Document:

INDEPENDENT DIRECTOR AGREEMENT

 

This INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this day of October 1, 2011 (the “Effective Date”), by and between Sunity Online Entertainment Ltd.  (the “Company”), and Jianing Yao (the “Independent Director”).

 

WHEREAS, the Company desires to engage the Independent Director, and the Independent Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Independent Director, intending to be legally bound, hereby agree as follows:

 

1.           DEFINITIONS.

 

(a)           “Corporate Status” describes the capacity of the Independent Director with respect to the Company and the services performed by the Independent Director in that capacity.

 

(b)           “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

 

(c)           “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Independent Director pursuant to Section 12 of this Agreement to enforce the Independent Director’s rights hereunder.

 

(d)           “Expenses” shall mean all reasonable fees, costs and expenses, approved by the Company in advance and reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

 

(e)           “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

 

(f)            “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

  

 

  

 

(g)           “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

 

2.           SERVICES OF INDEPENDENT DIRECTOR. While this Agreement is in effect, the Independent Director shall perform duties as an independent director and/or a member of the committees of the Board and shall perform duties as an independent director of the Subsidiary upon request by the Company, be compensated for such and be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

 

(a)           The Independent Director will perform services as is consistent with Independent Director’s position with the Company, as required and authorized by the Memorandum of Association and Articles of Association of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Independent Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company. The Independent Director will also perform services as is consistent with Independent Director’s position with the Subsidiary, upon the request by the Company, and authorized by the Memorandum of Association and Articles of Association of the Subsidiary, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Independent Director’s performance hereunder.

 

(b)           The Independent Director is solely responsible for taxes arising out of any compensation paid by the Company to the Independent Director under this Agreement, and the Independent Director understands that he/she may be issued a U.S. Treasury form 1099 for any compensation paid to him/her by the Company, and understands and agrees that the Company shall comply with any tax or withholding obligations as required by applicable law from time to time in connection with this Agreement.

 

(c)           The Company may offset any and all monies payable to the Independent Director to the extent of any monies owing to the Company from the Independent Director.

 

(d)           The rules and regulations of the Company notified to the Independent Director, from time to time, apply to the Independent Director. Such rules and regulations are subject to change by the Company in its sole discretion. Notwithstanding the  foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

  

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3.           REQUIREMENTS OF INDEPENDENT DIRECTOR. During the term of the Independent Director’s services to the Company hereunder, Independent Director shall observe all applicable laws and regulations relating to independent directors of a public company as promulgated from to time, and shall not: (1) be an employee of the Company or any Parent or Subsidiary; (2) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company other than as a director and/or a member of a committee of the Board; (3) be an affiliated person of the Company or any Parent or Subsidiary, as the term “affiliate” is defined in 17 CFR 240.10A-3(e)(1), other than in his capacity as a director and/or a member of a committee of the Board; (4) possess an interest in any transaction with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(a), other than in his capacity as a director and/or a member of a committee of the Board committees; (5) be engaged in a business relationship with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(a), except that the required beneficial interest therein shall be modified to be 5% hereby.

 

4.           REPORT OBLIGATION. While this Agreement is in effect, the Independent Director shall immediately report to the Company in the event: (1) the Independent Director knows or has reason to know or should have known that any of the requirements specified in Section 3 hereof is not satisfied or is not going to be satisfied; and (2) the Independent Director simultaneously serves on an audit committee of any other public company.

 

5.           TERM AND TERMINATION. The term of this Agreement and the Independent Director’s services hereunder shall be for one (1) year from the Effective Date, unless terminated as provided for in this Section 5. This Agreement and the Independent Director’s services hereunder shall terminate upon the earlier of the following:

 

(a)           Expiration of the Independent Director’s term as a director of the Company;

 

(b)           Removal of the Independent Director as a director of the Company, upon proper Board or Shareholder action in accordance with the Memorandum of Association and Articles of Association of the Company and applicable law;

 

(c)           Resignation of the Independent Director as a director of the Company upon written notice to the Board of Directors of the Company; or

 

(d)           Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

 

6.           LIMITATION OF LIABILITY. In no event shall the Independent Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an independent director of the Company, unless the Independent Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

 

7.           AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Independent Director as follows:

 

(a)           Subject to the exceptions contained in Section 8(a) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Independent Director in connection with such Proceeding (referred to herein as “INDEMNIFIABLE EXPENSES” and “INDEMNIFIABLE LIABILITIES,” respectively, and collectively as “INDEMNIFIABLE AMOUNTS”).

