Document:

senyu8k20110217ex10-1.htm

Exhibit 10.1

SUBSCRIPTION AGREEMENT

 

This SUBSCRIPTION AGREEMENT (this “Agreement”) is made as of this 17th day of February, 2011 for the benefit of SEN YU INTERNATIONAL HOLDINGS, INC., a company incorporated under the laws of Delaware, USA (the “Company”), having its principal executive office at 19 West 44th Street, Suite 1108, New York, NY 10036 by D.D  INVESTMENT  CO., LIMITED, a Marshall Islands corporation (the “Subscriber”).

By executing this Agreement, the Subscriber hereby confirms its subscription for the purchase of an aggregate of 1,383,700 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), or such lesser amount as the Company may, in its sole discretion, determine to accept, and warrants to purchase 1,106,960 shares of Common Stock with an exercise price of $2.64 per share (“Warrant”).  The form of the Warrant is attached hereto as Exhibit A. The Shares, Warrant and the shares of Common Stock underlying the Warrants (“Warrant Shares”) are sometimes referred to collectively herein as the “Securities.”

In connection with this subscription, Subscriber and the Company agree as follows:

 

1.        Agreement to Subscribe

 

1.1           Purchase and Issuance of the Shares and Warrant.  The Subscriber is hereby subscribing for shares at per share the RMB 14.454 (approximately US$ 2.20 per share) and the aggregate purchase price is RMB 20,000,000 (approximately US$3,044,140) (the “Purchase Price”). The Company shall cause the Shares and the Warrant to be issued to the Subscriber within three business days of its receipt of the Purchase Price.

 

1.2           Delivery of the Purchase Price.  Upon execution of this Agreement, the Subscriber shall be bound to fulfill its obligations hereunder and hereby irrevocably commits to deliver to the Company, within three business days, the Purchase Price (payable in RMB) by bank check, wire transfer or such other form of payment as shall be acceptable to the Company, in its sole and absolute discretion.

 

2.        Representations and Warranties of the Subscriber

 

The Subscriber represents and warrants to the Company that:

 

2.1           Subscriber.  The information concerning the Subscriber provided by the Subscriber to the Company (including the information regarding the Subscriber set forth on the signature page hereto and in the Investor Suitability Questionnaire) is true, complete and accurate in all respects.  The Subscriber has provided to the Company a true, complete and accurate copy of its Certificate of Incorporation and Certificate of Incumbency.

 

2.2           Investment purposes.  The Subscriber is purchasing the Securities solely for investment purposes, for the Subscriber’s own account and not for the account or benefit of any U.S. Person (as defined below) or any other person or entity (whether located in the Republic of the Marshall Islands, People’s Republic of China or elsewhere), and not with a view towards the distribution or dissemination thereof.  The Subscriber has no present arrangement to sell the Securities to or through any person or entity.  The Subscriber understands that the Securities must be held indefinitely unless such Securities are resold in accordance with the provisions of Regulation S, are subsequently registered under the Securities Act of 1933 (“Securities Act”) or an exemption from registration is available.

  

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2.3           No Obligation to Register Securities.  Except as provided in Section 4 below, the Subscriber understands that the Company is under no obligation to register the Securities under the Securities Act, or to assist the Subscriber in complying with the Securities Act or the securities laws of any state of the United States or of any foreign jurisdiction other than as expressly provided herein.

 

2.4           Investment Experience.  The Subscriber, or the Subscriber’s professional advisors, has such knowledge and experience in finance, securities, taxation, investments and other business matters as to evaluate investments of the kind described in this Agreement.  By reason of the business and financial experience of the Subscriber or his or her professional advisors (who are not affiliated with or compensated in any way by the Company or any of its affiliates or selling agents), the Subscriber can protect his or her own interests in connection with the transactions described in this Agreement.  The Subscriber is able to afford the loss of his, her or its entire investment in the Securities.

 

2.5           Independent Investigation.  The Subscriber, in making the decision to purchase the Securities, has relied upon an independent investigation of the Company and has not relied upon any information or representations made by any third parties or upon any oral or written representations or assurances from the Company, its officers, directors or employees or any other representatives or agents of the Company, other than as set forth in this Agreement.  The Subscriber is familiar with the business, operations and financial condition of the Company and has had an opportunity to ask questions of, and receive answers from, the Company’s officers and directors concerning the Company and the terms and conditions of the offering of the Securities and has had full access to and fully and carefully review such other information concerning the Company as the Subscriber has requested.

 

2.6           Authority.  This Agreement has been validly authorized, executed and delivered by the Subscriber and is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by the Subscriber does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which the Subscriber is a party. The Subscriber was not formed for the specific purpose of acquiring the Securities, is a company incorporated under the laws of the Republic of Marshall Islands, is duly organized, validly existing and in good standing under the laws of the Republic of Marshall Islands. The entering into of this Agreement and the transactions contemplated hereby do not and will not result in the violation of any of the terms and provisions of any law applicable to, or the charter or other organizational documents, bylaws or other governing documents of, the Subscriber or of any agreement, written or oral, to which the Subscriber may be a party or by which the Subscriber is or may be bound.

