NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
COMMON STOCK PURCHASE WARRANT
To Purchase __________ Shares of Common Stock of
LJ INTERNATIONAL INC.
THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies
that, for value received, _____________ (the "Holder"), is entitled, upon the
terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time on or after the date hereof (the "Initial Exercise Date")
and on or prior to the close of business on the five year anniversary of the
Initial Exercise Date (the "Termination Date") but not thereafter, to subscribe
for and purchase from LJ International Inc., a British Virgin Islands
corporation (the "Company"), up to ______ shares (the "Warrant Shares") of
Common Stock, par value $0.01 per share, of the Company (the "Common Stock").
The purchase price of one share of Common Stock (the "Exercise Price") under
this Warrant shall be $2.98, subject to adjustment hereunder.
Section 1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement"), dated September 1, 2004, among
the Company and the purchasers signatory thereto.
Section 2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights
represented by this Warrant may be made at any time or times on or
after the Initial Exercise Date and on or before the Termination Date
by delivery to the Company of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto (or such other office or agency
of the Company as it may designate by notice in writing to the
registered Holder at the address of such Holder appearing on the books
of the Company); provided, however, within 5 Trading Days of the date
said Notice of Exercise is delivered to the Company, the Holder shall
have surrendered this Warrant to the Company and the Company shall have
received payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier's check drawn on a United States
bank.
b) Exercise Price. The Exercise Price of each share of Common
Stock under this Warrant shall be $2.98, subject to adjustment
hereunder.
c) Cashless Exercise. If at any time after one year from the
date of issuance of this Warrant there is no effective Registration
Statement registering the resale of the Warrant Shares by the Holder,
then this Warrant may also be exercised at such time by means of a
"cashless exercise" in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the
date of such election;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise
of this Warrant in accordance with the terms of this
Warrant by means of a cash exercise rather than a
cashless exercise.
d) Exercise Limitations.
i. Holder's Restrictions. The Holder shall not have
the right to exercise any portion of this Warrant, pursuant
to Section 2(c) or otherwise, to the extent that after
giving effect to such issuance after exercise, the Holder
(together with the Holder's affiliates), as set forth on
the applicable Notice of Exercise, would beneficially own
in excess of 4.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to such
issuance. For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by the
Holder and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such
sentence is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (A)
exercise of the remaining, nonexercised portion of this
Warrant beneficially owned by the Holder or any of its
affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities
of the Company (including, without limitation, any other
Debentures or Warrants) subject to a limitation on
conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of
its affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(d), beneficial
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ownership shall be calculated in accordance with Section
13(d) of the Exchange Act, it being acknowledged by Holder
that the Company is not representing to Holder that such
calculation is in compliance with Section 13(d) of the
Exchange Act and Holder is solely responsible for any
schedules required to be filed in accordance therewith. To
the extent that the limitation contained in this Section
2(d) applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by the
Holder) and of which a portion of this Warrant is
exercisable shall be in the sole discretion of such Xxxxxx,
and the submission of a Notice of Exercise shall be deemed
to be such Holder's determination of whether this Warrant
is exercisable (in relation to other securities owned by
such Holder) and of which portion of this Warrant is
exercisable, in each case subject to such aggregate
percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such
determination. For purposes of this Section 2(d), in
determining the number of outstanding shares of Common
Stock, the Holder may rely on the number of outstanding
shares of Common Stock as reflected in (x) the Company's
most recent SEC Report, (y) a more recent public
announcement by the Company or (z) any other notice by the
Company or the Company's Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the
written or oral request of the Holder, the Company shall
within two Trading Days confirm orally and in writing to
the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its affiliates
since the date as of which such number of outstanding
shares of Common Stock was reported.
ii. Intentionally Omitted.
e) Mechanics of Exercise.
i. Authorization of Warrant Shares. The Company
covenants that all Warrant Shares which may be issued upon
the exercise of the purchase rights represented by this
Warrant will, upon exercise of the purchase rights
represented by this Warrant, be duly authorized, validly
issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof
(other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Company covenants
that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of
the Warrant Shares upon the exercise of any purchase rights
under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing
stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of
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the purchase rights under this Warrant. The Company will
take all such reasonable action as may be necessary to
assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market
upon which the Common Stock may be listed.
ii. Delivery of Certificates Upon Exercise.