  

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(b)           Subject to the exceptions contained in Section 8(b) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Indemnifiable Expenses.

 

(c)           For purposes of this Agreement, the Independent Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an independent director of the Company and/or a member of a committee of the Board of the Company, if the Independent Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge of its accounts or certified by a public accountant or a firm of public accountants, which the Independent Director had reasonable grounds to believe to be true.

 

8.           EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 7(a) and 7(b) above in all circumstances other than the following:

 

(a)           If indemnification is requested under Section 7(a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Independent Director had reasonable cause to believe that the Independent Director’s conduct was unlawful, or (iii) the Independent Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

 

(b)          If indemnification is requested under Section 7(b) and

 

(i)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Independent Director, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder; or

  

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(ii)           it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Independent Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Independent Director received an improper benefit or improperly took advantage of a corporate opportunity, the Independent Director shall not be entitled to payment of Indemnifiable Expenses hereunder with respect to such claim, issue or matter.

 

9.           WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Independent Director is, by reason of the Independent Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Independent Director shall be indemnified in connection therewith. If the Independent Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Independent Director against those Expenses reasonably incurred by the Independent Director or on the Independent Director’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

10.         ADVANCES AND INTERIM EXPENSES. The Company may pay to the Independent Director all Indemnifiable Expenses incurred by the Independent Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Independent Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Independent Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Independent Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

 

11.         PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Independent Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Independent Director seeks payment under Section 7 hereof and the Proceeding of which has been previously notified to the Company and approved by the Company for indemnification hereunder. At the request of the Company, the Independent Director shall furnish such documentation and information as are reasonably available to the Independent Director and necessary to establish that the Independent Director is entitled to indemnification hereunder. The Company shall pay such Indeminfiable Amounts within thirty (30) days of receipt of all required documents.

 

12.         REMEDIES OF INDEPENDENT DIRECTOR.

 

(a)           RIGHT TO PETITION COURT. In the event that the Independent Director makes a request for payment of Indemnifiable Amounts under Sections 7, 9-11 above, and the Company fails to make such payment or advancement in a timely manner pursuant to the terms of this Agreement, the Independent Director may petition the appropriate judicial authority to enforce the Company’s obligations under this Agreement.

  

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(b)           BURDEN OF PROOF. In any judicial proceeding brought under Section 12 (a) above, the Company shall have the burden of proving that the Independent Director is not entitled to payment of Indemnifiable Amounts hereunder.

 

(c)           EXPENSES. The Company agrees to reimburse the Independent Director in full for any Expenses incurred by the Independent Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Independent Director under Section 12 (a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

 

(d)           VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 12 (a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

 

(e)           FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 12 (a) above.

 

13.         PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Independent Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Independent Director against the Company, any Entity which it controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Independent Director in an action brought against the Independent Director.

 

14.         INSURANCE. The Company may, at its discretion, obtain and maintain a policy or policies of director and officer liability insurance, in an amount not less than $[10,000,000], of which the Independent Director will be named as an insured, providing the Independent Director with coverage for Indemnifiable Amounts and/or Indemnifiable Expenses in accordance with said insurance policy or policies (“D&O INSURANCE”); provided that:

 

(a)           The Independent Director agrees that, while the Company has valid and effective D&O Insurance, and except as provided in (c) of this section, Sections 7-13 of this Agreement shall not apply, and the Company’s indemnification obligation to the Independent Director under this Agreement shall be deemed fulfilled by virtue of purchasing and maintaining such insurance policy or policies, in accordance with the terms and conditions thereof and subject to exclusions stated thereon. The Independent Director agrees that the Company shall have no obligation to challenge the decisions made by the insurance carrier(s) (“INSURANCE CARRIER”) relating to any claims made under such insurance policy or policies;