  

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2.7           Not a Broker-Dealer.  The Subscriber is neither a registered representative under the Financial Industry Regulatory Authority (“FINRA”), a member of FINRA or associated or Affiliated (as defined below) with any member of FINRA, nor a broker-dealer registered with the SEC under the Exchange Act of 1934 (“Exchange Act”) or engaged in a business that would require it to be so registered, nor is it an Affiliate of a broker-dealer or any Person engaged in a business that would require it to be registered as a broker-dealer.  In the event such Subscriber is a member of FINRA, or associated or Affiliated with a member of FINRA, such Subscriber agrees, if requested by FINRA, to sign a lock-up, the form of which shall be satisfactory to FINRA with respect to the Securities. “Affiliate” means, with respect to any specified Person: (i) if such Person is an individual, the spouse of that Person and, if deceased or disabled, his heirs, executors, or legal representatives, if applicable, or any trusts for the benefit of such individual or such individual’s spouse and/or lineal descendants, or (ii) otherwise, another Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified. As used in this definition, “control” shall mean the possession, directly or indirectly, of the power to cause the direction of the management and policies of a Person, whether through the ownership of voting securities or by contract or other written instrument. “Person” shall mean an individual, entity, corporation, partnership, association, limited liability company, limited liability partnership, joint-stock company, trust or unincorporated organization.

 

2.8           Not an Underwriter.  The Subscriber is not an underwriter of the Securities, nor is it an Affiliate of an underwriter of the Securities.

 

2.9           No Advice from Company.  Subscriber acknowledges that it has received, and fully and carefully reviewed and understands, copies of the SEC filings, either in hard copy or electronically through the SEC’s EDGAR system at http://www.sec.gov. The Subscriber also acknowledges that it has had the opportunity to review this Agreement, the exhibits hereto (including the risk factors relating to the Company attached hereto as Exhibit C) and the transactions contemplated by this Agreement with the Subscriber’s own legal counsel and investment and tax advisors.  Except for any statements or representations of the Company made in this Agreement, the Subscriber is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction. The Subscriber has consulted, to the extent deemed appropriate by the Subscriber, with the Subscriber’s own advisers as to the financial, tax, legal and related matters concerning an investment in the Securities and on that basis believes that its investment in the Securities is suitable and appropriate for the Subscriber.

 

2.10           Reliance on Representations and Warranties; Regulation S Exemption.  The Subscriber understands that the Securities are being offered and sold to the Subscriber in reliance on an exemption from the registration requirements of United States federal and state securities laws under Regulation S promulgated under the Securities Act and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Subscriber set forth herein including the information set forth in the Investor Suitability Questionnaire in order to determine the applicability of such exemptions and the suitability of the Subscriber to acquire the Securities.  In this regard, the Subscriber represents, warrants and agrees that:

  

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(i)           The Subscriber is not a U.S. Person and is not an affiliate (as defined in Rule 501(b) under the Securities Act) of the Company and is not acquiring the Securities for the account or benefit of a U.S. Person.  A “U.S. Person” means any one of the following:

(A)           any natural person resident in the United States of America;

(B)           any partnership, limited liability company, corporation or other entity organized or incorporated under the laws of the United States of America;

(C)           any estate of which any executor or administrator is a U.S. Person;

(D)           any trust of which any trustee is a U.S. Person;

(E)           any agency or branch of a foreign entity located in the United States of America;

(F)           any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person;

(G)           any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated or (if an individual) resident in the United States of America; and

(H)           any partnership, company, corporation or other entity if:

(1)           organized or incorporated under the laws of any foreign jurisdiction; and

(2)           formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Securities Act) who are not natural persons, estates or trusts.

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

(iii)           The Subscriber will not, during the period commencing on the date of issuance of the Securities and ending on the six months 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 Securities 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.

  

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(iv)           The Subscriber will, after expiration of the Restricted Period, offer, sell, pledge or otherwise transfer the Securities 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)           The Subscriber 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 Securities and any Common Stock, including without limitation, any put, call or other option transaction, option writing or equity swap.

(vi)           Neither the Subscriber nor any person acting on his behalf has engaged, nor will engage, in any directed selling efforts to a U.S. Person with respect to the Securities and the Subscriber and any person acting on his or her 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 Subscriber 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 Securities.  The Subscriber agrees not to cause any advertisement of the Securities to be published in any newspaper or periodical or posted in any public place and not to issue any circular relating to the Securities, 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)           The Subscriber has carefully reviewed and completed the investor questionnaire annexed hereto as Exhibit B.

 

2.11           No Advertisements.  The Subscriber did not learn of the investment in the Securities as a result of any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio or via the Internet, or presented at any seminar or meeting and is not aware of any public advertisement or general solicitation in respect of the Company or its securities.

 

2.12           Legend.  The Subscriber acknowledges and agrees that the Shares and Warrant shall bear a restricted legend (the “Legend”), in the form and substance as set forth in Section 5 hereof, prohibiting the offer, sale, pledge or transfer of the securities, except (i) pursuant to an effective registration statement filed under the Securities Act, (ii) in accordance with the applicable provisions of Regulation S, promulgated under the Securities Act, (iii) pursuant to an exemption from registration provided by Rule 144 under the Securities Act (if available), and (iv) pursuant to any other exemption from the registration requirements of the Securities Act or for estate planning purposes (subject to any escrow restrictions).

