Document:

Unassociated Document

 

STOCK PURCHASEAGREEMENT

THIS STOCK PURCHASE AGREEMENT (this "Agreement"), is made as of this 17th  day of January, 2014 by and among TARGET ACQUISITIONS I, INC., a Delaware corporation (“Target”), ZHANGJIAKOU TONGDA MINING TECHNOLOGIES SERVICE CO., LTD., a Chinese limited company (“Buyer” or “Tongda”) and an indirectly wholly-owned subsidiary of Target and Xingwang Shao, a resident of the People’s Republic of China (“Seller”).

Preliminary Statement

Seller is one of the five shareholders (collectively, the “Shareholders”) of Haixing Huaxin Mining Iindustry Co., Ltd., an entity organized under the laws of the People’s Republic of China (“China Huaxin”).  China Huaxin is in the late stages of constructing a facility (the “Production Facility”) in Haixing County, Hebei Province, China for the conversion of iron sands into direct reduced iron.

Target desires to acquire all of the outstanding shares of China Huaxin and, concurrently herewith, is entering into agreements with the four other shareholders of China Huaxin to acquire all of their shares in China Huaxin.

NOW, THEREFORE, the parties hereto in consideration of the mutual promises and covenants herein contained and intending to be legally bound, do hereby agree as follows:

1.           Purchase and Sale.  Subject to the terms and conditions hereinafter set forth, and on the basis of the representations and warranties contained herein, Seller hereby sells, conveys, transfers and assigns  to Buyer, free and clear of all encumbrances, liens and liabilities,  all right, title and interest in and to the shares of capital stock of China Huaxin owned by Seller (the “Shares”), which Shares represent 2% of the shares of capital stock of China Huaxin outstanding as of the date hereof.  Simultaneously with the execution and delivery hereof Seller is executing and delivering to Buyer such documents and instruments as are necessary to transfer title to the Shares.

In consideration of all right, title and interest in the Shares, Target is paying to Seller 200,000 RMB and shall issue to the order of Seller  102,000 shares of the common stock of Target (collectively, the “Purchase Price”).

2.       Representations and Warranties.   As an inducement to Target to enter into this Agreement and acquire the Shares, the Seller hereby represents and warrants to Target as of the date hereof:

2.1. Organization, Good Standing, Power.    China Huaxin is a corporation duly organized, validly existing and in good standing under the Company Law of the People’s Republic of China. China Huaxin has the power and authority to own, lease and operate its assets. The minute books, stock ledgers and stock transfer records of China Huaxin, if any, will be furnished to Target.

 

  

  

  

 

2.2. Company Documents.       Correct and complete copies of the organizational documents of China Huaxin, in each case as amended to date have been provided to Target.

2.3. Shares.     The Seller owns the Shares and has good, valid and marketable title to the Shares.  The Shares represent 2 % of the outstanding capital stock of China Huaxin.  Such Shares are held free and clear of any covenant, condition, restriction, voting arrangement, charge, security interest, option or adverse claim.  Upon payment of the Purchase Price, Target will acquire good and marketable title to the Shares, free and clear of any Security Interest, restrictions or claims.  The Shares, together with the shares currently owned by the individuals named in Schedule 2.3 represent 100% of the issued and outstanding shares of capital stock of the Company.

2.4 Authorization.  Seller possesses the legal right and capacity to execute, deliver and perform this Agreement, without obtaining any approval, authorization, consent or waiver or giving any notice. The Seller has taken all action required by applicable law or otherwise to be taken to authorize the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller and constitutes the legal, valid and binding obligations of Seller.

2.5. Effect of Agreement.  The execution, delivery and performance of this Agreement by Seller and the sale of the Shares contemplated hereby will not, with or without the giving of notice and the lapse of time, or both, violate any provision of law, statute, rule, regulation or executive order to which China Huaxin or the Seller is subject.

2.6. Governmental and Other Consents.   Except for such consents as have been obtained prior to the date hereof (i) no notice to, consent, authorization or approval of, or exemption by, any governmental or public body or authority is required in connection with the execution, delivery and performance by Seller of this Agreement and (ii) no notice to, consent, authorization or approval of, any person under any agreement, arrangement or commitment of any nature to which Seller is party to, or by which the Shares are bound by or subject to, is required in connection with the execution, delivery and performance by Seller of this Agreement.

 

2.7. Title to Assets; Absence of Liens and Encumbrances.      The sole asset of China Huaxin is the Production Facility.  China Huaxin has good and marketable title to, and owns outright, the Production Facility, free and clear of all liens, claims and encumbrances, other than those related to the Accrued Liabilities.

2.8. Equipment.  China Huaxin owns outright all equipment and fixtures in the Production Facility.

2.9.   Agreements, Arrangements; Conduct of Business.    China Huaxin has yet to conduct any business operations other than construction of the Production Facility and purchasing the equipment and fixtures therein.  China Huaxin is not party to any agreements or contracts calling for expenditures in excess of 100 RMB, in the aggregate.

