English Translation) April 2, 2007
Exhibit
10.2
(English
Translation)
April
2,
2007
|
The
Transferor:
|
Xxxxx
Xxxxx
|
|
The
Transferee:
|
CHINA
SAFETECH HOLDINGS
LIMITED
|
|
Party
C:
|
CHINA
SECURITY & SURVEILLANCE TECHNOLOGY,
INC.
|
|
of
All
Issued Shares
of
Chain
Star Investments Limited
|
This
Equity Transfer Agreement(the “Agreement”)
is
entered into by the following parties on April 2, 2007:
|
(1)
|
Xxxxx
Xxxxx
whose address is Unit 31, 5/F, Sing Win Xxxxxxx Xxxxxxxx, Xxx.00-00
Xxxxx
Xxx Xxxxxx, Xxxxxxx, Xxxx Xxxx (the “Transferor”);
|
|
(2)
|
CHINA
SAFETECH HOLDINGS LIMITED,
a
company incorporated in British Virgin Islands, whose address
is
X00, Xxxxx Xxxxx, Xxxxxxx Xxxxxx Special Zone, Futian District, Shenzhen
(the
“Transferee”);
|
|
(3)
|
CHINA
SECURITY & SURVEILLANCE TECHNOLOGY, INC.,
a
company incorporated in Delaware, United States, whose address
is X00,
Xxxxx Xxxxx, Xxxxxxx Xxxxxx Special Zone, Futian District,
Shenzhen
(“Party
C”);
|
|
|
The
Transferor, the Transferee and Party C above shall be individually
referred to as a “Party”
and collectively referred to as the “Parties”.
|
|
WHEREAS
|
CHAIN
STAR INVESTMENTS LIMITED,
a
limited liability company legally organized and validly existing
under the
Company Ordinance of Hong Kong, whose information is listed as Exhibit
I
(“Chain
Star”),
and all of its issued shares are beneficially held by the
Transferor.
|
| WHEREAS |
Chain
Star invests and establishes Shenzhen Hongtianzhi Electronics Co.,
Ltd., a
wholly foreign owned company legally organized and validly existing
under
the laws of People’s Republic of China, whose information is listed as
Exhibit III (“Hongtianzhi”),
and all of its issued and outstanding shares are beneficially held
by
Chain Star.
|
| WHEREAS |
The
Transferee desires to purchase from the Transferor and the Transferor
desires to transfer to the Transferee 100% issued shares of Chain
Star.
Upon completion of the transfer under this Agreement, the Transferee
shall
indirectly and fully acquire 100% equity and control power of
Hongtianzhi.
|
| WHEREAS |
The
Transferor and the Transferee have entered into Letter of Intent
of equity
transfer (“Letter
of Intent”)
on October 2, 2006.
|
NOW,
THEREFORE,
the
Parties hereby agree as follows:
1
Article
1 Definitions
| 1.1 |
Unless
otherwise defined in this Agreement, the following terms shall have
the
meanings indicated as follow:
|
|
“Company
Ordinance”
|
means
Chapter 32 Company Ordinance of the laws of Hong Kong;
|
|
|
“Shares
for Transfer”
|
means
1 common share of Chain Star owned by the Transferor to be transferred
from the Transferor to the Transferee under this Agreement, constituting
100% issued shares of Chain Star (for details please refer to Exhibit
II -
Part A);
|
|
|
“Equity
Transfer”
“Balance”
|
means
100% issued shares of Chain Star to be transferred from the Transferor
to
the Transferee under Article 2.1 hereof;
Refers
to Article 3.2.1(2);
|
|
|
“Total
Transfer Price”
|
means
total price paid to the Transferor by the Transferee under Article
3.1
hereof;
|
|
|
“Closing
Date”
|
April
2, 2007;
|
|
|
“Accounts
of Chain Star”
|
means
management and financial statements of Chain Star as of December
31, 2006,
the copies of which are attached as Exhibit A hereof;
|
|
|
“Hongtianzhi
Accounts”
|
means
financial statements of Hongtianzhi as of December 31, 2006 verified
by
PRC auditors, the copies of which are attached as Exhibit B
hereof;
|
|
|
“Business
Day and Working Hours”
|
||
|
“PRC”
|
means
People’s Republic of China;
|
|
|
means
Hong Kong Special Administrative Region of PRC;
|
||
|
“HKD”
|
means
legal currency of Hong Kong;
|
|
|
“USD”
|
means
legal currency of United States;
|
|
|
“RMB”
|
means
legal currency of PRC.