  

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2.13           Economic Considerations.  The Subscriber is not relying on the Company, or its affiliates or agents with respect to economic considerations involved in this investment.  The Subscriber has relied solely on his or her own advisors.

 

2.14           Compliance with Laws.  Any resale of the Securities during the “distribution compliance period” as defined in Rule 902(f) to Regulation S shall only be made in compliance with exemptions from registration afforded by Regulation S.  Further, any such sale of the Securities in any jurisdiction outside of the United States will be made in compliance with the securities laws of such jurisdiction.  The Subscriber will not offer to sell or sell the Securities in any jurisdiction unless the Subscriber obtains all required consents, if any. The Subscriber acknowledges that such Subscriber is familiar with Rule 144 (“Rule 144”) under the Securities Act, and has been advised that Rule 144 permits resales only under certain circumstances. The Subscriber understands that to the extent that Rule 144 is not available, such Subscriber will be unable to sell any Securities without either registration under the Securities Act or the existence of another exemption from such registration requirement.

 

2.15           Investment Commitment.  The Subscriber’s overall commitment to investments which are not readily marketable is not disproportionate to the Subscriber’s net worth, and an investment in the Securities will not cause such overall commitment to become excessive.

 

2.16           Receipt of Information.  The Subscriber has had an opportunity to receive, and fully and carefully review, all information related to the Company and the Securities requested by it and to ask questions of and receive answers from the Company regarding the Company and its businesses and the terms and conditions of the offering of the Securities.  Subscriber acknowledges that it has received, and fully and carefully reviewed and understands, copies of the SEC Documents, either in hard copy or electronically through the SEC’s EDGAR system at http://www.sec.gov.

 

2.17           No Governmental Review.  The Subscriber is aware that no federal or state agency has (i) made any finding or determination as to the fairness of this investment, (ii) made any recommendation or endorsement of the Securities or the Company, or (iii) guaranteed or insured any investment in the Securities or any investment made by the Company.

 

2.18           Potential Loss of Investment; Risk Factors.  The Subscriber understands that an investment in the Securities is a speculative investment which involves a high degree of risk and the potential loss of his or her entire investment. The Subscriber has considered carefully and understands the risks associated with an investment in the Securities, a summary of which risks is annexed hereto as Exhibit C.

 

2.19           Brokers and Finders.  No Subscriber will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or its subsidiaries for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Subscriber.

 

2.20           Prohibited Transactions.  Other than with respect to the transactions contemplated herein, since the earlier to occur of: (i) the time that such Subscriber was first contacted by the Company, or any other Person regarding an investment in the Company and (ii) the thirtieth (30th) day prior to the date hereof, neither the Subscriber nor any Affiliate of the Subscriber which (x) had knowledge of the transactions contemplated hereby, (y) has or shares discretion relating to the Subscriber’s investments or trading or information concerning such Subscriber’s investments, including in respect of the Securities, or (z) is subject to the Subscriber’s review or input concerning such Affiliate’s investments or trading decisions (collectively, “Trading Affiliates”) has, directly or indirectly, nor has any Person acting on behalf of, or pursuant to, any understanding with such Subscriber or Trading Affiliate effected or agreed to effect any transactions in the securities of the Company or involving the Company’s securities (a “Prohibited Transaction”).

  

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3.        Representations and Warranties of the Company

 

The Company represents and warrants to the Subscriber that:

 

3.1           Organization and Qualification.  The Company is a corporation duly incorporated and existing in good standing under the laws of Delaware and has the requisite corporate power to own its properties and assets and to carry on its business as now being conducted.

 

3.2           Authorization. The Company has full power and authority and has taken all requisite action on the part of the Company, its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of this Agreement, (ii) the authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities. This Agreement constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors' rights generally.

 

3.3           Issuance to Securities. The Shares and the Warrants have been duly authorized by all necessary corporate action. The Shares, when paid for or issued in accordance with the terms hereof, shall be validly issued and outstanding, fully paid and nonassessable. Upon the due exercise of the Warrants in accordance to the terms of the Warrants and payment of the exercise price, the Warrant Shares will be duly authorized by all necessary corporate action and validly issued and outstanding, fully paid and nonassessable, and the holders thereof shall be entitled to all rights accorded to a holder of Common Stock.

 

 

4.           “Piggy-Back” Registration Rights.

 

If at any time the Company proposes to file a registration statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for shareholders of the Company for their account, other than a registration statement on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall give written notice of such proposed filing to the Subscriber as soon as practicable but in no event less than ten (10) business days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the offering, and offer to the Subscriber in such notice the opportunity to register the sale of such number of Shares and the shares of Common Stock underlying the Warrant as such Subscriber may request in writing within five (5) business days following receipt of such notice (a  “Piggy-Back Registration”). Subject to customary underwriter cutbacks applicable to all holders of registration rights, the Company shall cause such Registrable Securities to be included in such registration and shall use its commercially reasonable efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. “Registrable Securities” means (a) all of the Shares, (b) all Warrant Shares, and (c) any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that Registrable Securities shall not include any shares eligible to be sold without volume limitation or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect.