 

  

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2.10.  Permits.    China Huaxin has provided Target with copies of all permits and other government licenses it has obtained with respect to the Production Facility.

2.11  Litigation.   China Huaxin is not a party to any litigation.

2.12. Labor Matters.  China Huaxin has no employees.

2.13  Brokers and Finders.   Neither the Seller nor China Huaxin, nor any of its officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated by this Agreement.  Seller agrees to indemnify, defend and hold Target harmless from any liability, loss, cost, claim and/or demand that any other broker or finder may have in connection with this transaction as a result of actions taken by the Company or the Seller.

   2.14   Securities Laws.   Seller understands that the shares of Target to be issued to Seller (the “Target Shares”) are being offered and sold in reliance on an exemption from the registration requirements of United States federal and state securities laws under Regulation S promulgated under the United States Securities Act of 1933 (the “Securities Act”) and that Target is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Seller set forth herein in order to determine the applicability of such exemptions.  In this regard, the Seller represents, warrants and agrees that:

      (i)           The Seller is not a U.S. Person (as defined in the Securities Act) and is not acquiring the Target Shares for the account or benefit of a U.S. Person.

      (ii)          At the time of the origination of contact concerning this Agreement and the date of the execution and delivery of this Agreement, the Seller was outside of the United States.

      (iii)         Seller will not, during the period commencing on the date of issuance of the Target Shares and ending on the six month anniversary of such date, or such shorter period as may be permitted by Regulation S or other applicable securities law (the “Restricted Period”), offer, sell, pledge or otherwise transfer the Target Shares in the United States, or to a U.S. Person for the account or for the benefit of a U.S. Person, or otherwise in a manner that is not in compliance with Regulation S.

     (iv)          Seller will, after expiration of the Restricted Period, offer, sell, pledge or otherwise transfer the Target Shares only pursuant to registration under the Securities Act or an available exemption therefrom and, in accordance with all applicable state and foreign securities laws.

     (v)           Seller was not in the United States, engaged in, and prior to the expiration of the Restricted Period will not engage in, any short selling of or any hedging transaction with respect to the Target Shares, including without limitation, any put, call or other option transaction, option writing or equity swap.

 

  

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    (vi)           Neither Seller nor any person acting on its behalf has engaged, nor will engage, in any directed selling efforts to a U.S. Person with respect to the Target Shares and the Seller and any person acting on its behalf have complied and will comply with the “offering restrictions” requirements of Regulation S under the Securities Act.

    (vii)          The transactions contemplated by this Agreement have not been pre-arranged with a buyer located in the United States or with a U.S. Person, and are not part of a plan or scheme to evade the registration requirements of the Securities Act.

   (viii)          Neither the Seller nor any person acting on its behalf has undertaken or carried out any activity for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States, its territories or possessions, for any of the Target Shares.  The undersigned agrees not to cause any advertisement of the Target Shares to be published in any newspaper or periodical or posted in any public place and not to issue any circular relating to the Target Shares, except such advertisements that include the statements required by Regulation S under the Securities Act, and only offshore and not in the U.S. or its territories, and only in compliance with any local applicable securities laws.

   (ix)           Each certificate representing the Target Shares shall be endorsed with the following legends, in addition to any other legend required to be placed thereon by applicable federal or state securities laws:

(A)           “THE SECURITIES ARE BEING OFFERED TO INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE SECURITIES ACT”)) AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON REGULATION S PROMULGATED UNDER THE SECURITIES ACT.”

(B)           “TRANSFER OF THESE SECURITIES IS PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AVAILABLE EXEMPTION FROM REGISTRATION.  HEDGING TRANSACTIONS MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

 

        8.                      Representations and Warranties of Buyer.  As a material inducement to Seller to enter into this Agreement, Buyer makes the following representations and warranties to Seller:

(a)       Buyer has been duly organized and is validly existing in its jurisdiction of organization and is fully authorized to enter into and perform its obligations under this Agreement and to carry out the transactions contemplated hereby.

 

  

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(b) Buyer is fully authorized to enter into and perform its obligations under this Agreement and to carry out the transactions contemplated thereby and this Agreement represents a valid and binding obligation of Buyer in accordance with its terms.

(c)           Neither the execution nor delivery of this Agreement nor consummation of the transactions herein by Buyer constitutes a violation or breach of applicable law or of any provision  of any contract or instrument to which Buyer is a party or by which it is bound, or any order, writ, injunction, decree or judgment applicable to Buyer.  This Agreement constitutes the legal, valid and binding obligation of Buyer enforceable in accordance with its terms.