|
2
| 1.2 |
In
this Agreement:
|
| (i) |
Any
rule or law involved herein shall include any and all amendments,
supplements or reenactments hereof from time to
time;
|
| (ii) |
Words
and terms contained in Companies Ordinance shall be interpreted according
to definitions stipulated in Companies Ordinance except as otherwise
defined or stated in this Agreement, however, any amendment or change
to
Companies Ordinance shall be excluded which is not enforced before
or on
the date to execute this Agreement.
|
| (iii) |
Single
word also include plural meaning; word referred to any gender also
include
the other gender and neuter, word referred to person also include
groups
(legal person or non-legal person) and (under every circumstance),
vice
versa;
|
| (iv) |
Here
above mentioned the parties, descriptions, exhibits, appendices and
terms
and conditions shall be respectively referred to the parties,
descriptions, exhibits, appendices and terms and conditions hereof;
and
|
| (v) |
The
headings and table of contents in this Agreement are provided for
reference only and will not affect its construction or
interpretation.
|
Article
2 Equity Transfer
| 2.1 |
As
per stipulations in this Agreement, the Transferor, as the actual
interest
holder of all outstanding shares of Chain Star (for more details
please
refer to Part A, Exhibit II), shall transfer such shares to be transferred
to the Transferee (for more details please refer to Part B, Exhibit
II).
After such transfer, the Transferee will own 100% outstanding shares
of
Chain Star.
|
| 2.2 |
Upon
the completion of transaction hereunder, Shares for Transfer shall
not be
attached with any mortgage, lien or property encumbrances of any
form, and
Shares for Transfer shall be transferred with all rights attached
and
accumulated thereto, including all dividends, profits, the investment
in
Hongtianzhi by Chain Star and relevant benefits accumulated and
distributed from the completion
date.
|
Article
3 Transfer Price
| 3.1 |
Transfer
Price
|
|
The
Transferor and the Transferee agree, the Transferor shall transfer
to the
Transferee Shares for Transfer. In return, the Transferee shall
pay to the
Transferor Total Transfer Price of RMB250,000,000,
including RMB125,000,000 in cash and shares of Party C listed on
US OTCBB
with the value of
RMB125,000,000.
|
| 3.2 |
Payment
|
| 3.2.1 |
The
Transferee shall pay Total Transfer Price to the Transferor as
follows:
|
| (1) |
The
Transferee has paid to the Transferor RMB12,500,000
on October 16, 2006.
|
3
| (2) |
The
Transferee shall pay the remaining price of RMB112,500,000 (“Balance”)
at one time on the execution date of this
Agreement.