  

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5.        Legends, etc.

 

5.1           Legend. Each certificate representing the Securities 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:

“THESE 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.”

“TRANSFER OF THESE SECURITIES IS PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, 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.”

  

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5.2           Subscriber’s Compliance. Nothing in this Section 5 shall affect in any way a Subscriber’s obligations and agreement to comply with all applicable securities laws upon resale of the Securities.

 

5.3           Company’s Refusal to Register Transfer of Securities. The Company shall refuse to register any transfer of the Securities not made in accordance with (i) the provisions of Regulation S, (ii) pursuant to an effective registration statement filed under the Securities Act, or (iii) pursuant to an available exemption from the registration requirements of the Securities Act.

 

6.        Governing Law; Jurisdiction; Waiver of Jury Trial

 

This Agreement shall be governed by and construed in accordance with the laws of the State of New York, USA.

 

7.        Assignment; Entire Agreement; Amendment

 

7.1           Assignment. Neither this Agreement nor any rights hereunder may be assigned by any party to any other person other than by Subscriber to a person agreeing to be bound by the terms hereof.

 

7.2           Entire Agreement. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter thereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

 

7.3           Amendment.  Except as expressly provided in this Agreement, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge, or termination is sought.

 

7.4           Binding Upon Successors. This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns.

 

8.        Notices; Indemnity

 

8.1           Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telex (with correct answer back received), telecopy, electronic mail (i.e., e-mail) or facsimile 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 second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

  

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(a)

	
If to the Company:

	  	  	
19 West 44th Street, Suite 1108

	  	  	
New York, NY 10036 

	  	  	
Attention: Zhenyu Shang

	  	  	
Fax Number: (212)997-8585

	  	  	  
	  	  	
with copies (which shall not constitute notice) to:

	  	  	
Ellenoff Grossman & Schole LLP

	  	  	
150 East 42nd Street

	  	  	
New York, New York 10017

	  	  	
Attn: Barry I. Grossman, Esq.

	  	  	
Tel. No.: (212) 370-1300

	  	  	
Fax No.:  (212) 370-7889

	  	  	
Email: bigrossman@egsllp.com

	  	  	  
	  	
(b)

	
If to the Holder:

	  	  	  
	  	  	
with copies (which shall not constitute notice) to:

 

Any party hereto may from time to time change its address for notices by giving at least ten (10) business days written notice of such changed address to the other party hereto.

 

 

8.2           Indemnification.  The Subscriber shall indemnify and hold the Company and its officers, directors, employees, agents and affiliates harmless from and against any loss, cost or damages (including reasonable attorney’s fees and expenses) incurred as a result of the Subscriber’s breach of any representation, warranty, covenant or agreement in this Agreement.

 

9.        Counterparts

 

This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.  Such counterparts may be delivered by facsimile or other electronic transmission, which shall not impair the validity thereof.

 

10.        Survival; Severability

 

10.1           Survival. The representations, warranties, covenants and agreements of the parties hereto shall survive the date hereof and the issuance of the Securities.

  

10.2           Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party.

  

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11.        Titles and Subtitles

 

The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

 

[Signature page follows]

 

 

 

  

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SIGNATURE PAGE

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year this subscription has been accepted by the Company as set forth below.

 

	  	
SUBSCRIBER

	  	  
	  	
D.D  INVESTMENT  CO., LIMITED

	  	  
	  	  
	  	  
	  	
By:/s/ Wu Ye                                  

	  	
 (Signature of Authorized Signatory)

	  	  
	  	  
	  	
Address:  _____________________

	 	 
	 	                   _____________________
	  	  
	  	
Telephone:    ___________________

	 	 
	  	
Fax:                 ___________________

ACCEPTED BY:

SEN YU INTERNATIONAL HOLDINGS, INC.

By: /s/ Zhenyu Shang

       Name: Zhenyu Shang

       Title:

Date:    February 17, 2011

 

 

 

B-12Exhibit 10.1

 

PERFORMANCE AWARD AGREEMENT

 

This Performance Award Agreement (the “Agreement”) has been made as of                                    (the “Date of Grant”) between Duke Energy Corporation, a Delaware corporation, with its principal offices in Charlotte, North Carolina (the “Corporation”), and                                   (the “Grantee”).

 

RECITALS

 

Under the Duke Energy Corporation 2010 Long-Term Incentive Plan, as it may, from time to time, be further amended (the “Plan”), the Compensation Committee of the Board of Directors of the Corporation (the “Committee”), or its delegatee, has determined the form of this Agreement and selected the Grantee, as an Employee, to receive the award evidenced by this Agreement (the “Award”) and the Performance Shares and tandem Dividend Equivalents that are subject hereto.  The applicable provisions of the Plan are incorporated in this Agreement by reference, including the definitions of terms contained in the Plan (unless such terms are otherwise defined herein).