(d)           Buyer has made, either alone or together with its advisors, such independent investigation of the Business as Buyer deems to be, or such advisors have advised to be, necessary or advisable in connection with the transactions contemplated by this Agreement; provided that such investigation by Buyer shall not relieve Seller of any liability for a breach of its representations and warranties contained herein.

      (e) The shares of Target upon issuance:

                             (i) will be free and clear of any security interests, liens, claims or other encumbrances, subject to restrictions upon transfer under the Securities Act and any applicable state securities laws;

                              (ii)  will have been duly and validly authorized and duly and validly issued, and will be fully paid and non-assessable (with no personal liability attaching to the holders thereof or to the Company) and will be free from preemptive rights or rights of first refusal held by any person; provided Seller’s representations herein are true and accurate and Seller takes no actions or fails to take any actions required for the acquisition of the Shares to be in compliance with all applicable laws and regulations; and

                            (iii) will have been issued in reliance upon an exemption from the registration requirements of and will not result in a violation of Section 5 under the Securities Act.

5.           Covenant Not To Compete.  In further consideration for the purchase of the Purchased Assets, for a period of 1 year following the date of the Closing, (i) none of Seller, its director, officers, managers or other related persons will directly, or indirectly, own, operate, manage, or serve as an officer, director, employee or independent contractor to any person or entity engaged in the Business or act as an advisor to any person or entity engaged in  the Business, or solicit, directly or indirectly, on behalf of themselves or any third party, the customers of the Buyer (whether existing as of the Closing Date or at any time thereafter), or otherwise engage in the Business, within a 200 kilometers (124.27) mile radius of the Site, and (ii) will not solicit any past, future  or present customers of the Business or interfere in any way in the relationships between the Business and its customers, employees or staff, without Buyer’s written consent].

 

12.           Further Assurances.  Each party agrees to execute and deliver all instruments and take action as the other party may request from time to time in order to effectuate the transactions contemplated hereby.

 

  

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13.           Notices.  Any and all notices or other communications required or permitted to be given under any of the provisions of this Agreement shall be in writing and shall be deemed to have been given two business days after deposit with a recognized overnight courier fee paid, addressed to the intended recipient at such party’s address as set forth below, or such other address as such party may designate by like notice to the other party hereto.

 

To Seller at:

No.47, Caiyan Road

Taishen District, Taian

Shandong Province, PRC

 

To Buyer at:

Tianyang Xiaoqu, Qiaodong District

Zhangjiakou, Hebei Province

With a copy to, which shall not constitute notice:

Eaton & Van Winkle LLP

3 Park Avenue

New York, New York 10016

Attn: Vincent J. McGill

 

14.           Survival; Indemnification.  All covenants, representations and warranties in this Agreement shall survive for a period of twelve months after the date hereof, except that any representation or warranty relating to taxes shall survive for the applicable statutory limitation period and any claim for amounts payable hereunder or any indemnity claim hereunder asserted prior to the end of the foregoing survival periods shall survive until resolved.  Each party hereby agrees to defend, indemnify and hold the other party, its directors, officers, employees, advisors and affiliates, harmless from and against any and all losses, claims, liabilities or damages (collectively, “Losses”) arising out of or in connection with or founded on a claim that any of the foregoing representations, warranties and covenants of the indemnifying party are untrue, together with any and all costs and expenses (including reasonable attorneys’ fees) relating to such losses or arising therefrom or incurred by the other in connection with enforcement of this indemnification provision. Each party shall be responsible for its or his own costs and expenses in connection with the transactions being contemplated hereby, including attorneys’ fees.  Buyer shall promptly notify Seller of any claims and fully cooperate with Seller in the defense thereof.

The parties have agreed that there shall be no escrow or other security withheld to secure Buyer against claim arising out of or related to the Seller’s Business.  In lieu of an escrow, Seller has agreed that Buyer may offset any Losses arising out of a breach by Seller of their representations, warranties and covenants contained herein, or out of any claims made against Buyer related to the Business prior to the Closing out of the deferred portion of the Purchase Price.

 

  

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15.           Confidentiality.  Buyer has received certain business records, tax returns and privileged communications in connection with the due diligence process.  Buyer covenants, represents and warrants that all information will be kept strictly confidential, except to the extent used in the business of Buyer and to the extent disclosure is required by law or pursuant to legal process.