|
| (3) | The Transferee (through the parent company, Party C) shall issue restricted shares equal to RMB125,000,000 to the Transferor or his designees within ninety days from the execution date of this Agreement, and the share value shall be calculated on the average closing price (USD5.77/share) of twenty trading days prior to the execution date of the Letter of Intent, which means that the Transferee shall issue totally 2,800,711 shares to the Transferor. The Transferor shall pledge corresponding shares to the Transferee under Article 5.2 hereof. |
| (4) | In addition, if net profits of Chain Star and Hongtianzhi in 2006 audited by US auditors are lower than RMB 15,000,000 or although such net profits reach RMB 15,000,000, net profits plus received tax refund are lower than RMB 20,000,000, then the Transferor shall refund the price to the Transferee at corresponding proportion. Such proportion shall be calculated as follows: for example, if net profits actually achieved by Chain Star and Hongtianzhi in 2006 plus received tax refund are RMB 19,000,000, then the price to be refunded shall be: ø2,000-1,900÷÷2,000×250,000,000 = RMB12,500,000, among which, 6,250,000 shall be cash and 6,250,000 shall be equivalent shares. |
| 3.2.2 |
The
Transferee shall send the Balance to the following bank accounts
designated by the Transferor:
|
|
USD
Account
Account
Name: XXXXX XXXXX
Account
No.: 000-000000-000
Bank:
HSBC
Address
of the bank: XX00-0, Xxxxx Xxxxxx Xxxxx, The Wood, 8 Xxxxxxx’x Street,
Hong Kong
SWIFT:
XXXXXXXXXXX
|
4
| 3.3 |
Exchange
Rate
|
Cash
of
the total transfer price shall be paid by the Transferee to the Transferor
in
USD. Exchange Rate of RMB against USD shall be 1æ7.7351.
Article
4 Closing
| 4.1 |
The
equity transfer shall be completed on the Closing Date at the place
stipulated by both parties in accordance with Exhibit
V.
|
| 4.2 |
Terms
and conditions to be performed hereof shall remain in force after
the
Closing Date.
|
| 4.3 |
From
the Closing Date, Debts and Credits and all risks of Chain Star and
Hongtianzhi shall be promptly borne by the Transferee (except otherwise
undertaken by the Transferor in Exhibit
IV).
|
| 4.4 |
From
the Closing Date, the Transferee shall have the right to consolidate
profits of Chain Star and Hongtianzhi to accounts of the Transferee
group.
At the meantime, the Transferee shall have the right to send manager
or
financial person, or authorize, appoint exsiting personnel of Chain
Star
and Hongtianzhi to take charge of management and operation of Chain
Star
and Hongtianzhi as well as all files, materials, financial documents
and
so on. The Transferor shall not enjoy any right and/or interest as
shareholder of Chain Star and Hongtianzhi from the Closing Date because
of
such equity transfer, provided that all relevant obligations shall
be
borne by the Transferor under law and this
Agreement.
|
Article
5 Warrants, Representations and
Undertakes of the Transferor
| 5.1 |
In
addition to the information disclosed in this Agreement, the Transferor
shall warrant, represent and undertake to the Transferee under terms
and
conditions stipulated in Exhibit IV, which also constitute the base
for
the Transferee to accept such shares for
transfer.
|
| 5.2 |
Under
the circumstances of fully authorized operation and guaranteed
sufficient operation funds, the Transferor undertakes to the
Transferee
that Chain Star and Hongtianzhi’s profits after tax in 2007 which are
audited by US Auditors shall reach three levels: RMB25,000,000,
RMB28,000,000, RMB30,000,000. If profits after tax reach RMB25,000,000,
the Transferee shall release shares pledge of the Transferor
equivalent to
RMB7,000,000; if Chain Star and Hongtianzhi reach profits after
tax of
RMB28,000,000, the Transferee shall release shares pledge of
the
Transferor equivalent to RMB12,000,000; and if Chain Star and
Hongtianzhi
reach profits after tax of RMB30,000,000, the Transferee shall
release
shares pledge of the Transferor equivalent to RMB15,000,000.
The
Transferor undertakes to the Transferee the profits after tax
in 2008
which are audited by US Auditors shall reach three targeting
levels:
RMB35,000,000, RMB38,000,000, RMB40,000,000. If profits after
tax reach
RMB35,000,000, the Transferee shall release shares pledge of
the
Transferor equivalent to RMB7,000,000; if Chain Star and Hongtianzhi
reach
profits after tax of RMB38,000,000, the Transferee shall release
shares
pledge of the Transferor equivalent to RMB12,000,000; and if
Chain Star
and Hongtianzhi reach profits after tax of RMB40,000,000, the
Transferee
shall release shares pledge of the Transferor equivalent to
RMB15,000,000;
|
5
Article
6 Warrants, Representations and
Undertakes of the Transferee and Party
C
| 6.1 |
The
Transferee shall
keep the organization structure of Chain Star and Hongtianzhi after
equity
transfer, expand its brand influence and fully support business
development of Chain Star and Hongtianzhi. The Transferee shall also
provide financial support as required by
business.
