Document:

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Exhibit 4.2

Strategic Advisory Services Agreement

THIS AGREEMENT made in duplicate this 1st day of July 2003, between Solo
Argento Inc., a BVI company (the “Consultant”) and LJ International
Inc., a BVI Company (the “Client”).

IN CONSIDERATION the Consultant and Client hereby covenant and agree, each with
the other, as follows:

	1.	 	Object
	 
	 	 	The Consultant shall furnish to Client, its services in accordance with the
details and specifications marked as Schedule “A” and attached hereto (such
Schedule constituting an integral term of the agreement). The Consultant
shall perform such services at all times in accordance with the rules of
the art and in full compliance with the statutes, laws, ordinances and
regulations governing its profession, trade craft or business.
	 
	2.	 	Independent Contractor

	 	(1)	 	The Consultant shall have the sole supervision and direction of
the work covered by this agreement. The consultant shall be
responsible for the manner in which the said work is done, for the
method employed in doing the same and for all acts and things done in
the performance of the Consultant’s obligations hereunder. It is
agreed and understood that at all times the foregoing shall remain
subject to the approval of the Board of Directors of the Client.
Nothing herein shall operate or be construed to believe the Consultant
of any duties or obligations imposed upon it as an independent
contractor.
	 
	 	(2)	 	Furthermore, the Consultant hereby agrees that any authorized
representative of Client shall at all reasonable times have access to
inspect all working papers, materials and other work-in-progress as
the authorized representative shall see fit to perform.

	3.	 	Expenses
	 
	 	 	In addition to the agreed consideration for the Consultant’s fees, Client
shall reimburse the Consultant for all reasonable expenses, including
transportation expenses, incurred during the performance of the
Consultant’s service. Client shall pay the Consultant for such expenses
within thirty days upon the submittal of expense statements together with
duly receipted bills or vouchers. Consultant shall obtain the prior
written approval of the Client for any expenses to be incurred by
Consultant in excess of US$1,000.
	 
	4.	 	Liability
	 
	 	 	The Consultant hereby assumes all risks incidental to its performance of
this agreement and shall, at all times, fully indemnify and save harmless
Client, its successors and assigns, from and against any and all claims,
damages, losses, costs and expenses which Client may from time to time
incur or suffer as a result of, or arising out of, injury to, or death of,
persons or damage to real of tangible personal property which may be caused
by the negligence of the Consultant, its agents, servants or employees
under this agreement.
	 
	5.	 	Consultant’s Fee
	 
	 	 	Client shall pay the Consultant for its services a total fee of
US$240,000.00, to its representative in Hong Kong, for the duration of this
Agreement commencing the date of execution hereof. The payments are
payable as follows:

	 
	Payment #1 - January 1, 2004, $60,000.00 due and payable within 15 business days
	Payment #2 - July 1, 2004, $60,000.00 due and payable within 15 business days
	Payment #3 - January 1, 2005, $60,000.00 due and payable within 15 business days
	Payment #4 - July 1, 2005, $60,000.00 due and payable within 15 business days

	 	 	Warrants
	 
	 	 	A total of 600,000 warrants are granted to the Consultant and are
exercisable at US$2.00 per share at any time through March 31, 2004.

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	6.	 	Term
	 
	 	 	This contract shall be deemed to have come into force and effect on the 1st
day of July, 2003, and shall terminate on the 30th day of June, 2005 and
may be renewed on the mutual agreement of the parties on the terms to be
agreed.
	 
	7.	 	Assignment and Subletting
	 
	 	 	It is expressly agreed that this agreement shall not be assigned, sublet or
transferred, in whole or in part, without prior written consent of the
parties.
	 
	8.	 	Confidential Information

	 	(1)	 	Except as may be necessary in the performance of an order under
this agreement, the Consultant shall not at any time or in any manner
make or cause to be made any copies, pictures, duplicates, facsimiles
or other reproduction or recordings of any type, or any abstracts or
summaries of any reports, studies, memoranda, correspondence, manuals,
records, plans or other written, printed or otherwise recorded material
of the Client, or which relate in any manner to be present or
prospective business of the Client. The Consultant shall have no
interest in any of this material and agrees to surrender any of this
material which may be in its possession to the Client immediately upon
the termination of this agreement or at any time prior to the
termination upon the request of the Client.
	 