16.           Miscellaneous.

a.           This writing constitutes the entire agreement of the parties with respect to the subject matter hereof and may not be modified, amended or terminated except by a written agreement specifically referring to this Agreement signed by Seller and Buyer.

b.           This Agreement may not be assigned by either party without written consent of the other party hereto. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and permitted assigns.

c.           The paragraph headings contained herein are for the purposes of convenience only and are not intended to define or limit the contents of said paragraph.

d.           This Agreement shall be governed by and construed in accordance with the laws of China without regard to the conflicts of law provisions thereof.  Jurisdiction for the resolution of any conflicts or disputes arising hereunder, if not resolved through good faith negotiation, shall be in Hebei Province, China.

e.           This Agreement may be executed in any number of counterparts, all of which when taken together shall be deemed to be one and the same instrument.

f.           The Parties to this Agreement acknowledge that each has had the input of legal counsel in drafting this Agreement as well as in conjunction with the negotiation and execution of this transaction.  Accordingly the Parties to this Agreement hereby waive any rule of construction or interpretation that would otherwise require ambiguities under this Agreement to be interpreted or constructed to his favor by virtue of such rule or rules regarding contract ambiguities.

 

[signatures are on the following page]

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

	
 

	  	
ZHANGJIAKOU TONGDA MINING TECHNOLOGIES SERVICE CO., LTD.

	
Seller

	  	
Buyer

 

	

By: /s/ Xingwang Shao                                                                

	  	By: /s/ Jiazhen Liu                                                                      
	
       Name: Xingwang Shao

	  	
       Name: Jiazhen Liu

	
       Title:

	  	
       Title:

	 	 	 
	 	 	Target Acquisitions I, Inc.
	 	 	 
	 	 	

By: /s/ Changkui Zhu                                                                   

	 	 	       Name: Changkui Zhu
	 	 	

       Title:

 

 

8Unassociated Document

 

	
  

	
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") AND APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.

 

Target Acquisitions I, Inc.

4.0% Convertible Debenture

Due June 30, 2014

People’s Republic of China RMB 3,333,333

Target Acquisitions I, Inc., a Delaware corporation (the "Issuer"),  for value received, hereby promises to pay to China Concentric Capital Group Ltd. or registered assigns (the “Holder”), at Tianyang Xiaoqu, Qiaodong District, Zhangjiakou, Hebei Province the principal sum of Three million three hundred thirty three thousand three hundred thirty three (3,333,333) RMB Chinese Yuan, no later than June 30, 2014 (the "Maturity Date"), and to pay interest thereon from January 20, 2014, at the rate of four (4.0%) percent per annum until the principal hereof is paid.  Interest accrued shall be paid on the Maturity Date and if the principal hereof is not paid on the Maturity Date, thereafter, monthly in arrears.  The interest rate on any overdue principal or interest shall be eighteen (18%) percent, which amount shall accrue daily, from the due date of any principal or interest, as the case may be, through and including the date of payment.

If this Security is converted into shares of common stock of Issuer (the "Common Stock") pursuant to the provisions hereof, interest shall be calculated through and including the date of conversion and shall be paid on such date.

Principal of this Security shall be payable at the earliest of the Maturity Date, Redemption Date or Acceleration Date (each as hereinafter defined) against surrender hereof at the principal executive offices of the Issuer in China.  Payments of principal and of any interest on this Security shall be made in such coin or currency of China as at the time of payment is legal tender for payment of public and private debts.  Payments of interest on this Security shall be made by check mailed on or before the due date for such payment to the Holder as indicated below or to such other address as the  Holder may have previously given notice to the Issuer in writing.  Interest shall accrue and be payable on this Security through the earlier of the Maturity Date, Conversion Date or Redemption Date.

 

  

  

  

 

1.           Transfer.

(a)     The Issuer will at all times act as its own security registrar and paying and transfer agent and agrees to cause to be kept at its principal executive office a register (the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Issuer will provide for the registration of Securities and registration of transfers of Securities.  As of the date this Security was originally issued, such principal executive offices of the Issuer were located at Chunshuguo Luanzhuang Village, Zhuolu County, Zhangjiakou, Hebei Province, China 075600.  The Issuer shall not change the location of its principal executive offices unless Issuer provides all Registered Holders with no less than thirty (30) days prior written notice. The Holders of this Security as indicated on the Security Register are referred to herein as the Registered Holders.

(b)  The transfer of a Security is registrable on the Security Register upon surrender of such Security at the principal executive offices of Issuer duly endorsed by, or accompanied by a written instrument of transfer in form reasonably satisfactory to the Issuer duly executed by the Registered Holder thereof, or the Registered Holder’s attorney duly authorized in writing, together with any certifications and representations which Issuer may reasonably require to reflect compliance with all applicable securities laws, rules and regulations and the due authorization of the transaction.  Upon such surrender of this Security for registration of transfer, the Issuer shall execute and deliver, in the name of the designated transferee or transferees, one or more new Securities, dated the date of the execution thereof, of any authorized denominations and of a like tenor, form and aggregate principal amount.

(c)  At the option of the Registered Holder, upon request confirmed in writing, Securities may be exchanged for Securities of any authorized denominations and of a like tenor, form and aggregate principal amount upon surrender of the Securities to be exchanged at the principal executive offices of the Issuer.  Whenever any Securities are so surrendered for exchange, the Issuer shall execute and deliver the Securities which the Registered Holder making the exchange is entitled to receive.  Any registration of transfer or exchange will be effected only upon the Issuer being reasonably satisfied with the documents of title and identity of the person making the request and subject to compliance with applicable Federal and state securities laws.