 

AWARD

 

In accordance with the Plan, the Corporation has made this Award, effective as of the Date of Grant and upon the following terms and conditions:

 

Section 1.              Number and Nature of Performance Shares and Tandem Dividend Equivalents.  At target performance, the number of Performance Shares and the number of tandem Dividend Equivalents subject to this Award are each                                                              ; at maximum performance, the number of Performance Shares and the number of tandem Dividend Equivalents subject to this award are equal to 150% of the number of Performance Shares and tandem Dividend Equivalents at target performance, respectively.  The number of such Performance Shares that may become vested upon determination of achievement of each Performance Goal at maximum, as provided in Section 2(a), is 150% of the number that becomes vested at target performance.  Each Performance Share, upon becoming vested, represents a right to receive payment in the form of one (1) share of Common Stock.  Each tandem Dividend Equivalent, after its tandem Performance Share vests, represents a right to receive a cash payment equivalent in amount to the aggregate cash dividends declared and paid on one (1) share of Common Stock for the period beginning on the Date of Grant and ending on the date the vested, tandem Performance Share is paid or deferred and before the Dividend Equivalent expires.  Performance Shares and Dividend Equivalents are used solely as units of measurement, and are not shares of Common Stock and the Grantee is not, and has no rights as, a shareholder of the Corporation by virtue of this Award.

 

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Section 2.              Vesting of Performance Shares.

 

(a)  Performance Goals.  Except as otherwise provided in this Section 2, the Performance Shares shall vest only if and to the extent the Committee, or its delegatee, determines that the Performance Goals (as defined below) have been met (provided that such determination shall be made not later than the first March 15 following the end of the Performance Period, as defined below).  To the extent Performance Goals are not met, the Performance Shares that do not so become vested shall be forfeited.  The Committee reserves the right to reduce any vesting to the extent the Committee determines that such reduction is equitable and appropriate in connection with the proposed merger with Progress Energy, Inc.

 

(i)            The following Performance Goal shall apply with respect to one-half of the Performance Shares and Dividend Equivalents covered by this Agreement.  Provided Grantee’s continuous employment by the Corporation, including Subsidiaries, has not terminated, or as otherwise provided in Sections 2(b) or 2(c), up to one-half of the Performance Shares subject to this Award shall become vested upon the written determination by the Committee, or its delegatee, in its sole discretion, of the extent to which the Corporation achieves the “TSR Performance Goal,” which is the Corporation’s Total Shareholder Return (“TSR”) percentile ranking among the companies that are in the Philadelphia Utility Index as of the end of the Performance Period, with higher percentile ranking for more positive/less negative TSR, for the period beginning January 1, 2011 and ending December 31, 2013 (“Performance Period”),  in accordance with the applicable vesting percentage specified for such percentile ranking in the following schedule:

 

	
Percentile
   Ranking
    	
 
    	
Vesting
   Percentage
   (Applicable to
   Target # of
   Shares)
    	
 
    	
Vesting
   Percentage
   (Applicable to
   Maximum # of
   Shares)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

*When such determination is of a percentile ranking between those specified, the Committee, or its delegatee, in its sole discretion, shall interpolate to determine the applicable vesting percentage.

 

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Such Performance Shares that do not so become vested shall be forfeited.  For purposes of this Agreement, TSR means the change in fair market value over a specified period of time, expressed as a percentage, of an initial investment in specified common stock, with dividends reinvested, all as determined utilizing such methodology as the Committee, or its delegatee, shall approve, provided, however, that the Committee, or its delegatee, shall have the discretion to make appropriate and equitable adjustments to the TSR of any company (including the Corporation) whose shares trade ex-dividend as of December 31, 2013, provided, however, that no such adjustment shall be permitted if it would result in the loss of the otherwise available exemption of the Award under Section 162(m) of the Code.  In the event that a company becomes a member of the Philadelphia Utility Index following January 1, 2011, such company shall not be taken into account for purposes of this Agreement.

 

(ii)           The following Performance Goal shall apply with respect to one-half of the Performance Shares and Dividend Equivalents covered by this Agreement.  Provided Grantee’s continuous employment by the Corporation, including Subsidiaries, has not terminated, or as otherwise provided in Sections 2(b) or 2(c), up to one-half of the Performance Shares subject to this Award shall become vested upon the written determination by the Committee, or its delegatee, in its sole discretion, of the extent to which the Corporation achieves the “ROE Performance Goal,” which is based on the Corporation’s return on equity (“ROE”), as calculated in accordance with Exhibit A, for the Performance Period, in accordance with the applicable vesting percentage specified for ROE in the following schedule:

 

	
ROE
    	
 
    	
Vesting
   Percentage
   (Applicable to
   Target # of Shares)
    	
 
    	
Vesting
   Percentage
   (Applicable to
   Maximum # of
   Shares)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

*When such determination is at a level between those specified, the Committee, or its delegatee, in its sole discretion, shall interpolate to determine the applicable vesting percentage.

 

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Such Performance Shares that do not so become vested shall be forfeited.

