Case 8:10-cv-01299-AG -JCG Document 14-7 Filed 09/10/10 Page 2 of 20 Page ID

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Crisnic Fund, S.A.

www.crianfcf.und-com

STRUCTURED TRANSACTION AGREEMENT

THIS STRUCTURED TRANSACTION AGREEMENT (hereinafter ..Agreement')

is. hereby entered into on June 11, 2010, by and between Crisnic Fund, S.A.. the
(Fund,,), and Kexuan YSQ. whose address is One W8tefs Park Drive, Steffe 98.
San Mateo, CA. 94403, the· ("Borrowerj.

This Agreement is made for file purpose of engaging the Fund to provide a
structured lending transaction and custodial services to Borrower with re&J)eCt 10 one or
more· pubfldy traded stocks to be pledged as security as part of a lending tra~,
("Tranaaction1t)f the details of which are set forth in this Agreement and in various
Transaction and Terms Addenda rAddenda" or "Addendum"h which shall be-
incorporated into this Agreement by reference as wefl as in Exhibit A of this agreement

1. AUTHORIlY GRANTED TO THE FUND

BotrO\Ner hereby appoints. the Fund as custodian of all Pledged Collateral; as
defined below, and authoriZes the Fund to act on the Borrowefs behaff with respect.to
Pledged Collateral. This Agreement is made for the purpose of engaging the· Fund to
provide .structured transaction S8rVfces to the Borrower With respect to cash asse1s
andlor one or more publicly-traded stocks to be- pledged as security as part of a lending
transaction ("Transactionj. the details of which en set forth in this Agreement and in
various Transaction and Terms Addenda (""Addenda" or "Addendum"), WhiCh shalf be
incorporated into this Agreement by reference and to act on Borrowers behalf With
respect to aQ Piedged Collateral for each Transaction for the purposes of:
s. Providing or arranging structured Transactions.
b. Holding cash. securities and other assets on behalf of the Borrower;:
hereinafter defined asf'Pfedged ColIateraJj.
c. When appropriate. voting shares and receiving dividends Of interest on
Pledaed Collateral.
The term Pledged Collateraf shaD include any and al of Borrower's securities
pledged to the Fund through one or more Addenda prior to the Borrower receiving. any
Net T~n Proceeds, as well as any securities substituU:td by the Borrower
PUFSUant"tO Section 4(b) herein.

Structured Transaction Agreement

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Crisnic Fund, S.A.

2.. BORROWER REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to the Fund. on the date hereof and on each
date on whiCh the Fund distributes Net Transaction Proceeds, as defined below, and
continuing through the term of the Transaction. that

s. All statements and associated documentation provided to the Fund in

connection with any Transactions are true and complete and do not omit
any facts or information material to the evatuation of any Transaction
request. and agrees that the Fund is fully justified in relying on any such
representations. Accordingly, Borrower shall in all cases fully indemnify
the Fund for any damages resulting from the Fund·s rermnce on any such
statements or documentation, or resuJting from the Fund's ading, or
-refraining from acting, in accordance with a request of the Borrower. Any
request of Borrower, and any action taken or omitted by the fund in
accordam::e with any request of Bormwer. shaD be binding upon Borrower.

b. Borrower has full power and authority to execute and derIVer this
Agreement and to perform its obligations hereunder and, to the exteAt
necessary, the execution, delivery and perfonnance of this Agreement
have been duly approved by aft necessary corporate action- of the
Borrower, including any necessllQY shareholder approval. The Borrower
has duly executed this Agreement and in the event the Borrower is a
business entity, the Agreement has been executed by a duly authorized
officer of the Borrower and constitutes a legal, valid and binding obligation
of Borrower, enforceable in accordance with its tenns.
c. The Pledged Collatenll submHted is duly owned by the Borrower, free of
any adverse claim, lien or other right title or interest of any third party
(other than the security interest in favor of the Fund). and is fteely
transferabfe.
d. No parties other than the parties hereto have.. or shal have, any lien, claim
or security interest in the Pledged Collateral. No financing statement under
the Uniform Commercial Code is on file In any jurisdiction claiming a
security interest in or deSonbing (whether specifically or generally) the
Predged Collateral, and the Borrower wilt pefform or cause to be-
performed. any and a/l such further acts as may be rtecessaly to
consummate the Transaction(s) contemplated within this Agreement.
- - -
8. In the event Borrower is a director. officet or principal shareholder (as such
tenns are used in Section 16 of the Securities Exchange Act of 1934) of
any of the companies that issued shares of capita! stock submitted as
Pledged CoDateral, the BorrQ.wer wilt abide by au regurations goveming
hedging transactions conducted by directom. officers, or principal
shareholders. including disclosure requirements and limits on transactior1

Structured TransactiOn Agrement

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size. The Borrower further has secured competent legal counseJ certifying
Borrower's compfiance with such regulations.