(d)  All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits, as the Securities surrendered upon such registration of transfer or exchange.  No service or other charges shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

(e)  Prior  to due presentment of this Security for registration of transfer, the Issuer may treat the person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and the Issuer shall not be affected by notice to the contrary.

 

  

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2.           Representations and Warranties of the Issuer.  The Issuer represents and warrants to the Registered Holder as of January 20, 2014, as follows:

(a)           Issuer is a corporation duly organized, existing and in good standing under the laws of its state or province of incorporation and has the power to conduct the business which it conducts and proposes to conduct.

(b)           The execution, delivery and performance of the Securities by the Issuer has been duly approved by the Board of Directors of Issuer and all other actions required to authorize and effect the offer and sale of the Securities have been duly taken and approved.

(c)           The Securities and the Common Stock issuable upon conversion of the Securities (the "Conversion Shares") have been duly and validly authorized.  The Securities and Conversion Shares, when issued and paid for in accordance with the terms hereof, will be fully paid and non-assessable and valid and binding obligations of the Issuer enforceable in accordance with their respective terms.

(d)           Issuer will, at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for conversion of the Securities into shares of Common Stock.

(e)           Issuer has obtained all licenses, permits and other governmental authorizations necessary to the conduct of its business; such licenses, permits and other governmental authorizations obtained are in full force and effect; and Issuer is in all material respects complying therewith.

(f)           Issuer knows of no pending or threatened legal or governmental proceedings to which Issuer is a party which could materially adversely affect the business, property, financial condition or operations of the Issuer.

(g)           Issuer is not in violation of or default under, nor will the execution and delivery of the Securities, the issuance of the Common Stock upon conversion of the Securities and the incurrence of the obligations herein and therein set forth and the consummation of the transactions herein or therein contemplated, result in a violation of, or constitute a default under the certificate of incorporation or by-laws, the performance or observance of any material obligations, agreement, covenant or condition contained in any bond, debenture, note or other evidence of indebtedness or in any material contract, indenture, mortgage, loan agreement, lease, joint venture or other agreements or instrument to which the Issuer is a party or by which it or any of its properties may be bound or in violation of any material order, rule, regulation, writ, injunction or decree of any government, governmental instrumentality or court, domestic or foreign.

 

  

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3.           Covenants of the Issuer.  Issuer hereby covenants and agrees that for so long as any of the Securities shall remain outstanding:

(a)           it will duly and punctually pay the principal of and any interest on the Securities in accordance with the terms hereof;

(b)           it will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charters and statutory) and franchises;

(c)           it will cause all material properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the reasonable judgment of  Issuer may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that the foregoing shall not prevent the Issuer from discontinuing the operation or maintenance of any such properties if such discontinuance is, in the reasonable judgment of Issuer, desirable in the conduct of its business or the business of any of its subsidiaries, and not disadvantageous in any material respect to the holders of Securities; and, provided, further, that the failure to comply herewith shall not be deemed a breach hereof unless such failure would have a material adverse effect on the business, financial condition or results of operations of Issuer and its subsidiaries, taken as a whole (a "Material Adverse Effect");

(d)           it will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all taxes, assessments and governmental charges levied or imposed upon the Issuer or upon the income, profits or property of the Issuer, and (ii) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Issuer; provided, however, that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings; and, provided, further, that the failure to comply herewith shall not be deemed a breach if it would not have a Material Adverse Effect;

(e)           it shall furnish to each Registered Holder of Securities a copy of all documents it is required to send to its shareholders at the time the same are sent to shareholders, including, without limitation, annual reports and proxy statements;

(f)           as soon as it becomes aware of the same, it shall give written notice to each Registered Holder of Securities of any event or occurrence which by itself or with notice or lapse of time or both would entitle the holders of the Securities to declare the principal of and any interest on the Securities immediately due and payable pursuant to the terms hereof;

 

  

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(g)           it will promptly obtain and maintain from time to time all authorizations, permits, approvals, consents, licenses and exemptions which are required under any applicable law or regulation to enable it to perform all of its payment, conversion and other material obligations under the Securities or which may be required for the validity or enforceability of the Securities; provided, however, that the failure to obtain and maintain such authorizations, permits, approvals, consents, licenses and exemptions as to material obligations other than payment and conversion shall not constitute a breach of this provision unless such non-compliance materially adversely affects the Issuer’s ability to comply with its obligations under the Securities;