 

(b) In the event that, prior to the date that the determination of the achievement of each Performance Goal is made, the Grantee’s continuous employment by the Corporation, including Subsidiaries, terminates, the Performance Shares subject to this Award are thereupon forfeited, except that if such employment terminates (i) at a time when Grantee has attained age 55 and has at least five years of vesting service under the Duke Energy Retirement Cash Balance Plan or Cinergy Corp. Non-Union Employees’ Pension Plan, or under another retirement plan of the Corporation or a Subsidiary which plan the Committee, or its delegatee, in its sole discretion, determines to be the functional equivalent of the Duke Energy Retirement Cash Balance Plan or the Cinergy Corp. Non-Union Employees’ Pension Plan, unless the Committee, or its delegatee, in its sole discretion, determines that Grantee is in violation of any obligation identified in Section 3, (ii) as the result of the Grantee’s death, (iii) as the result of the Grantee’s permanent and total disability within the meaning of Code Section 22(e)(3), (iv) as the result of the termination of such employment by the Corporation, or employing Subsidiary, other than for cause, as determined by the Corporation or employing Subsidiary, in its sole discretion, or (v) as the direct and sole result, as determined by the Corporation, or employing Subsidiary, in its sole discretion, of the divestiture of assets, a business, or a company, by the Corporation or a Subsidiary, the Performance Shares subject to this Award shall vest upon such determination of the achievement of each Performance Goal, at such vesting percentage determined by the Committee, or its delegatee, in its sole discretion, by prorating on the basis of the portion of the Performance Period that such employment continued while Grantee was entitled to payment of salary (unless such termination occurs after the end of the Performance Period, in which event the number of Performance Shares earned, if any, shall not be prorated).

 

In the event that Grantee is on an employer-approved, personal leave of absence on the date that the determination of the achievement of each Performance Goal is made, then, unless prohibited by law, vesting shall be postponed and shall not occur unless and until Grantee returns to active service in accordance with the terms of the approved personal leave of absence and before November 1 of the calendar year immediately following the calendar year in which the Performance Period ends.  In the event Grantee does not return to active service from such leave of absence prior to November 1 of the calendar year immediately following the calendar year in which the Performance Period ends, any Performance Shares covered by this Award that were not vested as of the commencement of such leave shall be immediately forfeited (as if Grantee terminated employment for purposes of Section 4 hereof).   Further, in the event that such determination is made and during any portion of the Performance Period the Grantee was on employer-approved, personal leave of absence, the applicable vesting percentage shall be determined by the Committee, or its delegatee, in its sole

 

4

 

discretion, to reflect only that portion of the Performance Period during which such employment continued while the Grantee was entitled to payment of salary.

 

(c) In the event that a Change in Control occurs before the Performance Period has ended and (i) before the Grantee’s continuous employment by the Corporation, including Subsidiaries, terminates, or (ii) after such employment terminates during the Performance Period, (A) at a time when Grantee is considered “retired”, unless the Corporation, in its sole discretion, determines that Grantee is in violation of any obligation identified in Section 3, or (B) as the result of an event listed in items (ii) – (v) of the first sentence of Section 2(b), the Performance Shares subject to this Award shall vest upon such occurrence, at such vesting percentage determined by the Committee, or its delegatee, in its sole discretion, by prorating down, assuming performance at the target level for each Performance Goal, on the basis of the portion of the Performance Period that has elapsed prior to the time of such occurrence (or such earlier termination of employment), and the remaining Performance Shares shall be forfeited, irrespective of any subsequent determination of the achievement of each Performance Goal.

 

Section 3.              Violation of Grantee Obligation.  In consideration of the continued vesting opportunity provided under Section 2 following the termination of Grantee’s continuous employment by the Corporation, including Subsidiaries, if, at the time of such termination of employment, Grantee is considered “retired”, Grantee agrees that during the period beginning with such termination of employment and ending with the third anniversary of the Date of Grant (“Restricted Period”), Grantee shall not (i) without the prior written consent of the Corporation, or its delegatee, become employed by, serve as a principal, partner, or member of the board of directors of, or in any similar capacity with, or otherwise provide service to, a competitor, to the detriment, of the Corporation or any Subsidiary, (ii) violate any of Grantee’s other noncompetition obligations, or any of Grantee’s nonsolicitation or nondisclosure obligations, to the Corporation or any Subsidiary; or (iii) except as required by subpoena or other legal process (in which event the Grantee will give the Chief Legal Officer of the Corporation prompt notice of such subpoena or other legal process in order to permit the Corporation or any affected individual to seek appropriate protective orders), publish or provide any oral or written statements about the Corporation or any Subsidiary, any of the Corporation’s or any Subsidiary’s current or former officers, executives, directors, employees, agents or representatives or any initiative, program or policy of the Corporation or any Subsidiary relating to any matter whatsoever that are disparaging, slanderous, libelous or defamatory, or that disclose private or confidential information about their business affairs, or that constitute an intrusion into their private lives, or that give rise to unreasonable publicity about their private lives, or that place them in a false light before the public, or that constitute a misappropriation of their name or likeness. The noncompetition obligations of clause (i) of the preceding sentence shall be limited in scope and shall be effective only with respect to competition with the Corporation or any Subsidiary in the businesses of:  production, transmission,

 