1. Neither the borrowing by the Borrower hereunder not the execution and
delivery by Borrower of this Agreement and other Transaction documents
executed and to be executed by the Bonowet'. including Financing Terms
Addendum(s). Wll conflict with or result in the breach of any agreement.
mortgage or similar instrument under which the Borrower or any of the
Borrower's properties are bound by any law, rule or regulation of any
governmental agency applicable to the Borrower or said properties.

g. There is no action or proceeding pending or, to the knowledge of th&

Borrower, contemplated or threatened against the Borrower before or by
any court. arbitrator,. grand jury. administrative agency, governmental
authority or instrumentality which contests the Borrowen ownership in ~
Pledged Collatemt.

h. The Borrower is not engaged in the business of extending credit for the
purpose at purchasing or carrying margin'stock (as defined in Regulation
U issued by the Board of Govemors of the Federal Reserve System), and
none of the Net Transaction Proceeds (as defined below) will be used to
purchase or carry margin stock in violation of Regulation U.

i. If requested, the Borrower will complete, in connection with each

Transaction,' Form G-3 as required by Regulation U, specifying the
Borrower's purpose(s) in entering into any Transaction. All Information
provided by the Borrower on each Form G-3 shall be true and accurate in
all respects. and sha8 not omit any material fact

j. The Borrower has reviewed the definition of "Accredited Investoi'" attached

hereto as Exhibit A and the Borrower qualifies as an Accred"1ted 'nvAStor
under one or more components of that definition..

k. The Borrower has not provided. and/or disclosed to the· F!Jnd information
on Pledged Collateral. which could be deemed or construed as insider
information, and the Fund has not received or relied upon any such
information from the Borrower and/or any other source.

3. TRANSACTION PROCEEDS AND TERMS OF FINANCING

B. Trapaaction ProC!lda. The terms of each Transaction shal be
contained In the respective Transaction and Terms Addendum(s} to be
individually executed by both parties and shall thereafter be considered a
part of and merged into this Agreement. The Pledged CollatefaJ value
multiplied by the Discount(s). being defined as uGross Transac:tton
Proceeds" and less fees being defined as '"Net Transaction Proceeds-,
interest rates. duration of each Transaction and ather appJicabfe temI$
Strut;Wred Transadlcn Agreement
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shall be detennined by the Fund based on a number of factors that will
Transaction to Transaction and from time to time. The "valy from
Transadion Balance'" is defined as the unpaid principal Gross Transaction
Proceeds plus accrued and unpaid interest. All material terms for each
Transaction shan be attached as Addenda to this Agreement and signed
by the Borrower prior to the funding and incorporated into this Agreement
The Net Transadion Proceeds may be distributed to designated accounts
of tne Borrow« as directed by the Funding Directive form at one time or
~m sequential dates through one or more trancheS in accordance with the
Transaction instructionS from the Borrower..

b. P!edae. The Borrower hereby pledges. grants, transfers and assigns to

the Fund a security interest in all of Borrower's right. title and interest in
and to (":Pledge") the foltowing described Pledged Collateral. 'NI1ether now
owned by the Borrower or hereafter acquired and whether now existing or
hereafter created:

O} All of the shares of capital stock;

(iO all cash, instruments, securities. equity interests or other property

representing a div.idend or other distribution on any of the securities
which Constitute Pledged Collateral. or representing a alStribution or
return of capital upon or in respect of the Pledged Collateral or
resulting from a split-up, merger. revision, recapitali2atio.
reclassification or other similar change of the Pledged CoUaterat
recelved or otherwise distributed in respl;!Ct of or in exchange
therefore, and any warrants, rights or ~ns issued to the holderi&
of. or otherwise in respect of the Pledged Collateral;

(iii) all. proceeds or products of any of the property of the Borrower

desCribed in subsections (i) and (jj) above of this SecHan 3(b) and.
to the extent related to any property described in said clauses or
such proceeds. all books. correspondence. records~ certificates,
instruments and other documents; and
[tv) all instruments. securities. equity intetests or other property or
rights purchased by the Borrower or the Fund with the proceedS or
products of the property described in subsections (i) and (Ii) above
of this Section 3(b). and all proceeds or prod~ thereof.

c. Pledge Absolute- The Bottower hereby agrees that this Pledge shaI be
binding upon the Borrower and that the Pledge of the Pledged Collateral
hereunder shall be irrevocable and unconditional, irrespecti\le of 1M
vatidity, legality or enforceabUity of the Agreement. any Financing Tem'I$,
Addendum or any other Transaction document. the abSence of any actiOn
to enforce the same, the waiver or -consent by th8 Fund With respect to
atr'f provision thereof, or any action to enforce the same or any other
Structured Transaction Agreement

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Crisnic Fund, S.A.

similar clrcumstances. The Borrower hereby waives diligence.
presentment, demand of payment, filing of claims wKh a court in 9\6 6VAftl
of merger Of' bankruptcy of Borrower, any notice to require a proceeding
first against Borrower or any other person, protest or notice with respect to·
the T~ction or any oU1er evidences of indebtedness secured hereby or
the Indebtedness evidenced thereby and all demands whatsoever, and
covenants that this Agreement Will remain in tuB force and effect so tong
as any Transactions remain unpaid.

d. Fund-Appoin1!d AttDmey..fn-Fac:t. The Borrower hereby appoints the

Fund as the Borrower'S attorney-in-fact, with fun power of substitution, for
the purpose of carrying out the provisions of this Agreement and taking
any actiOn and executing any' instrument that the Fund may deem
oecessary or adVisable to accomplish the purposes hereof, which
appointment is- irrevocable and coupled with an interest Without limiting
1he generality of the foregoing, the fund shall have the right and power to
sign the name of the Borrower to any financing statements. continuation
statements or other documents under the Uniform Commercial Code
relating to the Pledged Collateral and shalf have the right and power to
receive, endorse and collect all checks Clnd other mders for the payment
of money made payable to the Borrower representing any dividend.
interest payment or other distrfbution pilyable or d"JStributabI& in respect of
the Pledged. Cotlateral or any part thereOf and to give fuB discharge
therefore.