  

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(b)           The Independent Director agrees that the Company’s indemnification obligation to the Independent Director under (a) of this section shall be deemed discharged and terminated, in the event the Insurance Carrier refused payment for any Proceedings against the Independent Director due to the acts or omissions of the Independent Director;

 

(c)           While the D&O Insurance is valid and effective, the Company agrees that it shall indemnify the Independent Director for the Indemnifiable Amounts and Indemnifiable Expenses, to the extent that any Proceedings are coverable by D&O Insurance, but in excess of the policy amount, in accordance with Sections 7-13 of this Agreement; and

 

(d)           While the D&O Insurance is valid and effective, this Section 14 states the entire and exclusive remedy of the Independent Director with respect to the indemnification obligation of the Company to the Independent Director under this Agreement.

 

15.         SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Independent Director against other persons, and the Independent Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

16.         AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

 

17.         SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Independent Director. The Independent Director has no power to assign this Agreement or any rights and obligations hereunder.

 

18.         CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Independent Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

 

19.         SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

  

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20.         MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Independent Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

 

21.         NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date en which it is so mailed:

 

If to Independent Director, to: Level 9, Block A, No. 31 Gaoxin Road, Xi’an, P.R.C.

 

If to the Company, to: 10 East 40 Street, New York, N.Y. 10016, or to such other address as may have been furnished in the same manner by any party to the others.

 

22.         GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of New York.

 

23.         CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in New York County, New York for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

 

24.         AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of Memorandum of Association and Articles of Association of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

 

25.         INDEPENDENT CONTRACTOR. The parties understand, acknowledge and agree that the Independent Director’s relationship with the Company is that of an independent contractor and nothing in this Agreement is intended to or should be construed to create a relationship other than that of independent contractor. Nothing in this Agreement shall be construed as a contract of employment/engagement between the Independent Director and the Company or as a commitment on the part of the Company to retain the Independent Director in any capacity, for any period of time or under any specific terms or conditions, or to continue the Independent Director’s service to the Company beyond any period.

  

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26.         ARBITRATION. Any dispute, controversy or claim arising out of or relating to this Agreement or the breach thereof, shall be settled by arbitration, before one arbitrator in accordance with the rules of the American Arbitration Association then in effect and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The arbitrator will be selected, by the parties, from a panel of attorney arbitrators. The parties agree that any arbitration shall be held in New York, New York. The language of the arbitration shall be in English. The arbitrator will have no authority to make any relief, finding or award that does not conform to the terms and conditions of this Agreement. Each party shall bear its own attorneys’ or expert fees and any and all other party specific costs. Either party, before or during any arbitration, may apply to a court having jurisdiction for a restraining order or injunction where such relief is necessary to protect its interests. Prior to initiation of arbitration, the aggrieved party will give the other party written notice, in accordance with this Agreement, describing the claim as to which it intends to initiate arbitration.

 

27.         ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Independent Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

 

IN WITNESS WHEREOF, the parties hereto have executed this Independent Director Indemnification Agreement as of the day and year first above written.

	
AGREED

	  	
AGREED

	 
	 	 	 	 
	
Sunity Online Entertainment Ltd.

	  	
Independent Director

	 
	  	  	  	 
	  	  	  	 
	/s/ Fan Zhang	  	/s/ Jianing Yao	 
	
Name:  Fan Zhang

	  	
Name:  Jianing Yao

	 
	
Title:    Chairman & CEO

	  	  	 

  

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SCHEDULE A

 

	
I

	
POSITION:

 

INDEPENDENT DIRECTOR of the Company and the Subsidiary upon request by the Company.

 

	
II.

	
START DATE: October 1, 2011

 

	
III.