Certificates for shares purchased hereunder shall be
delivered to the Holder within 3 Trading Days from the
delivery to the Company of the Notice of Exercise Form,
surrender of this Warrant and payment of the aggregate
Exercise Price as set forth above ("Warrant Share Delivery
Date"). This Warrant shall be deemed to have been exercised
on the date the Exercise Price is received by the Company.
The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named
therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the Warrant
has been exercised by payment to the Company of the
Exercise Price and all taxes required to be paid by the
Holder, if any, pursuant to Section 2(e)(vii) prior to the
issuance of such shares, have been paid.
iii. Delivery of New Warrants Upon Exercise. If this
Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to Holder
a new Warrant evidencing the rights of Holder to purchase
the unpurchased Warrant Shares called for by this Warrant,
which new Warrant shall in all other respects be identical
with this Warrant.
iv. Rescission Rights. If the Company fails to
deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section
2(e)(iv) by the Warrant Share Delivery Date, then the
Holder will have the right to rescind such exercise
v. Buy-In Compensation. In addition to any other
rights available to the Holder, if the Company fails to
deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise on
or before the Warrant Share Delivery Date, and if after
such date the Holder is required by its broker to purchase
(in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated
receiving upon such exercise (a "Buy-In"), then the Company
shall (1) pay in cash to the Holder the amount by which (x)
the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying
(A) the number of Warrant Shares that the Company was
required to deliver to the Holder in connection with the
exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed,
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and (2) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored or deliver
to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with
its exercise and delivery obligations hereunder. For
example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with
respect to an attempted exercise of shares of Common Stock
with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in
respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by
the Company. Nothing herein shall limit a Holder's right to
pursue any other remedies available to it hereunder, at law
or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect
to the Company's failure to timely deliver certificates
representing shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.
vi. No Fractional Shares or Scrip. No fractional
shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be
entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction in
an amount equal to such fraction multiplied by the Exercise
Price.
vii. Charges, Taxes and Expenses. Issuance of
certificates for Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid
by the Company, and such certificates shall be issued in
the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the
event certificates for Warrant Shares are to be issued in a
name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the
Holder; and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
viii. Closing of Books. The Company will not close
its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to
the terms hereof.
Section 3. Certain Adjustments.
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a) Stock Dividends and Splits. If the Company, at any time
while this Warrant is outstanding: (A) pays a stock dividend or
otherwise make a distribution or distributions on shares of its Common
Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not
include any shares of Common Stock issued by the Company pursuant to
this Warrant), (B) subdivides outstanding shares of Common Stock into a
larger number of shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number
of shares, or (D) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case the
Exercise Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
after such event. Any adjustment made pursuant to this Section 3(a)
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
b) Subsequent Equity Sales. If the Company or any Subsidiary
thereof, as applicable, at any time while this Warrant is outstanding,
shall offer, sell, grant any option to purchase or offer, sell or grant
any right to reprice its securities, or otherwise dispose of or issue
(or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents entitling any
Person to acquire shares of Common Stock, at an effective price per
share less than the then Exercise Price (such lower price, the "Base
Share Price" and such issuances collectively, a "Dilutive Issuance"),
as adjusted hereunder (if the holder of the Common Stock or Common
Stock Equivalents so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options
or rights per share which is issued in connection with such issuance,
be entitled to receive shares of Common Stock at an effective price per
share which is less than the Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price), then, the
Exercise Price shall be reduced by multiplying the Exercise Price by a
fraction, the numerator of which is the number of shares of Common
Stock issued and outstanding immediately prior to the Dilutive Issuance
plus the number of shares of Common Stock which the offering price for
such Dilutive Issuance would purchase at the then Exercise Price, and
the denominator of which shall be the sum of the number of shares of
Common Stock issued and outstanding immediately prior to the Dilutive
Issuance plus the number of shares of Common Stock so issued or
issuable in connection with the Dilutive Issuance. Such adjustment
shall be made whenever such Common Stock or Common Stock Equivalents
are issued. The Company shall notify the Holder in writing, no later
than the second business day following the issuance of any Common Stock
or Common Stock Equivalents subject to this section, indicating therein
the applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms.