4. TReATMENT OF PLEDGED COLLATERAL

a. Upon transferring Pledged Collateral to the designated account of the

Fund as Collatetal for the Transaction, the Borrower hereby grants the
Fund the absolute right to pledge, transfer, assign, hypothecate, lend,
encumber, seu Short, or selt outright Pledged CoRaterai. as needed to
procure a Transaetion or hedge against adverse market movements. The
Fund is ~nder no obligation to sequester the Pledged CoHiatefat apart from
any other assets of the Fund, and the Fund may combine the Pledged
Collateral, in whole- or in part. with any other assets. The Borrower may
not bOYT sen, self short or engClgf! in derivative transactions related to·
Shares in any of the companies Pledged as Collateral at any time 0) within
30 days after receiving Net Transaction. Proceeds 'for the applicable
Transaction or (iJ) within 30 days of TJ"an$BCtion maturity.

b. For purposes of determining the maximum Transaction value of the

Pledged Collatenil per.mitted by Regulation U, the maximum value d the
Pledged Collateral on the day of the substitution shall be used. Any such
SUbstitution shalt require that a request for sub8titution be made by the
Borrower. The Fund shall have 30 days to evaluate 1he request prior to
denying or approving the request

Structured Transaction Agreement

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Crisnic Fundi S.A..

5-. HEDG1NG THE PLEDGED COlLATERAL SHARES

. The Fund shaD confirm by fax, phone. or electronic mail the receipt and current
market value of the Pledged CoDateraL Once confirmed. the Fund may proceed with
hedge arrangements and remit to the Borrower the Net Transaction Proceeds which is
calculated based I)fl the Pledged Collateral discount percentage ("DiScounf'). as set out
in the applicable Addendum, multipfied by the Pledged conateral value less appfieable
fees. The Net Transaction Proceeds shall be remitted by wire transfer to the account(s)
designated by the Borrower and .may CCCU1 at one time or in multiple cflSbursements as
indicated on the co~nding Addendum. The hedging process is designed to reduce
th$ exposure of both the Fund and the Borrower from adVerse Colateral valuation
changes. including vofatility. declines in Collateral 'Value and changes in the market for
'the Pledged Collateral.

6. TRANSACnON CONTINGENCIES

Borrower understands that the Fund's ability to provide financing may depend on
the Fund's secunng a hedge on the Pledged Collateral. The Fund will exercise
reasonable beSt efforts to procure a hedge within twenty-four (24) hours of receiving the
securities comprising the Pledged Collateral in·a form acceptable to the Fund. In cases
of Securities with low trading volumes or markets that -are not well developed, the
execution of these contracts may take longer than one (1) bUSiness day. Durin9 this
timei the marf<&t value of the· underlying asset to be hedged may· change in value
affecting the amount of Net TransactiOn Proceeds. Additionally, the Fund will only be
responsibte for remitting the funds against a hedged value wh~n obtained. If it appears
that a hedge cannot be obtained within -an acceptable period of time, within the
judgment of the Fund. the Fund shaD return all securities comprising 1he Pledged
CoUateml"tc Borrower as the Fund shaD determine or upon written request of Borrower.

T. TREATMENT OF INTEREST

Unless otherwise stated in any Financing Terms Addendum, interest payments

shall be fixed for the term of the applicable Transaction and shan be paid quarterly in
arrears baaed upon the principal balance. The BoI'l"OYler shall remit int:e.est paymems 10
the Fund at the address noted in the "Final Addendum provided by the fund at closing.
or as directed by the· Fund in writing. Anything in this Agreement or in any other
agreement document or note delivered in connection with this Agreement to the
contIafy notwithstanding. the interest rate chatged under this Agreement and any
interest payment received by the Fund shal not exceed the maximum rate of interest
permitted from time to time by ~icable law. In the event the Fund receiveS ftom
Bomlwer as interest any amounts that would exceed the maximum rate permitted
exceed the exceed the.maximum rate permitted by appficable law, the excess amount
will be deemed· a partial prepayment of principal and treated as such under this
Agreement Notwiths1anding the foregoing, to the full extent permitted by applicable law,
the Borrower waives the application of any law which would limit the amount of interest
payable under this Agreement

Structured Tf8f1&ad:iOn Agreement

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8. PLEDGeD COllATERAL DlVlOENOS (VOTING

AU dividends declared and paid with respect to the Pledged Collatetal fat eacn
Transaction. and/or tranche in the applicable Addendum(s) will either be (0 credited to
the Borrower, either for payment in cash or as credit against simple interest or (ii)
retained by the Fund for its own account, as specified in the applicable Addendum,
regardless of whether the Fund. pursuant to this Agreement has pledged, transferIa:f.
assigned. hypothecated. lent. encumbered, sold short,- or sold outright such Pledged
Collateral as part of itS hedging efforts.