	
COMPENSATION:

 

FEES. For all services rendered by the Independent Director pursuant to this Agreement, both during and outside of normal working hours, including but not limited to, attending all required meetings of the Board or applicable committees thereof, executive sessions of the independent directors, reviewing filing reports and other corporate documents as requested by the Company and the Subsidiary, providing comments and opinions as to business matters as requested by the Company and the Subsidiary, the Company agrees to pay to the Independent Director a fee in cash of $18,000 per annum (“the Fee”).  The Fee shall be payable in cash to the Independent Director monthly in equal installments. In the event the Company desires to pay the Independent Director on quarterly basis, the Fee in cash shall be payable to Independent Director quarterly in equal installments. The Fee also include the fee for the Independent Director to act as the Independent Director of the Subsidiary if so requested by the Company.

 

EXPENSES. During the term of the Independent Director’s service as a director of the Company, the Company shall promptly reimburse the Independent Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the independent directors, and (c) stockholder meetings, as a director or a member of any committee of the Board, which are approved by the Company in advance.

 

STOCK. As of the date hereof, the Company does not currently maintain any equity incentive compensation plans.  At such time that the Board of Directors of the Company adopt any such equity incentive compensation plan(s), the Independent Director would be eligible to participate in such plan(s) according to the terms of the plan(s).

  

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NO OTHER BENEFITS OR COMPENSATION. The Independent Director acknowledges and agrees that he/she is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

	
AGREED

	  	
AGREED

	 
	 	 	 	 
	
Sunity Online Entertainment Ltd.

	  	
Independent Director

	 
	  	  	  	 
	  	  	  	 
	/s/ Fan Zhang	  	/s/ Jianing Yao	 
	
Name:  Fan Zhang

	  	
Name:   Jianing Yao

	 
	
Title:    Chairman & CEO

	  	  	 

 

  

11Unassociated Document

 

STOCKHOLDERS AGREEMENT

 

This STOCKHOLDERS AGREEMENT dated as of October 5, 2011 (this “Agreement”) is made and entered into by and between Wonder Auto Technology, Inc., a Nevada corporation (the “Company”) and Qingjie Zhao (the “Stockholder”).

 

WHEREAS, the Stockholder Beneficially Owns Nine Million One Hundred Sixty-Five Thousand Seventeen (9,165,017) shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) representing approximately Twenty-Seven Percent (27%) of the outstanding Common Stock of the Company; and

 

WHEREAS, the Stockholder and the Company wish to provide for certain arrangements with respect to the voting of the shares Beneficially Owned by Stockholder.

 

NOW, THEREFOR, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

Except as otherwise specifically indicated, the following terms have the following meanings for all purposes of this Agreement:

“Advance Notice Date” shall mean the last day on which stockholder nominations for consideration in the Election of Directors may be made under the Bylaws.

 

“Affiliate” means any Person that directly or indirectly through one or more intermediaries is Controlled by the Stockholder.

 

A Person shall be deemed to “Beneficially Own” (and thus have “Beneficial Ownership” of) all Voting Stock as to which such Person, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has the power to vote or to direct the voting of such security.

“Board” means the Board of Directors of the Company, as constituted from time to time.

 

“Bylaws” means the bylaws of the Company as amended as contemplated by this Agreement, and as amended thereafter from time to time in accordance with the provisions thereof and applicable law.

“Commission” means the U.S. Securities and Exchange Commission.

 

“Controlled by” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Stock, by contract or otherwise.

 

“Directors” means the individuals serving from time to time on the Board.

“Director Nominees” shall mean the nominees for Director, other than the Stockholder Nominee, who are proposed for election to the Board and included on the proxy statement and proxy card of the Company for such election.

“Economic Interest” in a security means having or sharing the opportunity, directly or indirectly, to profit or share in any profit (or loss) derived from a transaction in the security, including through options, swaps or other derivative securities or synthetic arrangements.

  

  

  

 

“Election of Directors” shall mean any election of the Directors, whether held at a regular or special meeting of stockholders.