	 	(2)	 	The Consultant shall not at any time (except under legal process)
divulge any matters relating to the business of the Client or any
customers or agents of the Client which may become known to it by
reason of its Services under an order, orders or otherwise and shall be
true to the Client in all dealings and transactions relating to the
Services contemplated by this agreement and any order. Furthermore,
the Consultant shall not use at any time (whether during the
continuance of this agreement or after its termination) for its own
benefit or purposes or for the benefit or purposes of any other person,
firm, corporation, association or other business entity, any trade
secrets, business development programs, or plans belonging to or
relating to the affairs of the Client, including knowledge relating to
customers, clients, or employees of the Client.
	 
	 	(3)	 	Except as may be necessary in the performance of an order under
this agreement, the Client shall not at any time or in any manner make
or cause to be made any copies, pictures, duplicates, facsimiles or
other reproduction or recordings of any type, or any abstracts or
summaries of any reports, studies, memoranda, correspondence, manuals,
records, plans or other written, printed or otherwise recorded material
of the Consultant, or which relate in any manner to the present or
prospective business of the Consultant, its contacts or clients. The
Client shall have no interest in any of this material and agrees to
surrender any of this material which may be in its possession to the
Consultant immediately upon the termination of this agreement or at any
time prior to the termination upon the request of the Consultant.
	 
	 	(4)	 	The Client shall not at any time (except under legal process)
divulge any matters relating to the business of the Consultant or any
customers or agents of the Consultant which may become known to it by
reason of its Services under an order, orders or otherwise and shall be
true to the Consultant in all dealings and transactions relating to the
Services contemplated by this agreement and any order. Furthermore,
the Client shall not use at any time (whether during the continuance of
this agreement or after its termination) for its own benefit or
purposes or for the benefit or purposes of any other person, firm,
corporation, association or other business entity, any trade secrets,
business development programs, or plans belonging to or relating to the
affairs of
the Consultant, including knowledge relating to customers, clients, or
employees of the Consultant.

	9.	 	Time of Essence

	 	(1)	 	Time shall be deemed to be of the essence of the agreement,
provided that the time for completing any work, which has been or is
likely to be delayed by reason of force majeure or other cause beyond
the reasonable control of the Consultant, shall be extended by a period
equal to the length of the delay so caused, provided that prompt notice
in writing of the occurrence causing or likely to cause such delay is
given to Client.
	 
	 	(2)	 	Client shall advise the Consultant in writing of any occurrence
causing or likely to cause delays in the completion of its
responsibilities under this agreement.

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	10.	 	Termination
	 
	 	 	Either party may terminate this agreement in the event of a “Default” being
committed and unremedied as hereafter described
	 
	 	 	DEFAULT – The following shall constitute incidents of Default by either
party:

	 	a)	 	Fraudulent Acts or willful misrepresentations including but not
limited to:

	i)	 	any direct misrepresentation or misrepresentation by
omission by either party or any of its agents or employees
concerning the other party which results in any liability, either
civil or criminal.
	 
	ii)	 	Any direct misrepresentation or misrepresentation or
omission by either party or any of its agents or employees to the
other party regarding any material matter relating to this
contract.

	 	b)	 	Bankruptcy or insolvency. Either party:

	i)	 	Files a petition for relief in bankruptcy or makes an
assignment for the benefit of creditors.
	 
	ii)	 	Applies for or consents to the appointment of a trustee
or receiver or a trustee or receiver is appointed for either
party, or
	 
	iii)	 	Bankruptcy, insolvency or liquidation or other
proceedings are commended by one party against the other and such
proceedings are not discharged or dismissed within sixty (60) days
after such appointment or commencement.

	 	 c)	 	Any breach of the terms of this agreement. Either party’s
violation of any of the provisions of this Agreement without cure
after ten (10) days of receipt of written notice made to the party
regarding the violation.