In the eVent that any Pfedged Collateral requires that a vote be- submitted relating
to the management of a CoDateral affiliated company and the Fund has ownership
and/or possession of the Pledged Collateral. the Fund shalt exercise such rights. When
the Fund is presented with the abiity to. and in accordance with the proxy voting poticy
of the Fund. proxy votes submitted on behalf of-the Borrower shall always be voted with
the company. management

9. RIGHTS OF SUBSTITUTION

The Borrower understands that during the 1enn of each Transaction prep~
are permissible only as approved by the Fund in writing. which approval shaD be gmnted
in the- Fundis sole discr-etion. In the event that the Fund accepts the Borrower's request
for early termination or prepayment. the Borrower shall be responsible for all early
termination fees and transaction costs. At any time during the term of a Transaction,
B~ may. with the consent of the Fund pledge additional Collateral to The Fund in
substitution of any Pledged -Collateral then included in the Pledged CoIaterat. Such
substituted CollateraJ must be deemed by the Fund to be of substantially similar nature
and character, including. but not limited to, similarity in terms of value, volatility, and
maJket outlook, economic environment. trading volume, transaction costs and market-
maker diversffication. SubstitUtion costs and fees shall be determined at the time of the
Borrower's request for substitution. In no event may a proposed substitution:

(i) cause the credit extended under the Transaction to exceed the
maximum Tl3nsadion value of the Pledged- Collateral, as
prescribed by Regulation It. or

(ii) Increase the amount by which the credit extended under the
Transaction exceeds the Maximum Transaction value of the
Pledged Collateral. as prescribed by Regulation U.

10. evENTS OF DEFAULT AND REMEDIES -

a. Eytnfs of Default An Event d Default (-event of Defautr) Shall exist if

anyone or more of the following shan occur.

Structured Tnmsaction Agreement

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- (~ failure by the Borrower to pay 1he outstandin9 principaJ and interest
{"Transaction Balancej withln five (5) buSitle$$ days of the date
When due; or

(i~ If any representation or warranty made by the Borrower in -this

Agreement or in any document or Addendum furnished or executed
at the time of Closing or pursuant to this Agreement Of any other
Transaction document, including any Terms Addendum and shaI
prove to have been knowingly untrue or misleading in any material
respect at the time made; or

(iii) Default by the Borrower in the performance or observance of any

covenant or agreement contained in this Agreement -or default in
any ather Transaction document Which is not cured within any
applicable grace perlad set forth therein, if any; or

(Iv) A finalludgment for the payment of money in excess of $1.000,000

shall be rendered against the Borrower, and such judgment shaft
remain un.discharged for a period of thirty (30) days from the date
ci entry thereof unless within such thirty-day period such judgment
shall be stayed, and appeal taken there from and the eKeCUtfon
thereon stayed during such appeal; or

(v) If the Borrower shall make a general_ assignment for the benefit of
creditors or consent to the appointment af a receiver, -liquidator, -
custodian. or similar official of all or substantially of all of its
properties, or any such offiCial is placed in controf of such
properties. Of the Borrower admits in writing its inability to pay its-
debts as they mature, or the Borrower shall commence any- action
« proceeding or take advantage of or file under any federat or sfate
Insolvency statute, including. without rmilation. the United States
Bankruptcy Code. seeking to have an order for relief entered with
respect to the Borrower or seeking adjudication as a bankrupt or
insolvent, or seeking reorganization, arrangement. adjustment,-
liquidation. dlssolutfon. or other relief with respect to the Borrower
or the 8orroweta debts; or

(vi) The Transaction shall be in defauJt and cease at any time after its
execution and delhlery and for any reason to create a yarra and
perfected first-pnority security interest in and to the Pledged
Collateral or the valkftty or priority of such security interest shall be
contested by the Borrower or by any other person; or any of the
other Transaction documents shaJl at any time after their execution
and delivery for any reason cease to be in full force and e1fect or
shall be declared nuB or void, or the validity or enforceabWty thereof
shan be contested by the Borrower or by any other person; Of

Structured TransactiOn Agreement

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(Vil) The fair market value of the Pledged CoHatetaI shaI at .any time .be
less than seventy (70%) Percent of lh& (}t6lt TmMAMnn
Proceeds (regardless of whether the Fund, pursuant to this
Agreement. has pfedged, transferred, assigned. hypo~r lent,
encumbered. sold short. or sold outright any of the securities
comprising .the Pledged Collateral as part of Its hedging efforts)
and, upon five (5) business-days' written notice f'Default Noticej
from the Fund to the Borrower. the Borrower has not pfedged
additional Collateral to the Fund such that the fair tnarket value of
the Pledged Collateral is equal to or greater "'an the original
Pledged Collateral value.

b. Rights. Upon the oocurrence of an Event of DefauH, the Transaction

8afance
. 1
together with any .....
........ --3
.oM intet'est thenean I ShaH be immedistalu
,.........
due and payable without notice or demand, presentment or protest, all of
which are hereby E»epreSSly waived.

