
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APPENDIX
A
Restricted
Securities Owned prior to Exchange
|
Stockholder
|
Common
Shares
Owned
|
Other
Restricted
Securities Owned
|
Percentage
of Stock Outstanding
|
Voting
Percentage
of
Stock
Outstanding
|
|
Xxxxxx
Xxx
|
0
|
0
|
0
|
0
|
|
Xxx
Xx
|
0
|
0
|
0
|
0
|
|
Moveup
Investments Limited
|
0
|
0
|
0
|
0
|
APPENDIX
B
Restricted
Securities Owned After Exchange
|
Stockholder
|
Common
Shares
Owned
|
Other
Restricted
Securities Owned
|
Percentage
of Stock Outstanding
|
Voting
Percentage
of
Stock
Outstanding
|
|
Xxxxxx
Xxx
|
46,187,136
(1)
|
0
|
65.05%
|
65.05%
|
|
Xxx
Xx
|
46,187,136(1)
|
0
|
65.05%
|
65.05%
|
|
Moveup
Investments Limited
|
4,230,865
|
0
|
5.96%
|
5.96%
|
|
(1)
|
Xxxxxx
Xxx and Xxx Xx each have a 50% equity ownership in XIA Pharmaceutical
Inc.
They are both executive officers of the Company and Xxxxxx Xxx is
a
director. In addition, they are husband and wife.
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