	11.	 	Miscellaneous
	 
	 	 	These Terms and Conditions and this Agreement set forth the understanding
between the parties and supersedes prior agreements and representations
between the parties, whether written or oral, regarding the subject matter
contained herein.

	 	i.	 	Governing Law and Dispute Resolution – This Agreement
shall be construed and interpreted in accordance with the laws of
the State of California. None of the parties shall institute an
arbitration or court proceeding to resolve a dispute between the
parties except as expressly herein provided. If there is a
dispute, either party may demand direct negotiation. If such
dispute is not resolved within fifteen (15) Business Days after a
demand for direct negotiation, the parties shall attempt to
resolve the dispute through mediation conducted in Arroyo Grande,
California. If the parties do not promptly agree on a mediator,
then any of the parties may notify the American Arbitration
Association, to initiate selection of a mediator from the
commercial dispute resolution panel. The parties shall pay the
fees and expenses of the mediator shall issue a written statement
to the parties to that effect and either party may then seek
relief through arbitration, which shall be binding, before a
single arbitrator pursuant to the Commercial Arbitration Rules of
the American Arbitration Association (the “Association”). The
place of arbitration shall be Arroyo Grande, California. Any
party seeking arbitration by written notice to the other party by
first class registered postal mail, or confirmed receipt email or
fax, may commence arbitration at any time after receipt of written
mediator’s statement. The arbitrator shall be selected by the
joint agreement of the parties, but if they do not
so agree within fifteen (15) business days after the date of the
notice referred to above, the selection shall be made pursuant to
the rules from the panel of arbitrators maintained by such
Association. The arbitrator shall render his decision normally
within one hundred eighty (180) days of appointment. Any award
rendered by the arbitrator shall be final, conclusive and binding
upon the parties hereto and there shall be no right of appeal
therefrom. Any court having jurisdiction thereof may enter
judgment upon the award rendered by the arbitrator. The
unsuccessful party shall pay all costs and expenses of arbitration,
including attorneys’ fees and expenses of the arbitrator. The
arbitrator shall not be permitted to award punitive or similar type
damages under any circumstances.
	 
	 	ii.	 	Waiver/Severability – The waiver by either party of a
breach or right under this Agreement will not constitute a waiver
of any other or subsequent breach or right. If any provision of

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	 	 	 	this Agreement is found to be invalid or unenforceable by a court
of competent jurisdiction, such provision shall be severed from
the remainder of this Agreement, which will remain in full force
and effect.
	 
	 	iii.	 	Force Majeure – Neither party shall be in default or
otherwise liable for any delay in or failure of its performance
under this Agreement where such delay or failure of its
performance hereunder arises by reason of any Act of God, or any
government or any governmental body, acts of war, the elements,
strikes or labor disputes, or other cause beyond the control of
the party. Neither party shall have any liability under this
Agreement for consequential damages including without limitation,
loss of loyalty, income or profit.
	 
	 	iv.	 	This Agreement may be amended in whole or in part only in
writing and identified as an amendment to this specific Agreement
sequentially numbered and dated and signed by an order of Client
and an officer of Consultant.
	 
	 	v.	 	This Agreement shall be binding upon and shall inure to
the benefit of the administrators, legal representatives,
successors and assignees of the parties hereto.
	 
	 	vi.	 	The enforceability or the invalidity of any provision of
this Agreement as applied to a particular circumstance or
situation or instance shall not invalidate or adversely impact or
materially effect the enforceability or the applicability of any
other provision of this Agreement.
	 
	 	vii.	 	Whenever required by the text, the singular shall include
the plural, the male shall include the female and neuter and in
all cases visa versa.
	 
	 	viii.	 	Any notice required or given pursuant to this Agreement
shall be given in writing and shall be deemed to be effectively
given upon personal (hand delivery), or upon postmark from the
post office of the party giving such notice by registered or
certified mail, return receipt requested, addressed to each of the
parties being noticed at the address on the front of this
Agreement or their last known address of business.
	 
	 	ix.	 	The parties to this Agreement agree that the intent,
terms and conditions of this Agreement shall be construed in
accordance with and governed in all respects by the laws of the
State of California. Any litigation which may be initiated based
upon this Agreement and the rights and obligations hereunder shall
be filed in the State of California.
	 
	 	x.	 	In any legal action arising out of or relating to, or due
to this Agreement is caused to occur by a party to this Agreement,
then the prevailing party shall be entitled to recover reasonable
attorneys’ fees, costs and disbursements in addition to any other
relief to which the prevailing party may be entitled.
	 
	 	xi.	 	The parties to this Agreement hereby agree to indemnify
and hold harmless the other from any and all claims, costs, fees,
expenses, and judgments incurred by the party by reason of the
conduct of the other party, its agents, directors, its
representatives and employees.
	 
	 	xii.	 	The above Agreement may be signed in counterparts.