At any t!me after the oc:currettCe of an Event of Default or app6cable notice

period, the Fund shaH thereupon have the rights. benefits. and remedies
afforded to- it under any of the Transaction documents with respect to the
Pledged Cotlateral and may take. use, sen or otheMise. encumber or
dispose of the Pledged Collateral as if it were the Fund's own property.
The Borrower agrees that the Fund may or may not proceed. as it
determines in its sole discretion, with any or all other rights. benefits. and
remadie$- which it may ·have against the Borrower. Anything herein to the
-- '. contrary notwithstanding. (but except as provided belo!Nl. the Fund
agreest for itsetf, its representatives. successors. endorsees and assigns,
that
Neither the Borrower, nor any representatives, successors, 8$Signs or
affiliates of the Borrower. shall be personally or corporately (if the
Borrower is a COIpOfate entity) Hable for the Transaction Balance; and (ii)
the Fund (and any such representative, successor. endorsee or assignee)
shall look to the Pledged Collateral and/or the other instruments of
security, including an option contract that gives the Fund the right to sell a
certain quantity of 1I1e urrderMn9 security to the writer of the optiOn at a
specified price up to a specified date hereafter referred to as a rPut") and
the hedging transaQions of tt1e Fund, that secure the Transaction for
payment of the Net Transaction Proceeds. and will not make any cfaim or
instiMe any action or proceeding against the Borrower (or any
representatives. successors. assigns or affiliates. eX BorrOllJer) for- any
deficiency remaining after .collection ,upon the Pledged Collateral,
provided. however, and notwithstanding the foregoing. the Borrower is and
will rsmain personaUy or corporately liable for any deficiency remaining
after collection of the Pledged CoJJateraI to the extent of any ~ suffered
by the Fund, or its representatives, successors. endorsees or assigns, if
such loss is caused by the Borrower based in whole or In part upon:
Structured Transadion Agreement

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(Q Damage arising from any fraud l misrepresentations or the breach at

any material covenant or agreement;

(ii) Damage to the Pledged Collateral resulting from gross negligence

or intentional acts;
(iii) Failure to pay taxes Of other property-related liens; or

(iv) Damages arising from the fa~ure to comply with any and aU Jaws.

11. BORROWER OPTIONS AT END OF TRANSACTION TERM

At the end of the teRn of the Trsnsaction. the Borrower may exercise any of the
following options:

a. Pay the Transaction Balance in full by paying (i) the prii1dpal Transaction
·Balance. (i) any and all interest and charges that have accrued as of that
date. Upon payment of the Transaction Balance Amount in full in
aecordance with this agreement and/or as outlined in the ~lnal
Addendum~ at closing, Fund wit defiver to Borrower the Pledged
Collateral. In the event that Pledged Collateral includes one or more
stacks, the number of shares of each stock pledged as Pledged CoBatera~
shall be adjusted for any stock- sptits reverse splits, mergers. spin-offs. or
j

similar changes affecting the Borrower's. position as benefiCial owner of the

securities. When Pledged Collateral includes stock. the ("PortfoliO Market
Value' is Ihe amount equal to the sum of the amounts detemlined by
multiplying (x) the number of shares of each stock which constitutes pa1
of the Pledged Coltateral by the closing ~. of that sfDck on the maturity
date of the Transaction as defined in the Transaction and Terms
Addendum(s):

tnfonn the Fund in writing by registered maR of the Borrower's intent not to
repay the Transaction Balance, choosing instead to forfeit the entire
Pledged Collateral Portfolio to the Fund, including aU embedded Puts and
other hedging transactions which were transacted by the Fund with
respect to the Transaction, with no contingent liability; or

UpDn mutual consent of the Botrower and the Fund. renew this Agreement
. for an additional period of time as provided in section 13 below.

b. In addition to the above there are prepayment option windows beginning in

month 24, 36 and 48 with 60 days written notice.

c. On the. 24th month of the loan term (36 months before the loan amount
becomes due). Borrower shaft have the right to prepay the total
outstanding loan amount along with any and aU interest and charges that
StnJctunid Transoiction Agreement
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have accrued·. of th.n date. Thi; right Is absOlutely conditional on the
BomrNer to notify 1he Fund. in writing, 60 days before the 2411\ rnontn. 01
their intention to repay the full lOan amount The fa~ure of the Borrower to
give thiS notification at least 60 days before the 24th month of the loan
term, and thereafter whenever the Borrower intend$ to repay the total
outstanding loan amount along with any and aU interest and. charges that
have accrued as of that date wiD result In a loss of the Borrower to prepay
the loan amount at that time. Upon prepayment in accordance with this
section Borrower shall have the right to the deliverance of the Pledged
Collateral in accordance with this agreement.