(h)           it will duly and punctually comply with and observe all statutes now or hereafter in force and all ordinances, regulation and by-laws thereunder and all requirements and orders of any government or other public authority; provided, however, that any non-compliance with any such statute, ordinance, regulation or by-law shall not constitute a breach of this provision unless such non-compliance materially adversely affects the Issuer’s ability to comply with its obligations under the Securities;

(i)           it shall permit any representative of any Registered Holder or Holders of at  least $250,000 aggregate principal amount of the Securities to make inspections of, and to report on, the property of, and business operations being carried out by, the Issuer or any of its subsidiaries;

(j)           it shall not:

(i)           declare or pay any cash dividends on its Common Stock or purchase, redeem or otherwise acquire or retire for value any shares of Common Stock (other than under the terms of the Issuer's stock option plan); or

(ii)           consolidate with or merge into any other Person, where the Issuer is not the surviving corporation, or convey, transfer, lease or otherwise dispose of all or substantially all of its assets, except in compliance with the terms and conditions set forth in Section 11 below.

4.           Voluntary Conversion.

(a)           Each Registered Holder of Securities may at any time convert all or any amount of the principal amount of the Securities then owned by such Registered Holder into shares of Common Stock of Issuer at a conversion price equal to 11.11 RMB per share of Common Stock, subject to adjustment as provided in this Section.

 

  

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(b)           The conversion right granted in Section 4(a) hereof may be exercised only by a Registered Holder of Securities, in whole or in part, by the surrender of the certificate or certificates representing the Securities to be converted at the principal executive offices of the Issuer against delivery of that number of shares of whole Common Stock as shall be computed by dividing the face amount of the Securities being converted by the Conversion Price on the Conversion Date.  At the time of conversion of Securities, the Issuer shall pay in cash to the Registered Holder thereof an amount equal to all accrued and unpaid interest, if any, to and including the Conversion Date.  Each Security surrendered for conversion shall be endorsed by the Registered Holder.  Issuer will transmit the Common Stock certificates issuable upon conversion of any Securities and a certificate representing the balance of the Securities to the Registered Holder via express courier within three (3) business days after the Conversion Date.  The term "Conversion Date" shall mean the date the original Notice of Conversion and Securities being converted are received by the Issuer.  The term "Notice of Conversion" shall mean the written notice from the Registered Holder to the Issuer.

(c)           All Common Stock which may be issued upon conversion of the Securities will, upon issuance, be duly issued, fully paid and non-assessable and free from all taxes, liens, and charges with respect to the issue thereof.  At all times that any Securities are Outstanding, Issuer shall have authorized and shall have reserved for the purpose of issuance upon such conversion into Common Stock of all Securities, a sufficient number of shares of Common Stock to provide for the conversion of all Outstanding Securities at the then effective Conversion Price.  Without limiting the generality of the foregoing, if, at any time, the Conversion Price is decreased or increased, the number of shares of Common Stock authorized and reserved for issuance by Issuer upon the conversion of the Securities shall be proportionately increased or decreased, as the case may be.

(d)           The Initial Conversion Price is 11.11 RMB per share of Common Stock ("Initial Conversion Price").  The Initial Conversion Price shall be adjusted as provided for below in this Section (d) (the Initial Conversion Price and the Initial Conversion Price, as thereafter then adjusted, shall be referred to as the "Conversion Price") and the Conversion Price from time to time shall be further adjusted as provided for below in this Section (d).  Upon each adjustment of the Conversion Price, the Registered Holders of the Securities shall thereafter be entitled to receive upon conversion, at the Conversion Price resulting from such adjustment, the number of shares of Common Stock obtained by dividing the face amount of the Securities being converted by the Conversion Price, as then adjusted.  The Conversion Price shall be adjusted as follows:

 

  

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(i)           In the case of any amendment to the Certificate of Incorporation of Issuer to change the designation of the Common Stock or the rights, privileges, restrictions or conditions in respect to the Common Stock or division of the Common Stock, the Securities shall be adjusted so as to provide that upon conversion thereof the Registered Holder shall receive, in lieu of each share of Common Stock theretofore issuable upon such conversion, the kind and amount of shares, other securities, money and property receivable upon such designation, change or division by such holder issuable upon such conversion had the conversion occurred immediately prior to such designation, change or division.  The Securities shall be deemed thereafter to provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4.  The provisions of this Subsection 4(d)(i) shall apply in the same manner to successive reclassifications, changes, consolidations and mergers.

(ii)           If Issuer shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, or declare a dividend or make any other distribution upon the Common Stock payable in shares of Common Stock, the Conversion Price in effect immediately prior to such subdivision or dividend or other distribution shall be proportionately reduced, and conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect immediately prior to such combination shall be proportionately increased.