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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands, and where
a corporation their seals, duly attested to by a proper signing officer
authorized on that behalf. The parties do hereby represent and warrant that
they are authorized to enter into this agreement, that they understand the
contents and that they have had the opportunity to seek independent legal
advice prior to the execution hereof.

	 	 	 	 	 
	Signed by:	 	 	 	For: Solo Argento Inc.
	 	 	

	 	 
	 	 	
Authorized Signing Officer	 	 
	 	 	 	 	 
	Signed by:	 	 	 	For: LJ International Inc.
	 	 	

	 	 
	 	 	
Authorized Signing Officer	 	 

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Exhibit 4.3

NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON THE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY REGULATION D AND
SUCH OTHER SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON
EXERCISE HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE SECURITIES ACT.

STOCK PURCHASE WARRANT

To Purchase 600,000 Shares of Common Stock of

LJ INTERNATIONAL INC.

     THIS CERTIFIES that, for value received, Solo Argento Inc. (the “Holder”)
is entitled, upon the terms and subject to the conditions hereinafter set
forth, at any time on or after July 1, 2003 (the “Initial Exercise Date”) and
on or prior to the close of business on March 31, 2004 (the “Termination Date”)
but not thereafter, to subscribe for and purchase from LJ International Inc., a
company duly incorporated and validly existing under the laws of the British
Virgin Islands (the “Company”), up to Six Hundred Thousand (600,000) shares
(the “Warrant Shares”) of common stock, $0.01 par value, of the Company (the
“Common Stock”). The purchase price of one share of Common Stock (the
“Exercise Price”) under this Warrant shall be $2.00 per Warrant
Share. The Exercise Price and the number of shares for which the Warrant
is exercisable shall be subject to adjustment as provided herein.

     1.     Title to Warrant. This Warrant and all rights hereunder are not
transferable, in whole or in part, by the Holder.

     2.     Authorization of Shares. The Company covenants that all shares of
Common Stock which may be issued upon the exercise of rights represented by
this Warrant will, upon exercise of the 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).

     3.     Exercise of Warrant; Registration Rights.

          (a) Except as provided in Section 4 herein, 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 before the close of business on the Termination
Date by the surrender of this Warrant and the Notice of Exercise Form annexed
hereto duly executed, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the Holder at
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address of Holder appearing on the books of the Company). Upon payment of
the Exercise Price of the shares thereby purchased by wire transfer or
cashier’s check drawn on a United States bank, the Holder shall be entitled to
receive a certificate for the number of shares of Common Stock so purchased.
Certificates for shares purchased hereunder shall be delivered to the Holder as
soon as practicable after the date on which this Warrant shall have been
exercised as aforesaid. This Warrant shall be deemed to have been exercised and
such certificate or certificates 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 Holder, if any, pursuant to Section 5
prior to the issuance of such shares, have been paid. 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 shares
of Common Stock called for by this Warrant, which new Warrant shall in all
other respects be identical with this Warrant.

               This Warrant may also be exercised by means of a “cashless exercise” in
which the Holder shall be entitled to receive a certificate for the number of
shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A)  = the last sales price per share of Common Stock on the Trading Day
preceding the date of such election;

(B)  = the Exercise Price of the Warrants; and

(X)  = the number of shares issuable upon exercise of the Warrants in accordance
with the terms of this Warrant.