12. NOTICE AT END Of TRANSACTION TERM

The Borrower agrees to inform the Fund in WItting and by registered mail of the
Borrower's decision either with respect to the options described in Section 11 above.
Should the Borrower desire not to repay the Transaction Balance. the Borrower shall
notify the fund in writing. by registered mall of its intention to forfeit the Pledged
Collateral no Jess than thirty (30) days prior to the end of the specified Transaction term.
Should the Borrower fail to provide such timely notice of the Borrowers intent, the Fund
shaH automatically liquidate the Pledged Collateral and any embedded Put or hedge
instrument which was transacted by the Fund to cover any unpaid prtncipal and interest
13.. RENEWAL OPTIONS AT END OF TRANSACTION TERM

At maturity. and by mutum consent of the Borrower and the Fund. the parties
....,p. . . -
mCIY renew this Agreement for a period r.I time no tess .than twenty three (23) monthS or
greater than five (5) years. This Agreement may be renewed multiple times for VSlYtng
Transaction terms, subject to the foRowtng conartions:

S. if the market value of the Pledged CoIlaterat is greater than all .amounts
due under this Agreement and both the Borrower and the Fund consent to
renewal, the Borrower will reQeive new Net Transaction Proceeds based
on the appreciated Pledged CoJfateraI value at the time of renewal. The
Fund Will then retain outstanding principal under the Transaction and any
Cap Differential Amount, and retum any excess fund$ to the Borrowerr

b. If the Il'I8I1<et value of the Pledged Collateral· is equal to or less than the
aggregate Transaction principal and interest and. the Borrnwer and the
Fund consent to renewal. the Borrower need not pay the Fund any
outstanding PrinCipal Transaction balance. but may instead pay a renewal
fee to the Fund. Renewal fees shall be based On market ~
existing at the time and negotiated by the parties.
c. Renewat interest rates and other Transaction terms may differ from the
original Agreement. the exact terms of which will be set forth on updated
Transaction and Terms Addenda and detennined by market conditions at
.the time.
SII'uctured Transadfan .Agreement
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erisnie Fund, S.A.

d. If the Borrower and the Fund ace unable to agree upon a renewal fee or
other renewal Transaction terms-, Sonower shall elect one of the additional
options setforth in Section 11(8).

14. ADDITIONAL ASSURANCES

a. The Fund agrees to return aU securities which constitute the Pledged

Collateral. as set out and defined in the appRcabie Addendum. upon the
Borrower's satisfying in full aU outstanding Transaction balances, including
principal, interest and any cap Differential Amount

b. The .Fund's obligation to retum Pledged CoUateral at Transaction maturtty

may be secondarily guaranteed by one or more private· third party
guarantors. The guarantors have represented and evidenced to the Fund
that they have sufficient aesets to provide additional financial support to
the Fund and an additional guarantee of the redelivery of Pledged
Collateral at Transaction maturity, if necessary. Guaramot'S are priv8tely
owned entities and as such file no pubjic financial intorrnation, are not
required to ~ister with any State or federal regulator and do not publish
aud"1ted financial statements. AlthOugh the Fund's management believes
that guarantors can provide this additional guarantee. the Borrower should
consider- that these third parties have additional. investment relationships
and aedit obfig~s that may impede their ability to provide financial
support to the Fund reQUired to re-detiver Pledged Collateral in the· event
that such support is needed. ·.further, in addition to the assets of the
guarantors. addltiona) substantial support in providing this secondary
guaranty 10 the Fund exists because of one or more third party banking
relationships, certain credit facilities and Fund business relationships.

15. lNDEMNIFICAnON

Whether or not the Transactions contemplated hereby are consummated. the

Bom:lwer hereby agrees to indemnify the Fund, any affiliate of the Fund and their
respective managers, directors, officers, employees, agents, counsel and· other advisors
(each an -Indemnified Person") against, and hold each of them harmless from, any and
all liabilities, obligations, losses. claims. damages. penalties, actions, judgments. suits;
costs, expenses or disbursements of any kind or nature whatsoever, including the
reasonable fees and disbursaments of counaej to an Indemnified Person (Including
alocated costs of i'rtemal courisel), which may be impOsed on, incurred by, or asserted .
against any Indemnified Person. (i) in any way relating to or ariSing out of any of this.
Agreement and other· T-ransaction dOCUments executed and to be executed by the.
Borrower, the use or intended use of the proceeds of the Transaction, or the
Transactions contemplated hereby or thereby, or (ii) with respect 10 any investigation.
litigation or other proceeding relating to any of the foregoing, irrespective of whether1he
Jndemn~. Pe~ ~han be designated a party thereto (collectively, the Itfndemnified
Llabilities-): provided that the Borrower shaH not be liable to any Indemnified Person for
, Situctured Ttansadio!'1 Agtaement .
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Crisnie Fund. S.A.

any portion of sucI1 tndemrrified Liabitifies to th& extent they are found by a final decisfon
of a court of competent jurisdiction to have resulted from such Indemntned. Person's
gross negligence or wijllful misconduct. If and to the extent ,that the foregoing
indemnifiCation is for any reason hekJ unenforceable, the Borrower agrees to make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicabfe law.

16. TAX TREATMENT

The Fund. including Its managers, directors, officers, employees. escrow agents,
affiliates. counsel and other advisors, makes no representation as to hOW the
Transaction(s) might be treated for federal, state or local tax purposes. The
Transaction(s.) mayor may not be considered a taxable event. The Borrower
acknowledges 'that the Fund has not offered the Borrower any tax advice and that the
Borrower has the sole responsibility for consulting indepe~ tax advice and shafl not
rely on the Fund for such purposes. Since. the Borrower retains SOle responsibility for the
determination of federal, state and !ocal tax consequences of any Transaction to which
the BorraNer is a party, the Borrower agrees tb release the Fund and hold it hannless
against any and all dalms relating to such tax consequences.