“Eligible Stockholder” means an Independent Stockholder of the Company, or a group of Independent Stockholders acting together, that, together with its or their Affiliates, has continuously Beneficially Owned and has held Economic Interest of not less than the Required Interest for at least one (1) year preceding the Advance Notice Date and through the date of the Election of Directors, and that complies with all applicable provisions of the Bylaws with respect to the nomination of Directors.

“Governmental or Regulatory Authority” means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision, or any stock exchange or market in which the Common Stock is listed or quoted, as applicable, for trading or traded.

“Independent Stockholders” means any holder of Voting Stock other than the Stockholder and its Affiliates or any Affiliate of the Company.

“Person” means any individual, corporation, partnership, unincorporated association or other entity.

“Required Interest” means three percent (3%) of the outstanding voting securities of the Company entitled to vote in the Election of Directors, based upon the number of outstanding voting securities of the Company most recently disclosed prior to the Advance Notice Date by the Company in a filing with the Commission.

“Stockholder Nominee” shall mean one (1) nominee for Director for whom the Stockholder may vote his shares separate from all requirements relating to voting for the Director Nominees.

“Voting Stock” means stock of any class or securities entitled to vote generally in any Election of Directors.

 

ARTICLE II

VOTING PROVISIONS

 

2.1               Proxy Access Bylaws.  Within five (5) business days following the effective date of this Agreement, the Board shall approve amendments to the bylaws of the Company, as currently in effect, to (i) effectuate the “proxy access” provisions set forth Sections 2.1 and 2.2 of this Article II, (ii) implement an advance notice bylaw provision reasonably acceptable to the Stockholder and the Board, (iii) provide that any Election of Directors shall occur only at a properly noticed meeting of stockholders and that the stockholders of the Company shall not have the power or authority to elect Directors by written consent of stockholders, and (iv) provide that any amendment to the Bylaws that alters in any substantive manner any of the provisions of the Bylaws contemplated by clauses (i) through (iii) above shall not be effective unless ratified by holders of not less than sixty-six and two-thirds percent (66-2/3%) of the Voting Stock outstanding as of the record date with respect to the annual or special stockholders meeting held for purposes of ratifying such proposed amendment to the Bylaws.

2.2 (a)               Nominee Inclusion in Company Proxy.  With respect to each stockholder meeting during the term of this Agreement at which an Election of Directors is to occur, the Company shall include in its proxy statement and on its proxy card, in addition to individuals nominated by the Board upon recommendation of the Nominating and Governance Committee of the Board, each of: (x) up to two (2) nominees for director proposed by the Stockholder (up to one (1) nominee for Director if the Nominating and Governance Committee of the Board recommends for nomination to the Board the Stockholder and provided the Stockholder is included on the Company’s proxy statement and on the Company’s proxy card), and (y) no more than two (2) nominees for Director proposed by each Eligible Stockholder, provided, however, that:  (A) in the case of Eligible Stockholder nominees, each such nominee shall meet the definition of “independent director” as set forth under the listing rules of The Nasdaq Stock Market or such other nationally recognized stock exchange on which the Company’s Common Stock is then listed, and (B) each nominee for Director shall have met all applicable notice requirements as to stockholder proposals as set forth in the Bylaws and under applicable law.

  

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(b)   Any stockholder seeking to designate a nominee for Director to be included in the Company’s proxy statement and on the Company’s proxy card shall comply with all provisions of the Bylaws otherwise applicable to stockholder nominations and furnish to the Secretary of the Company, no later than the Advance Notice Date (i) the information set forth in the Bylaws with respect to nominees for Director, (ii) the written undertakings described below and (iii) any accompanying statement to be included in the Company’s proxy statement, which statement in order to be so included shall not exceed 500 words and must fully comply with Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, including without limitation Rule 14a-9.