          (b) The Company agrees to include the shares of Common Stock issuable upon
exercise of this Warrant in any new registration statement filed by the Company
after the issuance date hereof, which registration statement is on a form which
permits the registration of shares for resale by selling stockholders, so as to
permit the resale of such shares by the Holder. The Company will notify the
Holder of the effectiveness of any such registration statement promptly after
such event, and shall provide the Holder with copies of a final prospectus to
be used in connection with any resales of shares. In addition, the Company
agrees to use its best efforts to file a registration statement covering the
sale of the shares of Common Stock issuable upon exercise of this Warrant
within six (6) months from the date hereof and to use its best efforts to
obtain the effectiveness of the registration statement and to maintain the
prospectus included in the registration statement for a period of time, not
exceeding nine (9) months, as may be necessary to effect the sale of the Common
Stock. The Holder understands that the Company will prepare, file and maintain
the registration statement at the cost and expense of the Company (except for
the fees and expenses of counsel to the Holder). The Holder also confirms that
there is no assurance or

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guarantee that the registration statement covering the
Common Stock will be declared effective by the Securities and Exchange
Commission.

     4.     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 the Exercise
Price.

     5.     Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant 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 shares of Common Stock 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.

     6.     Closing of Books. The Company will not close its shareholder books or
records in any manner which prevents the timely exercise of this Warrant.

     7.     Division and Combination.

          (a) This Warrant may be divided or combined with other Warrants upon
presentation at the aforesaid office of the Company, together with a written
notice specifying the denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney.
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.

          (b) The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 7.

          (c) The Company agrees to maintain, at its aforesaid office, books for the
registration of the Warrants.

     8.     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, the Warrant Shares so purchased shall
be and be deemed to be issued to 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.

     9.     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 certificate
or any stock certificate relating to the Warrant Shares, and

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in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it
and its transfer agent, 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.

     10.     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 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.

     11.     Adjustments of Exercise Price and Number of Warrant Shares. (a) Stock
Splits, etc. The number and kind of securities purchasable upon the exercise of
this Warrant and the Exercise Price shall be subject to adjustment from time to
time upon the happening of any of the following. In case the Company shall (i)
pay a dividend in shares of Common Stock or make a distribution in shares of
Common Stock to holders of its outstanding Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock or (iv) issue any shares of its capital stock
in a reclassification of the Common Stock, then the number of Warrant Shares
purchasable upon exercise of this Warrant immediately prior thereto shall be
adjusted so that the Holder shall be entitled to receive the kind and number of
Warrant Shares or other securities of the Company which he would have owned or
have been entitled to receive had such Warrant been exercised in advance
thereof. Upon each such adjustment of the kind and number of Warrant Shares or
other securities of the Company which are purchasable hereunder, the Holder
shall thereafter be entitled to purchase the number of Warrant Shares or other
securities resulting from such adjustment at an Exercise Price per Warrant
Share or other security obtained by multiplying the Exercise Price in effect
immediately
prior to such adjustment by the number of Warrant Shares purchasable
pursuant hereto immediately prior to such adjustment and dividing by the number
of Warrant Shares or other securities of the Company resulting from such
adjustment. An adjustment made pursuant to this paragraph shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.

          (b) Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell,
transfer or otherwise dispose of all or substantially all its property, assets
or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or
any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring
corporation (“Other Property”), are to be received by or distributed to the
holders of Common Stock of the Company, then Holder shall have the right

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thereafter to receive, upon exercise of this Warrant, the number of shares of
common stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Other Property 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. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant to be performed and observed
by the Company and all the obligations and liabilities hereunder, subject to
such modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of shares of Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 11. For purposes of this Section 11, “common stock of the
successor or acquiring corporation” shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 11 shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or disposition of assets.

     12.     Voluntary Adjustment by the 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.

     13.     Notice of Adjustment. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the Holder notice of such adjustment or adjustments setting forth the number
of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in the absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.

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     14.     Notice of Corporate Action. If at any time:

               (a) the Company shall take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend or other distribution, or
any right to subscribe for or purchase any evidences of its indebtedness, any
shares of stock of any class or any other securities or property, or to receive
any other right, or

               (b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,

               (c) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at
least 10 days’ prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 10 days’ prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to
Holder at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 16(d).

     15.     Authorized Shares. The Company covenants that during the period the
Warrant is exercisable, 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 Nasdaq Stock
Market.

               The Company shall not by any action, including, without limitation,
amending its memorandum of association or articles of association or through
any reorganization, transfer of

-6-

 

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 against impairment. Without limiting the
generality of the foregoing, the Company will (a) not increase the par value of
any shares of Common Stock receivable upon the exercise of this Warrant 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 shares of Common Stock upon the exercise of this Warrant, and
(c) use its best 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.

