EQUITY TRANSFER AGREEMENT
This
EQUITY TRANSFER AGREEMENT (the “Agreement”) is executed by the following parties
on Xxxxx 00. 0000 xx Xxxxxxxx Xxxx, Xxxxx Xxxxxxxx, Xxxxx:
Party
A : Wiselink
Holdings Limited
Registered
address:
00/X
Xxxxxxxxxx Xxxxx, Xxx Xxxxxxxx, 00 Xxxxxx Xxxxxx, Xxxxxxx,
Xxxx
Xxxx
Duly
authorized representativeæMr.
Chen
Hanlin
Party
B : Great
Genesis Holdings Limited
Registered
address: 0/X,
Xxxxxxxx Xxxxxx00
Xxxxxx
XxxxxxxXxxxxxx,
Xxxx Xxxx
Duly
authorized representativeæMr.
Chen
Hanlin
Party
C:
Hubei
Wanlong Investment Co., Ltd
Registered
address:
Xx.
0,
Xxxxxxxx Xxxx, Xxxxx, Xxxxx
Duly
authorized representativeæMr.
Xxxxxxxx Xx
And
Party
D:
Xx.
Xxxx Xxxxxx, a PRC citizen and resident in his capacity as the controlling
shareholder of Party A and Party C
Party
A,
Party B , Party C and Xx. Xxxx Xxxxxx are hereinafter jointly referred to as
the
“Parties”.
WHEREAS,
Party A is the 35.5% equity interest owner of Jingzhou Henglong Automotive
Parts
Co., Ltd. ( “Henglong”), which it received from Party C, and Party A agrees to
transfer and assign the aforementioned 35.5% interest to Party B, and Party
B
agrees to purchase and accept the same after friendly negotiations. Party C
is
receiving a separate consideration outside this Agreement as consideration
for
entering into this Agreement. Party C acknowledges the receipt and sufficiency
of such separate consideration. Subject to the terms and conditions of this
Agreement, the Parties agree as follows:
1.
Representations and Warranties
1.1
Party
A and Party C’s representations and warranties
Party
A,
as well as its affiliated company, Party C, jointly represent and warrant to
Party B that all the equity
transferred under this Agreement are legally and validly owned by Party A;
in
addition, the equity transferred is free from and clear of any pledge or other
encumbrance, and no third party enjoys any rights of and claims to the
transferred equity. If the above representations and warranties are untrue,
Party A and Party C will jointly take any responsibility arising therefrom.
1.2
Party
B’s representations and warranties
Party
B
represents and warrants to Party A that it will pay the Purchase Price for
the
transferred equity as provided by this Agreement.
1.3
Xx.
Xxxx’x representations and warranties
Xx.
Xxxx
shall execute and deliver a Representation and Warranty Letter in the form
attached as Annex I herein for the benefit of Party B on the execution date
of
this Agreement.
2.
Basis date
For
accounting purposes, the Parties agree that December 31 2007 was the basis
date
of the equity transfer transaction under this Agreement.
3.
Transfer of equity
The
Parties agree that Party A shall transfer the 35.5% equity interest in Henglong
to Party B subject to the terms and conditions of this Agreement. For the
avoidance of doubt, issuance of additional shares under Section 4(ii) will
follow after the 35.5% equity interest in Henglong has been transferred to
Party
B.
4.
Equity purchase price and its payment
The
Parties agree that the purchase price for the transferred equity
is
United States Dollars 32,090,000 (the “Purchase Price”). United States Dollars
10,000,000 shall be paid in cash, and the remaining United States Dollars
22,090,000 shall be paid by issuance of common shares of China Automotive
Systems Inc. (Nasdaq: CAAS), in its capacity as the parent company of Party
B in
the manner described in the next sentence. The Purchase Price shall be paid
as
follows: (i) The cash portion shall be paid by Party B in full and 1,170,000
shares of CAAS (equivalent to about 4.9% of CAAS outstanding shares) will be
issued by CAAS to Party A, both within thirty (30) days after the execution
of
this Agreement, and (ii) the remaining 1,853,542 shares of CAAS will be issued
after obtaining any necessary shareholder approval as required by Nasdaq rules
or otherwise, as applicable, either at a meeting of shareholders or by written
consent of sufficient shareholders, and will only be issued if such approval
is
obtained. The price per share of the above common shares shall be deemed equal
to the volume weighted average price (VWAP) per share of CAAS common share
calculated with respect to the twenty (20) days prior to the announcement of
this transaction on January 22, 2008. As VWAP has been determined to be $7.3060,
the total number of shares to be issued will be 3,023,542. CAAS will take all
steps necessary to obtain the requisite shareholder approval for issuance of
1,853,542 shares, and, in the event of a shareholder meeting, to recommend
approval. If shareholder approval for the 1,853,542 shares of CAAS is not
obtained within one year from the execution of this Agreement for whatever
reason, Party B shall issue Party A a subordinated non-interest bearing
promissory note payable in three years in a principal amount based on 1,853,542
shares multiplied by the VWAP per share of CAAS common share calculated with
respect to the twenty (20) days prior to the one year anniversary of this
Agreement, but in no event greater than United Sates Dollars USD13,541,978.