5

 

distribution, or retail or wholesale marketing or selling of electricity; resale or arranging for the purchase or for the resale, brokering, marketing, or trading of electricity or derivatives thereof; energy management and the provision of energy solutions; development and management of fiber optic communications systems; development and operation of power generation facilities, and sales and marketing of electric power, domestically and abroad; and any other business in which the Corporation, including Subsidiaries, is engaged at the termination of Grantee’s continuous employment by the Corporation, including Subsidiaries; and within the following geographical areas (i) any country in the world where the Corporation, including Subsidiaries, has at least US$25 million in capital deployed as of termination of Grantee’s continuous employment by Corporation, including Subsidiaries; (ii) the continent of North America; (iii) the United States of America and Canada; (iv) the United States of America; (v) the states of North Carolina, South Carolina, Virginia, Georgia, Florida, Texas, California, Massachusetts, Illinois, Michigan, New York, Colorado, Oklahoma and Louisiana; (vi) the states of North Carolina, South Carolina, Texas, Colorado, Ohio, Kentucky, and Indiana; and (vii) any state or states with respect to which was conducted a business of the Corporation, including Subsidiaries, which business constituted a substantial portion of Grantee’s employment.  The Corporation and Grantee intend the above restrictions on competition in geographical areas to be entirely severable and independent, and any invalidity or enforceability of this provision with respect to any one or more of such restrictions, including areas, shall not render this provision unenforceable as applied to any one or more of the other restrictions, including areas.  If any part of this provision is held to be unenforceable because of the duration, scope or area covered, the Corporation and Grantee agree to modify such part, or that the court making such holding shall have the power to modify such part, to reduce its duration, scope or area, including deletion of specific words and phrases, i.e., “blue penciling”, and in its modified, reduced or blue pencil form, such part shall become enforceable and shall be enforced.  Nothing in Section 3 shall be construed to prohibit Grantee from being retained during the Restricted Period in a capacity as an attorney licensed to practice law, or to restrict Grantee from providing advice and counsel in such capacity, in any jurisdiction where such prohibition or restriction is contrary to law.

 

Section 4.              Forfeiture.  Any Performance Share subject to this Award shall be forfeited upon the termination of the Grantee’s continuous employment by the Corporation, including Subsidiaries, from the Date of Grant, except to the extent otherwise provided in Section 2.  Any Dividend Equivalent subject to this Award shall expire at the time its tandem Performance Share (i) is vested and paid, or deferred, or (ii) is forfeited. Notwithstanding any other provision to the contrary, this Award shall be forfeited automatically and shall be void in the event that the Grantee volunteers to terminate employment with the Corporation, including Subsidiaries, pursuant to the Duke Energy Corporation 2010 Voluntary Opportunity Plan.

 

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Section 5.              Dividend Equivalent Payment.  Payment with respect to any Dividend Equivalent subject to this Award that is in tandem with a Performance Share that is vested and paid shall be paid in cash to the Grantee at the same time as the vested Performance Share as provided in Section 6, or, if the vested Performance Share is deferred by Grantee as provided in Section 6, payment with respect to the tandem Dividend Equivalent shall likewise be deferred.  The Dividend Equivalent payment amount shall equal the aggregate cash dividends declared and paid with respect to one (1) share of Common Stock for the period beginning on the Date of Grant and ending on the date the vested, tandem Performance Share is paid or deferred and before the Dividend Equivalent expires.  However, should the timing of a particular payment under Section 6 to the Grantee in shares of Common Stock in conjunction with the timing of a particular cash dividend declared and paid on Common Stock be such that the Grantee receives such shares without the right to receive such dividend and the Grantee would not otherwise be entitled to payment under the expiring Dividend Equivalent with respect to such dividend, the Grantee, nevertheless, shall be entitled to such payment.  Dividend Equivalent payments shall be subject to withholding for taxes. Any required income tax withholdings in respect of Dividend Equivalents attributable to Performance Shares shall be satisfied by reducing the cash payment in respect of the required withholding amount, unless the Committee, or its delegatee, in its discretion, requires Grantee to satisfy such tax obligation by other payment to the Corporation.

 

Section 6.              Payment of Performance Shares.   Payment of Performance Shares subject to this Award that become vested shall be made to the Grantee on the earlier of: (i) the calendar year immediately following the Performance Period, or (ii) within 30 days after the occurrence of a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Corporation within the meaning of Section 409A of the Code, except to the extent deferred by the Grantee in accordance with such procedures as the Committee, or its delegatee, may prescribe from time to time or except to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code.  Payment (or deferrals, as applicable) shall be subject to withholding for taxes.  Payment shall be in the form of one (1) share of Common Stock for each full vested Performance Share, and any fractional vested Performance Share shall be rounded up to the next whole share for purposes of both vesting under Section 2 and payment under Section 6.  Notwithstanding the foregoing, the number of shares of Common Stock that would otherwise be paid or deferred (valued at Fair Market Value on the date the respective Performance Share became vested, or if later, payable) shall be reduced by the Committee, or its delegatee, in its sole discretion, to fully satisfy tax withholding requirements, unless the Committee, or its delegate, in its discretion requires Grantee to satisfy such tax obligation by other payment to the Corporation.  In the event that payment, after any reduction in the number of shares of Common Stock to satisfy withholding for tax requirements, would be for less than ten (10) shares of Common Stock, then, if so determined by the Committee, or its delegatee, in its sole discretion, payment, instead of being

 

7

 

made in shares of Common Stock, shall be made in a cash amount equal in value to the shares of Common Stock that would otherwise be paid, valued at Fair Market Value on the date the respective Performance Shares became vested.