          Upon the request of Holder, the Company will at any time during the period
this Warrant is exercisable acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.

          Before taking any action which would cause an adjustment reducing the
current Exercise Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Exercise Price.

          Before taking any action which would result in an adjustment in the number
of shares of Common Stock 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.

     16.     Miscellaneous.

          (a) Jurisdiction. This Warrant shall be binding upon any successors or
assigns of the Company. This Warrant shall constitute a contract under the
laws of the British Virgin Islands, without regard to its conflict of law,
principles or rules.

          (b) Restrictions. The Holder acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale by state and federal securities laws.

          (c) 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 Holder’s rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date. If the
Company fails to comply with any provision of this Warrant, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs

-7-

 

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 if Holder is the
prevailing party.

          (d) Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) hand delivered, (ii) deposited
in the mail, registered or certified, return receipt requested, postage
prepaid, (iii) delivered by reputable air courier service with charges prepaid,
or (iv) transmitted by facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice.
Any notice or other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
first business day following the date of sending by reputable courier service,
fully prepaid, addressed to such address, or (c) upon actual receipt of such
mailing, if mailed. The addresses for such communications shall be:

	 	 	 
	If to the Company:	 	
LJ International Inc.
	 	 	
Unit #12, 12/F, Block A
	 	 	
Focal Industrial Centre
	 	 	
21 Man Lok Street
	 	 	
Hung Hom, Kowloon, Hong Kong
	 	 	
Attention: Chairman
	 	 	
Telephone: 011-852-2764-3622
	 	 	
Facsimile: 011-852-2764-3783
	 	 	 
	with a copy to (shall not	 	
Andrew N. Bernstein, P.C.
	constitute notice):	 	
5445 DTC Parkway, Suite 520
	 	 	
Greenwood Village, CO 80111, U.S.A.
	 	 	
Attention: Andrew N. Bernstein, Esq.
	 	 	
Telephone: (303) 770-7131
	 	 	
Facsimile: (303) 770-7332

-8-

 

	 	 	 
	if to Holder:	 	
Solo Argento Inc.
	 	 	
P.O. Box 957, Offshore Incorporations Centre
	 	 	
Road Town, Tortola, British Virgin Islands
	 	 	
Telephone: (284) 494-8184
	 	 	
Facsimile: (284) 494-5132

Either party hereto may from time to time change its address or facsimile
number for notices under this Section 16(d) by giving written notice of such
changed address or facsimile number to the other party hereto as provided in
this Section 16(d).

          (e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, 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.

          (f) 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.

          (g) 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 the Holder from time to time of this Warrant and shall
be enforceable by the Holder.

          (h) Indemnification. The Company agrees to indemnify and hold harmless
Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys’ fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or
asserted against Holder in any manner relating to or arising out of any failure
by the Company to perform or observe in any material respect any of its
covenants, agreements, undertakings or obligations set forth in this Warrant;
provided, however, that the Company will not be liable hereunder to the extent
that any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys’ fees, expenses or disbursements are
found in a final non-appealable judgment by a court to have resulted from
Holder’s negligence, bad faith or willful misconduct in its capacity as a
stockholder or warrantholder of the Company.

          (i) Amendment. This Warrant may be modified or amended or the provisions
hereof waived only with the written consent of the Company and the Holder.

-9-

 

          (j) 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.

          (k) 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.

     IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.

Dated: July 1, 2003

	 
	LJ INTERNATIONAL INC.
	 
	By:
	      Yu Chuan Yih,
	      Chairman

-10-

 

NOTICE OF EXERCISE

To: LJ International Inc.

     (1)  The undersigned hereby elects to purchase                shares of Common
Stock (the “Common Stock”), of LJ International Inc. pursuant to the terms of
the attached Warrant, and tenders herewith payment of the exercise price in
full, together with all applicable transfer taxes, if any.

     (2)  Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:

	 
	

(Name)
	 
	

(Address)
	 
	

	 
	

(Social Security or Taxpayer Identification Number)

Dated:

	 	 
	 	

Signature

-11-

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