EX. 10.3
LOTUS PACIDFIC, INC.
Warrant Subscription Agreement
THE WARRANTS TO PURCHASE COMMON STOCK OF LOTUS PACIFIC, INC.,
A DELAWARE CORPORATION (THE "COMPANY"), PURCHASED PURSUANT TO THIS
SUBSCRIPTION AGREEMENT (THE "AGREEMENT"), HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR UNDER THE LAWS OF ANY JURISDICTION.
1. Subscription. The undersigned subscriber (the "Subscriber"), agreeing
to be legally bound hereby, does subscribe for and agree to purchase
8,000,000 shares of the Company's Warrant to purchase its Common Stock (the
"Warrants"). The total purchase price is US $80,000.
Each Warrant entitles the holder to purchase a share of the Company's
Common Stock with a par value of $0.01 per share during a period of five (5)
years commencing from the issuing date at a price ("the exercise price") of
US $3.00 per share.
The Subscriber herewith tenders payment upon signing this Warrant
Subscription Agreement, in such amount, the receipt of which is hereby
acknowledged by the Company, in the form of a check or wire transfer payable
to the Company from the Subscriber. The Company shall cause its stock
transfer agent to issue the Warrants as soon as practicable thereafter.
2. Representations and Warranties of Subscriber. To induce the Company
to enter into this Agreement, the Subscriber hereby represents and warrants
to the Company as follows:
(A) The Subscriber
(i) has had access to the books and records of the Company, and
is fully familiar with and understands the contents thereof;
(ii) acknowledges that it has had the opportunity to ask
questions of and receive answers from the management and from the authorized
representatives of the Company concerning the Company and to obtain any
additional information necessary to verify the accuracy of the information
so furnished;
(iii) has read carefully this Agreement;
(iv) has received no solicitation or general advertisement with
respect to the purchase of the Warrants; and
(v) has based its investment decision on such information as is
described above and supplied herein and has not received any other written
communication in connection with this transaction.
(B) The Subscriber understands and acknowledges the following:
(i) The Warrants are being offered and sold under the exemption
provided in, among others, Section 4(2) of the Securities Act of 1933, as
amended (the "Act") and under applicable exemptions from securities
registration as a transaction by an issuer not involving a public offering;
(ii) The Warrants have not been registered under the Act or
under any securities act; and the Warrants can not be sold or transferred
unless they are registered under the Act or an exemption from registration is
otherwise available;
(iii) The Company has no obligation or intention to register
said Warrants for resale under any federal or other securities laws or to
take any action which would make available any such exemption from the
registration requirements of any such laws;
(iv) Rule 144 of the Securities and Exchange Commission under
the Act would substantially restrict the transferability of the Warrants; and
(v) There is no assurance of a public market for the Warrants
and, accordingly, the Subscriber must bear the economic risks of its
investment for a infinite period of time.
(C) The Subscriber is acquiring the Warrants solely for its
own account, for investment only, and not with a view towards the further
distribution thereof. The Subscriber will not sell, transfer, hypothecate,
or otherwise dispose of the Warrants, or any portion thereof, unless such
sale, transfer, hypothecation or disposition is made in compliance with the
requirements of the Act and any and all applicable laws, rules and
regulations.
(D) THE SUBSCRIBER RECOGNIZES THAT ANY INVESTMENT IN THE
COMPANY INVOLVES SUBSTANTIAL RISK FACTORS.
(E) The Subscriber has adequate financial means of providing
for its current needs and financial contingencies without the need for
liquidity in this investment and has the ability to bear the economic risks
of this investment and can afford a complete loss of the purchase price; and
the Subscriber has no reason to contemplate any change in its financial
condition.
(F) The Subscriber, through its management and advisors, is
fully familiar with, and has the knowledge and expertise in, financial and
business matters necessary to evaluate the merits and the risks involved in
the purchase of the Warrants.
(G) These representations and warranties provided to the
Company by the Subscriber are true and correct as of the date hereof and the
Subscriber agrees to advise the Company prior to its acceptance of this
Agreement of any material change in any of such information.
(H) The Subscriber fully understands that no governmental
agency has approved or disapproved, passed upon or endorsed the merits of the
sale or purchase of the Warrants.
(I) The Subscriber is a corporation duly organized and
existing in good standing under the laws of the jurisdiction of its
incorporation.
(J) The undersigned representative of the Subscriber has
full power, in accordance with all applicable laws, to execute and perform
this Agreement, and such execution and performance do not have any conflict
with any applicable charter or bylaw provision or with any contract to which
it is a party or to which it is subject. The Board of Directors of the
Subscriber has duly authorized this Agreement, the transactions contemplated
herein, and the execution hereof by the undersigned representative.