5.
Rights and obligations
The
Parties agree, commencing from January 1, 2008 through the date on which Party
B
is officially approved and registered as the owner
of the
35.5% equity interest
transferred herein, Party A shall hold and enjoy the rights and interests
attached to the 35.5% equity interest in Henglong transferred to Party B on
trust for the benefit of Party B, including without limitation payment by Party
A of all dividends received from Henglong during the above period to Party
B,
and Party A shall exercise all rights enjoyed in its capacity as an equity
owner
of Henglong in accordance with the written instructions of Party B.
Once
Party B is officially approved and registered as the owner of the 35.5% equity
interest transferred herein, the rights and obligations of Party B as the owner
of such equity shall be deemed to commence from January 1, 2008.
6.
Breach of agreement
If
any
Party does not fully and appropriately perform its obligations under this
Agreement, it shall assume liabilities for breaching this Agreement. The
breaching Party shall compensate the Party not in breach for the losses and
damages incurred.
7.
Amendment and termination
The
Parties can amend or terminate this Agreement upon the occurrence of any of
the
following events after concluding a written agreement for amendment or
termination:
a.
Any
Party is prevented from performing its obligations under this Agreement due
to
force majeure or due to other objective reasons beyond its reasonable control;
or
b.
The
Parties reach an agreement due to a change of circumstances.
8.
Applicable law and dispute resolution
8.1
This
Agreement is governed by the laws of China.
8.2
The
Parties shall first resolve any dispute arising out of or in connection with
this Agreement through friendly negotiations. If the disputes cannot be resolved
after negotiations, the Parties shall submit their disputes to the Arbitration
Committee of Jingzhou City, Hubei Province, China ( the “Jingzhou Arbitration
Committee”). The disputes shall be arbitrated in accordance with the arbitration
rules of the Jingzhou Arbitration Committee. The arbitral award of the Jingzhou
Arbitration Committee shall be final and binding upon the Parties as to their
dispute.
9.
Effectiveness of this Agreement
This
Agreement will come into effect after signing by the duly authorized
representatives of the Parties, and after obtaining approval of the competent
foreign investment authorities in China.
9.
Miscellaneous
This
Agreement shall be executed in eight (8) originals and each party shall hold
two
(2) originals.
IN
WITNESS WHEREOF, this Agreement is executed by the Parties on the date first
above written.
Party
A : Wiselink
Holdings Limited
Duly
authorized representative:
/s/
Xxxxxx Xxxx
Party
B : Great
Genesis Holdings Limited
Duly
authorized representative:
/s/
Xxxxxx Xxxx
Party
C:
Hubei
Wanlong Investment Co., Ltd
Duly
authorized representative:
/s/
Xxxxxxxx Xx
Party
D: Xx. Xxxx Xxxxxx
/s/
Xxxxxx Xxxx
Annex
I Representations and Warranty Letter
Dated
as of March 31, 2008
I,
Chen
Hanlin, acknowledge that as a PRC citizen and resident who owns and controls
offshore companies which in turn make investment in the PRC, I must
comply
with relevant PRC laws and regulations, particularly the Circular
on Issues Concerning the Administration of Foreign Exchange in Financing and
Round-trip Investment by Domestic Residents Through Offshore Special Purpose
Companies (“Circular 75”)
issued
by the State Administration of Foreign Exchange of the PRC on 21 October 2005
and effective as of 1 November 2005, as amended and supplemented from time
to
time. I hereby represent and warrant to Great Genesis Holdings Limited and
China
Automotive Systems, Inc. that I shall make relevant registrations stipulated
under Circular 75, and all dividends and interest that should be enjoyed by
Party B as to all of its equities in Henglong will not be affected or
compromised by my violation of Circular 75 or other relevant laws and
registrations.
Chen
Hanlin:
/s/
Xxxxxx Xxxx