(c)   Any stockholder designating an individual for nomination as a Director in accordance with this Article shall execute and deliver to the Company no later than the Advance Notice Date an undertaking, in a form to be provided by the Secretary of the Company, that it will, and will cause its Affiliates to, (i) not sell or otherwise dispose of its Beneficial Ownership and Economic Interest of voting securities of the Company so as to reduce the Beneficial Ownership and Economic Interest held by such stockholder, together with its Affiliates, below the Required Interest on or prior to the date of the Election of Directors (and representing that they have no present intention of reducing, within one (1) year following the Election of Directors, their aggregate Beneficial Ownership and Economic Interest below the greater of (x) the Required Interest and (y) in the case of the Eligible Stockholders only, seventy-five percent (75%) of their aggregate Beneficial and Economic Interest as of the Advance Notice Date), (ii) comply with the provisions of the Company’s Articles of Incorporation and Bylaws and all laws and regulations relating to the accompanying statement submitted by the stockholder and any solicitation or communications with stockholders of the Company in connection with such nomination, (iii) indemnify the Company and its agents and representatives in respect of any and all liabilities that may arise out of the accompanying statement submitted by the stockholder or any solicitation or communications with stockholders of the Company by such stockholder, its Affiliates or their respective agents or representatives in connection with such nomination, including as a result of any violation of law or regulation by such stockholder, its Affiliates or their respective agents or representatives in connection therewith, (iv) not use any proxy card other than the Company’s proxy card in soliciting stockholders in connection with the matters to be voted on at the meeting at which the Election of Directors is held, and (v) file all solicitation materials used by it or on its behalf with the Securities and Exchange Commission under cover of Schedule 14A promulgated under the Exchange Act

(d)   Any stockholder designating individual for nomination as a Director in accordance with this Article shall also deliver to the Company no later than the Advance Notice Date a signed undertaking of the individual nominated as a Director agreeing that he or she will tender his or her resignation from the Board of Directors if (i) any of the information provided to the Company by the stockholder or the nominee pursuant to the Bylaws is determined to be inaccurate in any material respect, or (ii) the stockholder or any of its Affiliates shall breach their obligations under the undertakings described in the paragraph above in any material respect; provided, however, that in no event shall the fact that an Eligible Stockholder who has designated a nominee for Director (who is subsequently elected) has sold shares of Voting Stock resulting in such stockholder holding less than seventy-five percent (75%) of the Beneficial and Economic Interest such stockholder held as of the applicable Advance Notice Date (in the absence of facts indicating a breach of the representation as to such stockholder’s intention not to sell such shares and in the absence of any other breach), be deemed to require a resignation by such Director.

2.3           Stockholder Voting of Shares.  During the term of this Agreement, at any Election of Directors, except in the case of the Stockholder Nominee or as to any proposal other than the Election of Directors (as to whom or to which the Stockholder may vote its shares in any manner in its sole discretion), the Stockholder shall vote all shares of Voting Stock Beneficially Owned by the Stockholder (and shall use its best efforts to cause each of its Affiliates to vote all shares of Voting Stock Beneficially Owned by such Affiliates) for the Director Nominees in the same manner and percentage as all other Voting Stock not Beneficially Owned by the Stockholder or its Affiliates voted for such Director Nominees.  For the avoidance of doubt, and by way of example, as to a particular election of Directors, if (i) twenty-five percent (25%) of the Voting Stock present and voting but not held by the Stockholder or its Affiliates (the “Third Party Stock”) voted to approve Director candidate #1, (ii) thirty-five percent (35%) of the Third Party Stock voted to approve Director candidate #2, (iii) twenty-five percent (25%) of the Third Party Stock to approve Director candidate #3, and (iv) fifteen percent (15%) of the Third Party Stock to approve Director candidate #4, then the Stockholder would be obligated to vote as follows: (i) twenty-five percent (25%) of such shares to approve Director candidate #1, (ii) thirty-five percent (35%) of such shares to approve Director candidate #2,  (iii) twenty-five percent (25%) of such shares to approve Director candidate #3, and (iv) fifteen percent (15%) of such shares to approve Director candidate #4.  Notwithstanding any other provision of this Agreement to the contrary, (a) in no event shall any provision of this Agreement limit the Stockholder’s ability to vote Stockholder’s Voting Stock:  (x) for the Stockholder Nominee and (y) with respect to the Director Nominees in a manner so as to secure the Stockholder Nominee as one (1) of the Directors elected in such Election of Directors, which may include Stockholder not voting (and not using its best efforts to cause each of its Affiliates) to vote shares of Voting Stock as described in this Section 2.3 to the extent but only to the extent such voting of shares of Voting Stock as described in this Section 2.3 would result in the Stockholder Nominee not being elected to the Board in such Election of Directors and (b) in all events the Stockholder agrees that he shall use his best efforts (and cause Affiliates to use their best efforts) to be deemed present and voting for purposes of establishing a quorum as to any particular meeting during which one or more Directors are elected.