c) Pro Rata Distributions. If the Company, at any time prior
to the Termination Date, shall distribute to all holders of Common
Stock (and not to Holders of the Warrants) evidences of its
6
indebtedness or assets or rights or warrants to subscribe for or
purchase any security other than the Common Stock (which shall be
subject to Section 3(b)), then in each such case the Exercise Price
shall be adjusted by multiplying the Exercise Price in effect
immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of
which the denominator shall be the VWAP determined as of the record
date mentioned above, and of which the numerator shall be such VWAP on
such record date less the then per share fair market value at such
record date of the portion of such assets or evidence of indebtedness
so distributed applicable to one outstanding share of the Common Stock
as determined by the Board of Directors in good faith. In either case
the adjustments shall be described in a statement provided to the
Holders of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date mentioned above.
d) Calculations. All calculations under this Section 3 shall
be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 3, the number of shares of
Common Stock outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding.
e) Notice to Holders.
i. Adjustment to Exercise Price. Whenever the
Exercise Price is adjusted pursuant to this Section 3, the
Company shall promptly mail to each Holder a notice setting
forth the Exercise Price after such adjustment and setting
forth a brief statement of the facts requiring such
adjustment. If the Company issues a variable rate security,
despite the prohibition thereon in the Purchase Agreement,
the Company shall be deemed to have issued Common Stock or
Common Stock Equivalents at the lowest possible conversion
or exercise price at which such securities may be converted
or exercised in the case of a Variable Rate Transaction (as
defined in the Purchase Agreement), or the lowest possible
adjustment price in the case of an MFN Transaction (as
defined in the Purchase Agreement.
ii. Notice to Allow Exercise by Xxxxxx. If (A) the
Company shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Company shall
declare a special nonrecurring cash dividend on or a
redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Company shall be
required in connection with any reclassification of the
Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; (E) the
7
Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of
the Company; then, in each case, the Company shall cause to
be mailed to the Holder at its last addresses as it shall
appear upon the Warrant Register of the Company, at least
20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose
of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of
which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on
which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective
or close, and the date as of which it is expected that
holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities,
cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or
share exchange; provided, that the failure to mail such
notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action
required to be specified in such notice. The Holder is
entitled to exercise this Warrant during the 20-day period
commencing the date of such notice to the effective date of
the event triggering such notice
f) Fundamental Transaction. If, at any time while this Warrant
is outstanding, (A) the Company effects any merger or consolidation of
the Company with or into another Person, (B) the Company effects any
sale of all or substantially all of its assets in one or a series of
related transactions, (C) any tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (in
any such case, a "Fundamental Transaction"), then, upon any subsequent
conversion of this Warrant, the Holder shall have the right to receive,
for each Warrant Share that would have been issuable upon such exercise
absent such Fundamental Transaction the number of shares of Common
Stock of the successor or acquiring corporation or of the Company, if
it is the surviving corporation, and Alternate Consideration receivable
upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a Holder of the number of
shares of Common Stock for which this Warrant is exercisable
immediately prior to such event (the "Alternate Consideration"). For
purposes of any such exercise, the determination of the Exercise Price
shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable
in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among
the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the
8
Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the
Holder a new warrant consistent with the foregoing provisions and
evidencing the Holder's right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of
this paragraph (f) and insuring that this Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.
g) Exempt Issuance. Notwithstanding the foregoing, no
adjustments, Alternate Consideration nor notices shall be made, paid or
issued under this Section 3 in respect of an Exempt Issuance.
h) Voluntary Adjustment By Company. The Company may at any
time during the term of this Warrant reduce the then current Exercise
Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
Section 4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 5(a) and 4(d)
hereof and to the provisions of Section 4.1 of the Purchase Agreement,
this Warrant and all rights hereunder are transferable, in whole or in
part, upon surrender of this Warrant at the principal office of the
Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without
having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section
4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
c) Warrant Register. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time
to time. The Company may deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise
hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.