 

Section 7.              No Employment Right.  Nothing in this Agreement or in the Plan shall confer upon the Grantee the right to continued employment with the Corporation or any Subsidiary, or affect the right of the Corporation or any Subsidiary to terminate the employment or service of the Grantee at any time for any reason.

 

Section 8.              Nonalienation.  The Performance Shares and Dividend Equivalents subject to this Award are not assignable or transferable by Grantee.  Upon any attempt to transfer, assign, pledge, hypothecate, sell or otherwise dispose of any such Performance Share or Dividend Equivalent, or of any right or privilege conferred hereby, or upon the levy of any attachment or similar process upon such Performance Share or Dividend Equivalent, or upon such right or privilege, such Performance Share or Dividend Equivalent, or such right or privilege, shall immediately become null and void.

 

Section 9.              Determinations.  Determinations by the Committee, or its delegatee, shall be final and conclusive with respect to the interpretation of the Plan and this Agreement.

 

Section 10.            Governing Law.  This Agreement shall be governed, construed and enforced in accordance with the laws of the State of Delaware applicable to transactions that take place entirely within that state.

 

Section 11.            Conflicts with Plan, Correction of Errors, Section 409A and Grantee’s Consent.  In the event that any provision of this Agreement conflicts in any way with a provision of the Plan, such Plan provision shall be controlling and the applicable provision of this Agreement shall be without force and effect to the extent necessary to cause such Plan provision to be controlling.  In the event that, due to administrative error, this Agreement does not accurately reflect an Award properly granted to the Grantee pursuant to the Plan, the Corporation, acting through its Executive Compensation and Benefits Department, reserves the right to cancel any erroneous document and, if appropriate, to replace the cancelled document with a corrected document.  It is the intention of the Corporation and the Grantee that this Award not result in unfavorable tax consequences to Grantee under Code Section 409A.  Accordingly, Grantee consents to such amendment of this Agreement as the Corporation may reasonably make in furtherance of such intention, and the Corporation shall promptly provide, or make available to, Grantee a copy of any such amendment.

 

To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code and that this Award not result in unfavorable tax consequences to Grantee under Section 409A of the Code.  This

 

8

 

Agreement will be administered and interpreted in a manner consistent with this intent, and any provision that would cause this Agreement to fail to satisfy Section 409A of the Code will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Section 409A of the Code).  The Corporation and the Grantee agree to work together in good faith in an effort to comply with Section 409A of the Code including, if necessary, amending this Agreement based on further guidance issued by the Internal Revenue Service from time to time, provided that the Corporation shall not be required to assume any increased economic burden.  Notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, the Grantee shall not be considered to have terminated employment with Corporation for purposes of this Agreement and no payments shall be due to him under this Agreement which are payable upon his termination of employment until he would be considered to have incurred a “separation from service” from the Corporation within the meaning of Section 409A of the Code.  To the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following the Grantee’s termination of employment shall instead be paid within 30 days following the first business day after the date that is six months following his termination of employment (or upon his death, if earlier).  In addition, for purposes of this Agreement, each amount to be paid or benefit to be provided to the Grantee pursuant to this Agreement shall be construed as a separate identified payment for purposes of Section 409A of the Code.

 

Grantee acknowledges and agrees that payments made under this Agreement are subject to the Corporation’s requirement that the Grantee reimburse the portion of any payment where such portion of the payment was predicated upon the achievement of financial results that are subsequently the subject of a restatement caused or partially caused by Grantee’s fraud or misconduct.

 

Section 12.            Compliance with Law.  The Corporation shall make reasonable efforts to comply with all applicable federal and state securities laws applicable to the Plan and this Award; provided, however, notwithstanding any other provision of this Award, the Corporation shall not be obligated to deliver any shares of Common Stock pursuant to this Award if the delivery thereof would result in a violation of any such law.

 

Notwithstanding the foregoing, this Award is subject to cancellation by the Corporation in its sole discretion unless the Grantee, by not later than                         , 2011, has signed a duplicate of this Agreement, in the space provided below, and returned the signed duplicate to the                                                , which, if, and to the extent, permitted by the Executive Compensation and Benefits Department, may be accomplished by electronic means.

 

9

 

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed and granted in Charlotte, North Carolina, to be effective as of the Date of Grant.

 

 

	
ATTEST:
    	
 
    	
DUKE ENERGY CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
Corporate Secretary
    	
 
    	
Its:
    	
Chief Executive Officer
    

 

Acceptance of Performance Award

 

IN WITNESS OF Grantee’s acceptance of this Performance Award and Grantee’s agreement to be bound by the provisions of this Agreement and the Plan, Grantee has signed this Agreement this            day of                                           , 2011.

 

 

	
 
    	
 
    
	
 
    	
Grantee’s Signature
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(print name)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(address)
    

 

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