  

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ARTICLE III

PROXY

3.1           Irrevocable Proxy.  Stockholder agrees that this Agreement is intended to be a “shareholders’ agreement” within the meaning of Section 78 of the Nevada Revised Statutes.  Stockholder hereby agrees that if for any reason Stockholder or his Affiliates fail to vote for the Director Nominees in any Election of Directors in accordance with the terms of this Agreement, the Board shall have all right, power and authority to vote the shares of the Stockholder in accordance with the terms of this Agreement and Stockholder hereby grants an irrevocable proxy, coupled with an interest, to the Company’s then current Chairman of the Board and to the Company’s then current Audit Committee Chairman to effect such vote in accordance with the terms of this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER

 

The Stockholder hereby represents and warrants as follows:

 

4.1               Authority. This Agreement has been duly and validly executed and delivered by the Stockholder and constitutes a legal, valid and binding obligation of the Stockholder enforceable against him in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

4.2               No Conflicting Voting Agreement or Proxy. Other than pursuant to this Agreement, Stockholder is not a party to any voting agreement, voting trust or similar arrangement with respect to the Voting Stock of the Company and has not granted to any other Person any proxy with respect to such Voting Stock of the Company.

 

4.3               Governmental Approvals and Filings. No consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of the Stockholder is required in connection with the execution and delivery of this Agreement, other than a filing with the Commission under applicable requirements of the Securities Exchange Act of 1934.

 

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants as follows:

 

5.1               Authority. This Agreement has been duly and validly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

  

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5.2               No Conflicts. The execution and delivery by the Company of this Agreement do not, and the performance by the Company of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not:

 

(a)   Conflict with or result in a violation or breach of any of the terms, conditions or provisions of the Articles of Incorporation or Bylaws;

 

(b)   Conflict with or result in a violation or breach of any term or provision of any law, statute, rule or regulation or any order, judgment or decree of any Governmental or Regulatory Authority applicable to the Company or any of its properties or asset; or

 

(c) (i)   Conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require the Company to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of or (iv) result in the creation or imposition of any lien upon the Company or any of its properties or assets under, any contract, agreement, plan, permit or license to which the Company is a party.

 

5.3               Governmental Approvals and Filings. No consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of the Company is required in connection with the execution and delivery of this Agreement, other than any filings with the Commission, which filings, if any, shall be made with the consultation of counsel to the Company.

 

ARTICLE VI

GENERAL PROVISIONS

 

6.1               Effective Date; Term. This Agreement shall terminate and be of no further force or effect on the earlier of: (i) the date that is the five (5)-year anniversary of the effective date of this Agreement and (ii) the date on which the Company’s Common Stock is no longer registered under the Securities Exchange Act of 1934.

 

6.2               Legends.  All shares of Voting Stock held by the Stockholder shall bear a legend noting that the shares represented by such certificate are subject to the terms of this Stockholders’ Agreement.  The Stockholder shall use all reasonable efforts to exchange all certificates not bearing a legend held by the Stockholder with respect to Voting Stock with the Company’s transfer agent within ten (10) days of the date of this Agreement for shares bearing such a legend.