17. LEGAL ADVICE

Borrower acknowledges that the Fund. including its m~. directors, offICers.
employees. affiliate&. counsel and other advisors, has not offered or provided the
Borrower with any legal counsel and that the Borrower has the sole responsibility for
obtaInUtg its own independent legal advice before proceeding with any Transaction or
executing this Agtaement.

18. tNYESTMENT ADVICE

The Borrower acknowledges that the Fund is not, and has not offered to act as,
the Borrowers investment adviSOr and that the Borrower has not looked to the Fund as
such. - Specifically, the Fund has not recommended that the Borrower purchase~ sell or
pledge any particular Pledged Coflateraf incfuding stocks, bonds or other securities.

19. CURRENCY

Unless otherwise specified in a Financing Terms Addendum,' the base currency

, for -any transaction pUrsuant to this Agreement is the ~nited states Dollar (USO).

20. 'ASSIGNMENT

The Fund may assign or ptedge this Agreement as necessary to -perfonn normal
business functions. The Borrower agrees to asslst in completing documents. if
necessary, to 'effect such assignment or to otherwise complete this transaction. The
Borrower may not assign its rights or intere&t in this Agreement Without the prior-written
consairt of the Fund which consent may be withheld for any reason.
Stnlctw'ed Transaction Agreement
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Crisnic Fund, S.A.

21. PROPER LAW

This Agreement shall be interpreted in accordanCe with the laws of the State at
Georgia, unless both parties mutuany agree on another jurisdiction.

22. WAIVER OF1MMUHtTIES

The Borrower irrevocably waives, to the fuUest extent permitted by applicable law.
with respect to itself and its revenues and assets (irrespective of their use or intended
use). all immunitY on the grounds of sovereignty or other similar grounds from Q} suit, (ii)
jurisdiction of any court, (iii) relief by way of injunction. order for ~ffic performance or
for recovery of property. {iv} attachment of its assets (whether before or after judgment)
and (v) execution or enforcement of any judgment to which it or its ~venues or assets
might f:)thelWfse be entitled in any proceeding ~r in the courts of any
jurisdiction and irrevocably agrees. to the extent permitted by·applicable law, thafit Will
not clam any such immunity in any such proceeding. -

23. IIODIFICAnON BY MUTUAL CONSENT

This Agreement may be modified by mutual wmt6n consent of -both parties.

including su~uent Transaction Addenda.
24. SEVERASU..ITY

To the extent·eny.. provision of this Agreement is prohibited by or invafid u~e(

applicable- taw~ such provision shall be -ineffective to the extent of such prohibition. or
invalidity, without invalidating tOe remainder of such provision or the remaining
provisions of this Agreement

25. BINDING EFFECT

All of the terms of this Agreement, as amended from time to time. shall be binding
upon, inure 10 the -benefit of and be enforceable by the respective heirs, successors,
and assigns of the Fund and Borrower.

26. EXECUTION IN COUNTERPARTS

This Agreement and any joint written dimction, such as Addenda may be
execUted in co~rts. which When so executed shail constitute one
and the same
agreement or direction.
27. OFFICIAL ADDRESSES

-The Botrower's official address, telephone and facsimile numbers for notifications
regarding this Agreement and related 1ransadions is:

Structured Transaction Agreement

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Crisnic Fund, S.A.

KexuanYao
One Waters Drive Suite 98
San Mateo, CA. 94403
Tefephone: 650-212-7620

The Funcfs administrative office address, telephone and facsimile numberS tor
n~ regarding this Agreement and related transactions is:
Crisnic Fund. SA C/O lexperts AbogadOs
ConHoteI Office Center Office 5
Sabana Norte. San Jose, Costa Rica
Telephone: 506-2282-7352
Fax: 506-2291-4951

28. ARSfTRATION CLAUSE

In the event that a dispute or controversy regarO'mg this Agreement or the

accomplishment of transactions hereunder is not resolved by good faith discussion
between the parties, then the matter shaH be feSOfved by binding arbitration conducted
in accordance with the current rules of the American Arbitration Association which
arbitration shalf be conducted In Atlanta. Georgia or at such other location as may be
agreed to by the patties. .

No person shaD bring a punitive or certified class action to arbitration, nor seek to
enfOrce any pr&-dispute arbitration agreement against any person who has initiated in
.court. punitive class action; or Who is s' member of a punitive class who._ not opted
out of·the class with (espect to any claims encompassed by the punitive ~ action
until: {i) the class certification Is denied; or ~~ the cfass. is decertified; or· (ii) It1&
Borrower is .excluded fi'Dm the class by the court. Such forbearan~ to enforce an
agreement to arbitrate shan not conatitUt& a waiver of any rights under thiS Agreement
except to the extent $fated herein.

29. ENnRE AGREEMENT

This Agreement and the Addendurn(a) hereto constitute the entire Agl'88ment
between the parties relating to the Funding of a Transaction and sets forth in its entirety
the obligations and duties of the respectiVe parties.