3. Representations and Warranties of Company. To induce the
Subscriber to enter into the Agreement, the Company and its principal
shareholders do hereby represent and warrant as follows:
(A) The Company's Warrants to be delivered to the Subscriber
will constitute, under Delaware corporate law, valid and legally issued
Warrants of the Company, fully paid, and nonassessable.
(B) The officers of the Company are duly authorized to execute
this Agreement and have taken all actions required by law and agreement, its
charter and bylaws, to properly and legally execute this Agreement.
(C) The Company is not involved in any pending litigation,
claims, or governmental investigation or proceeding not reflected in its
financial statements or otherwise disclosed in writing to the Subscriber
and there are no lawsuits, claims, assessments, investigations, or similar
matters, to the best knowledge of the management, threatened or contemplated
against the Company, its management or properties.
(D) The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware; it has the corporate power
to own its property and to carry on its business as now being conducted and
is duly qualified to conduct such business in any jurisdiction so required.
(E) Pursuant to its Certificate of Incorporation, as amended,
the Company is authorized to issue 50,000,000 shares of Common Stock, par
value $0.001 per share, 37,637,054 shares of which are issued and
outstanding, fully paid and nonassessable. The company is authorized to issue
4,300 shares of Series A preferred stock, 4,300 shares of which are issued
and outstanding. The Company has authorized 100,000 shares of preferred
stock, none of which is issued or outstanding prior to the closing hereof.
The Company has no common stock warrant outstanding prior to the closing
hereof. The Company has no treasury stock. There are no other authorized or
outstanding subscriptions, options, or other agreements or commitments
obligating the Company to issue any additional shares of its capital stock
of any class, or any options or rights with respect thereto, or any
securities convertible into any shares of stock of any class. No shareholder
of the Company has any right of first refusal or any preemptive rights with
respect to the issuance of the Company's capital stock.
(F) Attached hereto and marked as Exhibit A, and hereby made a
part hereof, are the Financial Statements of the Company as of December 31,
1996, hereinafter referred to as the "Financial Statements". Except as
explained in the notes thereto, the Financial Statements present fairly the
financial condition of the Company as of the dates thereof and the results
of operations for periods covered thereby and, except as aforesaid, the
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved.
(G) The Company has in all material aspects performed all
obligations required to be performed by it in the past and no claim exists
for default in any material respect under any agreements, leases, or other
documents to which the Company is a party.
(H) The Company has complied in all material aspects with all
applicable statutes and regulations of any governmental authority having
jurisdiction over it or that have been applicable to its business. The
Company is current in its SEC filings and has filed all reports required to
be filed with the SEC during the past twelve (12) months.
(I) The Company has filed in correct form all income tax returns
due with respect to all prior years, and all franchise, real and personal
property tax returns that are required to be filed, and has paid all taxes
as shown on the said returns and all assessments received by it to the extent
that such taxes and assessments have become due.
(J) No loans or other obligations are payable to officers,
directors, employees, or stockholders of the Company.
4. Legends. The Subscriber hereby agrees that the certificate(s)
evidencing the Warrants shall bear such legends with regard to restrictions
on transfer as may be required under the Act and other applicable law.
5. Inspection Rights. It is understood that all documents, records and
books pertaining to this investment have been made available for inspection
by the Subscriber and each of its attorney, accountant and representative,
and that they will be available, upon reasonable notice, for inspection
during reasonable business hours at the office of the Company.
6. Indemnification by Subscriber. The Subscriber hereby agrees to
indemnify and hold harmless the Company and its officers and directors from
and against any and all loss, damage, or liability (including attorney's
fees) due to, or arising out of, a breach of any representation or warranty
made by the Subscriber contained herein.
7. Indemnification by Company. The Company and its undersigned principal
shareholders agree that they, jointly and severally, will indemnify
Subscriber and the Company against, and will hold each of them harmless
from, any and all loss, damage, or liability (including attorney's fees)
due to, or arising out of, a breach of any representation or warranty made
by the Company contained herein.
8. No Assignment or Transfer. The Subscriber agrees not to transfer or
assign this Subscription Agreement or any interest of the Subscriber herein
except as described above; any attempted transfer or assignment shall be
deemed void and without force or effect.
9. Governing Law. This Agreement shall be construed in accordance with
and governed and interpreted by the laws of the State of Delaware.
10. Headings. The headings employed in each of the numbered paragraphs
herein are for reference and convenience of the parties, but shall not be
deemed to have any substantive effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective authorized representatives and have caused
their signatures to be affixed hereto this fifth day of May, 1997.
Lotus Pacific, Inc. Evilving Investments Ltd.
By: /S/ By: /S/
▇▇▇▇▇ ▇▇▇, President Jinli Dong, President