6.3               Further Assurances.  Each party hereto agrees (i) to furnish upon request to each other party hereto such further information, (ii) to execute and deliver to each other party hereto such other documents, certificates, agreements and undertakings, and (iii) to do such other acts and things, all as another party hereto may reasonably request for the purpose of carrying out the intent of this Agreement and the transactions contemplated by this Agreement.  In the event that the Company receives official notice of delisting from the national securities exchange on which the Company’s Common Stock is then listed, the Company shall promptly (and in any event within ten (10) days after receipt of such notice) call a meeting of the Board at which the Stockholder shall be present in person to consider the implications of such delisting, and to evaluate the stockholder voting and other governance arrangements of the Company including, but not limited to, this Agreement.

 

6.4               Amendment and Waiver. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by law or otherwise afforded, will be cumulative and not alternative.

 

  

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6.5               Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered (i) personally, (ii) by courier, or (iii) mailed (first class postage prepaid) to the parties at the following addresses or facsimile numbers:

 

If to the Stockholder, to:

 

Qingjie Zhao

[ADDRESS TO BE PROVIDED]

 

If to the Company, to:

 

Wonder Auto Technology, Inc.

No. 16 Yulu Street

Taihe District, Jinzhou City

Liaoning Province 121013

People’s Republic of China

Attn: Chairman of the Board of Directors and Chairman of the Audit Committee of the Board of Directors

 

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section 6.5, be deemed given upon delivery, and (ii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice, request or other communication is to be delivered pursuant to this Section). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other parties hereto.

 

6.6               Entire Agreement. This Agreement supersedes all prior discussions and agreements among the parties hereto with respect to the subject matter hereof, and contains the sole and entire agreement among the parties hereto with respect to the subject matter hereof.

 

6.7               No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto, and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person.

 

6.8               No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any parties hereto without the prior written consent of the other party hereto and any attempt to do so will be void. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns and legal representatives.

 

6.9               Specific Performance; Legal Fees. The parties acknowledge that money damages are not an adequate remedy for violations of any provision of this Agreement and that any party may, in such party’s sole discretion, apply to a court of competent jurisdiction for specific performance for injunctive or such other relief as such court may deem just and proper in order to enforce any such provision or prevent any violation hereof and, to the extent permitted by applicable law, each party waives any objection to the imposition of such relief.

 

6.10               Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

 

6.11               Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the intended rights of any party hereto under this Agreement will not be forfeited in any material respect as a result thereof, (i) such provision will be fully severable, (ii) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof and (iii) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom.

 

6.12               Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada applicable to a contract executed and performed in such state, without giving effect to the conflicts of laws principles thereof.

 

6.13               Consent to Jurisdiction and Service of Process. Each party hereby irrevocably submits to the exclusive jurisdiction of the United States District Court for the District of  Nevada or any court of the State of Nevada in any action, suit or proceeding arising in connection with this Agreement, agrees that any such action, suit or proceeding shall be brought only in such court (and waives any objection based on forum non conveniens or any other objection to venue therein to the extent permitted by law), and agrees to delivery of service of process by any of the methods by which notices may be given pursuant to Section 6.5, with such service being deemed given as provided in such Section 6.5; provided, however, that such consent to jurisdiction is solely for the purpose referred to in this Section 6.13 and shall not be deemed to be a general submission to the jurisdiction of said courts or in the State of Nevada other than for such purpose. Nothing herein shall affect the right of any party to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the other in any other jurisdiction.

 

  

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6.14               Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

6.15               Translations.  This Agreement may be prepared in English and Mandarin, provided, however, that in the event of any inconsistency between the Mandarin and English versions of this Agreement, the English version shall in all cases control.

 

[Remainder of Page Intentionally Left Blank]

 

  

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IN WITNESS WHEREOF, each party hereto has signed this Agreement, or caused this Agreement to be signed on its behalf, as of the date first above written.

 

	 	 	 
	 	Wonder Auto Technology, Inc.	 
	 	 	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name:	Larry Goldman	 
	 	Title:	Audit Committee Chairman	 
	 	 	 	 
	 	 	 	 
	 	Qingjie Zhao	 
	 	 	 	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 

 

  

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