(iii)           If any capital reorganization or reclassification of the capital stock of the Issuer, or any consolidation or merger of the Issuer with another corporation or entity, or the sale of all or substantially all of the Issuer’s assets to another corporation or other entity shall be effected in such a way that holders of shares of Common Stock shall be entitled to receive stocks, securities, other evidence of equity ownership or assets with respect to or in exchange for shares of Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale (except as otherwise provided below in this Section), lawful and adequate provisions shall be made whereby the Registered Holder shall thereafter have the right to receive upon the basis and upon the terms and conditions specified herein, such shares of stock, securities, other evidence of equity ownership or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of Common Stock immediately theretofore purchasable and receivable upon the conversion of this Debenture under this Section had such reorganization, reclassification, consolidation, merger or sale not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of such Registered Holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Conversion Price and of the number of shares of Common Stock receivable upon the conversion of this Debenture) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities, other evidence of equity ownership or assets thereafter deliverable upon the conversion hereof (including an immediate adjustment, by reason of such consolidation or merger, of the Conversion Price to the value for the Common Stock reflected by the terms of such consolidation or merger if the value so reflected is less than the Conversion Price in effect immediately prior to such consolidation or merger).  Subject to the terms of this Debenture, in the event of a merger or consolidation of the Issuer with or into another corporation or other entity as a result of which the number of shares of common stock of the surviving corporation or other entity issuable to holders of Common Stock of the Issuer, is greater or lesser than the number of shares of Common Stock of the Issuer outstanding immediately prior to such merger or consolidation, then the Conversion Price in effect immediately prior to such merger or consolidation shall be adjusted in the same manner as though there were a subdivision or combination of the outstanding shares of Common Stock of the Issuer.  The Issuer shall not effect any such consolidation, merger or sale, unless, prior to the consummation thereof, the successor corporation (if other than the Issuer) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument executed and mailed or delivered to the Registered Holder, the obligation to deliver to the Registered Holder such shares of stock, securities, other evidence of equity ownership or assets as, in accordance with the foregoing provisions, the Registered Holder may be entitled to receive or otherwise acquire.  If a purchase, tender or exchange offer is made to and accepted by the holders of more than fifty (50%) percent of the outstanding shares of Common Stock of the Issuer, the Issuer shall not effect any consolidation, merger or sale with the Person having made such offer or with any Affiliate of such Person, unless prior to the consummation of such consolidation, merger or sale the Registered Holder of this Debenture shall have been given a reasonable opportunity to then elect to receive upon the conversion of this Debenture the amount of stock, securities, other evidence of equity ownership or assets then issuable with respect to the number of shares of Common Stock of the Issuer in accordance with such offer.

 

  

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(e)           Whenever the Conversion Price shall be adjusted pursuant to Section 9(d) hereof, Issuer shall issue a certificate signed by its President or Vice President and by its Treasurer, Assistant Treasurer, Secretary or Assistant Secretary, setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board of Directors of Issuer made any determination hereunder), and the Conversion Price after giving effect to such adjustment, and shall cause copies of such certificates to be mailed (by first-class mail, postage prepaid) to each Registered Holder of Securities.  Issuer shall make such certificate and mail it to each such holder promptly after each adjustment.

(f)           No fractional Common Stock shall be issued in connection with any conversion (or forced conversion, if applicable) of Securities, but in lieu of such fractional shares, the Issuer shall make a cash payment therefor equal in amount to the product of the applicable fraction multiplied by the Conversion Price then in effect.

5.           Change of Control.

(a) In the event that there is a "Change of Control Event" of the Issuer, the Issuer shall immediately notify each holder hereof.  Each holder may: (i) within fifteen (15) days after written notice from the Issuer, elect to accelerate the maturity date of the Debentures owned by such holder to a date not less than 30 but not more than 45 days after the date of such notice from Issuer ("Redemption Date"); or (ii) convert the Debentures owned by such holder into shares of Common Stock immediately prior to the Change of Control Event.

 

  

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(b) For purposes hereof, a "Change of Control Event" shall be deemed to have occurred if (i) any "person" (as such term is defined at Section 13(d) of the Securities Exchange Act of 1934) other than the Issuer or an entity then controlled by the Issuer is or becomes the beneficial owner, directly or indirectly of securities of the Issuer representing fifty (50%) percent or more of the combined voting power of the Issuer's then outstanding securities, including securities such person may have acquired directly from the Issuer; (ii) the Issuer merges or consolidates with another corporation and an entity controlled by the Issuer immediately prior to the merger or consolidation is not the surviving entity or if the Issuer is the surviving entity, holders of eighty (80%) percent or more of the voting power of the Issuer immediately prior to the merger or consolidation do not own, immediately after the merger or consolidation, sixty-five (65%) percent or more of the voting power of the surviving entity; or (iii) a sale, lease, exchange or other disposition of all or substantially all of the assets of the Issuer takes place.

6.           Issuance of New Securities.

(a)  If any mutilated Security is surrendered to the Issuer, the Issuer shall execute and deliver in exchange therefor a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding.