9
d) Transfer Restrictions. If, at the time of the surrender of
this Warrant in connection with any transfer of this Warrant, the
transfer of this Warrant shall not be registered pursuant to an
effective registration statement under the Securities Act and under
applicable state and jurisdictional securities or blue sky laws, the
Company may require, as a condition of allowing such transfer (i) that
the Holder or transferee of this Warrant, as the case may be, furnish
to the Company a written opinion of counsel (which opinion shall be in
form, substance and scope customary for opinions of counsel in
comparable transactions) to the effect that such transfer may be made
without registration under the Securities Act and under applicable
state and jurisdictional securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment
letter in form and substance acceptable to the Company and (iii) that
the transferee be an "accredited investor" as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the
Securities Act or a qualified institutional buyer as defined in Rule
144A(a) under the Securities Act.
Section 5. Miscellaneous.
a) Title to Warrant. Prior to the Termination Date and subject
to compliance with applicable laws and Section 4 of this Warrant, this
Warrant and all rights hereunder are transferable, in whole or in part,
at the office or agency of the Company by the Holder in person or by
duly authorized attorney, upon surrender of this Warrant together with
the Assignment Form annexed hereto properly endorsed. The transferee
shall sign an investment letter in form and substance reasonably
satisfactory to the Company.
b) No Rights as Shareholder Until Exercise. This Warrant does
not entitle the Holder to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof. Upon the
surrender of this Warrant and the payment of the aggregate Exercise
Price (or by means of a cashless exercise), the Warrant Shares so
purchased shall be and be deemed to be issued to such Holder as the
record owner of such shares as of the close of business on the later of
the date of such surrender or payment.
c) Loss, Theft, Destruction or Mutilation of Warrant. The
Company covenants that upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender
and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of
like tenor and dated as of such cancellation, in lieu of such Warrant
or stock certificate.
d) Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal
10
holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a Saturday, Sunday or legal holiday.
e) Authorized Shares.
The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized
and unissued Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant
shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as
may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable
law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed.
Except and to the extent as waived or consented to by
the Holder, the Company shall not by any action, including,
without limitation, amending its certificate of incorporation
or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of
this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and
nonassessable Warrant Shares upon the exercise of this
Warrant, and (c) use commercially reasonable efforts to obtain
all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations
under this Warrant.
Before taking any action which would result in an
adjustment in the number of Warrant Shares for which this
Warrant is exercisable or in the Exercise Price, the Company
shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
f) Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be
determined in accordance with the provisions of the Purchase Agreement.
11
g) Restrictions. The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal
securities laws.
h) Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Xxxxxx's
rights, powers or remedies, notwithstanding all rights hereunder
terminate on the Termination Date. If the Company willfully and
knowingly fails to comply with any provision of this Warrant, which
results in any material damages to the Holder, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.
i) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall
be delivered in accordance with the notice provisions of the Purchase
Agreement.
j) Limitation of Liability. No provision hereof, in the
absence of any affirmative action by Holder to exercise this Warrant or
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of Holder, shall give rise to any liability of Holder for
the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by
creditors of the Company.
k) Remedies. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant. The
Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
l) Successors and Assigns. Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors of the
Company and the successors and permitted assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and shall be enforceable by
any such Holder or holder of Warrant Shares.
m) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and
the Holder.
n) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Warrant shall
be prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
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o) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.
********************
13
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.
Dated: September __, 2004
LJ INTERNATIONAL INC.
By:
-------------------------------------------
Name:
Title:
14
NOTICE OF EXERCISE
To: LJ International Inc.
(1) The undersigned hereby elects to purchase ________ Warrant Shares
of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together
with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in
subsection 3(d), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 3(d).
(3) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:
----------------------------------------
The Warrant Shares shall be delivered to the following:
----------------------------------------
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(4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended.
[PURCHASER]
By:
-----------------------------------------
Name:
Title:
Dated:
---------------------------
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
whose address is
-----------------------------------------------------
------------------------------------------------------------------------.
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Dated: ______________, _______
Holder's Signature:
-----------------------------------
Holder's Address:
-----------------------------------
-----------------------------------
Signature Guaranteed:
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NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