III
III

Structured Tran&aCtion Agreement

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Crisnic Fund, SA.

N WITNESS WHeREOf, the parties have caused this Agreement to be executed by

1.tletr respective offIcer's thereunto duty authorized, as of the date first aboVe written.

FUND

~~~~
Name: 'fa
TttJe: Portfolio Manager

BORROWER
KaxuanYao

... '

WITNeSS
By: Date: _ _ __
Name:_..... _ _ _ _ __

~ Tntrlsaction Agreement
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 Case 8:10-cv-01299-AG -JCG Document 14-7 Filed 09/10/10 Page 18 of 20 Page ID
#:549
CALIFORNIA ALL-Pl.1RPOSE ACKNOWLEDGEMENT
I
, State ore.Wanda
! County ofS.. ~teo
On 111t tilly of Jmae, 1010 before me, 4ltgn 411nnri (the Notary Public), pmonaJ.ly appean:d
Xmn Xao.. proved tD-me on the basis ofsatisfactmy mdence to be the ~ whose name is
subseribed 10 the within instrument and aclmow1edged 10 me that he executed the same in his
authoriHd capacity. and that by his signature on the instnn'nent the person. or the entity upon beba1f of
which the person icted. executed the instnJment.
I

~ certifyunder' Penalty ofPerjwy UDder the

laws oflbe Stale.ofCalifumia that the
foregoing parasraph is true and com:cl"
WITNESS my hand and official seal.

Doeummtl Bxecution Date: Joe 21, 20Ut

Signs(s) Ot:het Than Named Abov~ Nt"
c.-padty{lea) CbiiDed by Sfper

Slprs NIIIIII:
Q~
·Il Corporate omecr - Titlc(s) _ __
Q Partner -I I l..imitm 0 Oenenl
u AUomey in Fact
a Trustee
IJ Guantian or Conservator
Q ~------------------

:Notary Semee·.Provtdeci ]ly:

. . . . . .. , I_F_OIyIlk1l.,Sddl........... C~,CU+lolM T..t:(69).'MI.... F_t658f34141le

------ ------ ------ ----- - - - - - .------ -_ - ..

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Crisnic Fund! S.A.

EXHIBIT A
Definition of Accredited IOYi§tOr

The Borrower represents that Borrower fa qualified . . an Ac:creditild Investor.

"Accredited Investor" shall mean any person who comes within any of the foJloWing
categories.- or Who the issuer reasonabty believes comes within any of the following
categ~ at the time of the sale of the securities to that person:

1. Any bank. as defined in sedion 3(a){2) of the securities Act. or any

savings and Transaction association or other institution as defined in section 3(a)(5)(A)
of- the Securities Act whether acting in its individual or fiduciary capacity; any broker or
dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any
insurance company as defined in section 2{13) of the Securities Act; any tnvestment
company registered under the Investment Company ACt of 1940 or a business
devefopment company as defined in section 2(a)(48) of that Act; any Small Business_
Investment Company licensed by the U.S. Small Business Administration under sectiOil
301(c) 0,. (d) of the Small Business 1nvestment Ad of 1958; any pJan estabfl6hed and
maifltained by a state, its political subdivisions., or any agency or instrumentality of a
state or Its pOJlticaI subdivisions for the benefit of its- emptoyeeS. if such plan has totaJ
assets in excess of $5,000,000; any emplo~ benefit plan within 1he ~ftin9 of the
Employee retirement Income Security Act of 1974 if the inves1ment decisioi1lS made by
a ptan fiduciary, as defined in section 3(21) of such Act, which is either a bank. savings
and Transaction association, Insurance company, or registered investment adviser, or if
the employee benefit plan has total assets-in excess of 15,000,000 or, if a seIf-directed
pJan, with- inVestment decisions made solely by persons that are accredited investcn;

2. Any private business development company. as defined in section 202(a}

(22) of the Inves~ Adv$e1's Act of 1940;

3. Any organization described in Section 501 ee) (3) of the Jntemat Revenue
COde. limited liability company. Massachusetts or similar busil'le$S-trust, or partnership.
not formed for the specffic purpose of acquiring the securities offered. with total assets
in excess 01-$5,000,000;

4. Any director, executive officer, ot general partner of the issuer of the

securities being offered or sold, or any director. executiVe officer, or general partner of a
general partner of that issuer; -

5. My natural person whose individual net WQI1h, or joint net worth with that
persOn's spouse._ at the time of his purchase exceed $1,000,000;

6. Any natural person who had an incfMduat income in excess of $200.000 in

each of the two most recent years or joint income with that person's spouse-In excess of
$3O{),OOO-in each of those
StrucbJred Transaction Agreement
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Crisnic Fund, S.. A.

years and has a reasonable expectation of reaching the same income level in the
current year; .

7. Any trust, wiUl total assets in excess of $5,000,000, not formed for the
$peCifjc purpose of acquiring the securities offered whose purchase is directed by a
sophisticated person as described in 17 C.F.R. § 230.5G6(b)(2)(ii)~ and

8. Any entity in which all of the equity owners are accredited investors.

1/1

S1ructured Transaction Agreement

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