(b)  If there is delivered to the Issuer (a) evidence to its reasonable satisfaction of the destruction, loss or theft of any Security and (b) such reasonable security or indemnity as may be required by it to save it harmless, then, in the absence of notice to the Issuer that such Security has been acquired by a bona fide purchaser, the Issuer shall execute and deliver in lieu of any such destroyed, lost or stolen Security a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding.

(c) Upon the issuance of any new Security under this Section 12, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith.

(d)  Any new Security delivered pursuant to this Section 12 shall be so dated that neither gain nor loss in interest shall result from such exchange.

(e)  The provisions of this Section 12 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

 

  

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7.           Notice.  Where the terms of the Securities provide for notice to the holders of any event, such notice shall be sufficiently given if given in writing and mailed, first class postage prepaid, to each Registered Holder affected by such event, at his address as it appears in the register for the Securities.  Any notice may be waived in writing by the person entitled thereto, either before or after the event, and such waiver shall be equivalent of such notice.

8.           Events of Default.  In the event of:

(a)           default in the payment of any interest on any Security for a period of ten (10) days after Maturity; or

(b)           default in the payment of the principal of any Security at Maturity; or

(c)           the breach by the Issuer of any of the representations and warranties set forth in Section 3 of the Securities; or

(d)           default in the performance or breach of any other material covenant or agreement contained in the Securities for a period of thirty (30) days after the date on which written notice of such default requiring the Issuer to remedy the same and stating that such notice is a "Notice of Default", shall first have been given to the Issuer by a Registered Holder; or

(e)           the entry by a court having jurisdiction of (i) a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or (ii) a decree or order adjudging the Issuer a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer under any applicable law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or of any substantial part of the property of the Issuer, or ordering the winding up or liquidation of the affairs of the Issuer, and any such decree or order for relief or any such other decree or order shall continue unstayed and in effect for a period of sixty (60) consecutive days; or

(f)           commencement by Issuer of a voluntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Issuer to the entry of a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Issuer, or the filing by the Issuer of a petition or answer or consent seeking reorganization or relief under any such applicable law, or the consent by the Issuer to the filing of such petition or to the appointment of or the taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or of any substantial part of its property, or the making by the Issuer of an assignment for the benefit of creditors, or the taking of action by the Issuer in furtherance of any such action;

 

  

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then a Registered Holder or Registered Holders owning fifteen (15%) percent or more of the Securities may, at their option, declare the principal of this Security and the interest accrued hereon to be due and payable immediately (such date being the "Acceleration Date") by written notice to the Issuer at its principal executive offices, and unless all such defaults shall have been cured by the Issuer prior to receipt of such written notice, the principal of this Security and the interest accrued thereon shall become and be immediately due and payable.

9.           Amendments and Modifications.  In the event that any of the terms of this Agreement are modified or amended, other than the date of issuance and face value of the Debenture, the Issuer shall notify each Registered Holder, in writing, of such modification(s) or amendment(s).  Each Registered Holder may accept all such terms, at the sole discretion of such Registered Holder by providing written notice to the Issuer within fifteen (15) days after having received such notification from the Issuer.  If no such acceptance is received by the Issuer within said fifteen (15) days, the term of this Debenture shall remain unmodified by such modification(s) or amendment(s).

10.           Governing Law; Jurisdiction.  This Security shall be governed by and construed in accordance with the laws of New York without regard to the conflicts-of-laws principles thereof.  The Issuer hereby irrevocably (a) submits to the exclusive jurisdiction of, and agrees that any action, suit or other proceeding at law, in equity or otherwise, shall only be brought in the Supreme Court, New York County, or Federal District Court for the Southern District of New York, for the purpose of any such suit, action or other proceeding arising out of or based upon this Agreement or the transactions contemplated hereby ("Action"); (b) waives, to the extent not prohibited by applicable law, rule or regulation, and agrees not to assert, by way of motion, as a defense or otherwise, in any such Action, any claim that any such person is not subject personally to the jurisdiction of the aforementioned courts, that its property is exempt or immune from attachment or execution, that any such action brought in the aforementioned court is brought in an inconvenient forum, that the venue of any such action brought in the aforementioned court is improper, or that this Agreement, or the transactions contemplated hereby enforced in or by such court, and (c) consents to service of process in any such Action by recognized overnight courier service.  Nothing herein shall affect the right to serve process in any other manner permitted by law.

 

  

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IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed and it corporate seal to be affixed hereto.

	 	 	

TARGET ACQUISITIONS I, INC.

	 	 	 	 
	 	 	
By: 

	 
	Witness: 	 	 	Name: Changkui Zhu
	 	 	 	Title: Chief Executive Officer
	 	 	 	 
	

Dated: January 20, 2014

	 	 	 
	 	 	 	 
	 	 	 	 

 

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