|
| 6.2 |
The
Transferee covenants
that existing employees of Chain Star and Hongtianzhi will remain
employed
given that they are willing to stay and will not impede the development
of
companies after the Equity Transfer; arrangement of senior management
personals and relevant events about operation rights and interests
enjoyed
by senior management personals and technicians shall be governed
by
separate agreements between the Transferee and relevant persons to
be
entered after the Equity Transfer. In addition, the Transferee covenants
that benefits of such persons shall not be lower than their existing
benefits.
|
| 6.3 |
The
Transferee shall provide appropriate operation funds to Chain Star
and
Hongtianzhi on
time in order to support the Transferor to realize profits after
tax for
2007 and 2008, dates and amounts of providing such funds shall be
otherwise stipulated.
|
| 6.4 |
Party
C shall file
relevant reports to the U.S. Securities and Exchange Committee
(“SEC”)
according to law and issue shares to the Transferor under Article
3.2.1(3)
hereof within legal term after execution of this
Agreement.
|
Article
7 Governing Law
This
agreement shall be governed and construed by rules and laws of Hong
Kong.
6
Article
8 Settlement of Disputes and Agent
of Receiving Legal Procedure Documents
| 8.1 |
Any
dispute, arising out of or relating to this Agreement, shall be settled
by
friendly negotiation and discussion. If no agreement is reached through
friendly negotiation and discussion, such dispute shall be final
arbitrated by Hong Kong International Arbitration Center(HKIAC) in
accordance with HKIAC Arbitration Rules then in effect. Unless otherwise
provided arbitration rules of HKIAC then in effect, the arbitration
shall
be the sole and exclusive method and procedure of any dispute arising
out
of or relating to this Agreement.
|
| 8.2 |
The
Parties to this Agreement agree that unless not permitted by the
applicable laws and rules, the arbitration terms hereto shall be
interpreted as and constitute the currently effective arbitration
agreement in writing with legal effect, and shall be granted with
such
effect. The Parties to this Agreement hereby expressly waive any
right of
possibly requested local administrative, judicial or alternative
dispute
settlement methods, as the conditions of any settlement procedure
which
arising our of this Agreement.
|
| 8.3 |
The
Parties to this Agreement expressly represent that the award made
according to Article 8 hereof shall be final award binding upon the
Parties. In addition, the Parties to this Agreement hereby waive
the right
to appeal the award made according to Article 8 hereof. The Article
8
shall constitute the most comprehensive exclusive agreement to the
extent
permitted by the applicable laws.
|
| 8.4 | (1) |
The
Transferee irrevocably entrusts CHARACTERS CORPORATE SERVICES LIMITED,
whose address is Suite 2204, Xxxx Xxxx Xxxxxxxxxx Xxxxxx, 000 Xxxxxxxx
Xxxx, Xxxxxxx, Xxxx Xxxx (“Agent”),
to receive legal procedure documents and to be on behalf of the Transferee
to receive arising out of or relevant to the Agreement or the legal
procedures in Hong Kong (including, but not limited to, claims for
reimbursement, summons, arbitration application and arbitration award)
(“legal procedure documents”).
|
| (2) |
Transferee
undertakes to consecutively entrust the agent as the agent of receiving
legal procedure documents, in order to on behalf of the Transferee
receive
legal procedure documents in Hong Kong and immediately the Transferor
in
writing if the agent or its address is
modified.
|
| (3) |
The
Transferee agrees and confirms that legal procedure documents which
have
been sent to its agent shall be deemed as having been sent to any
Transferee.
|
Article
9 Liabilities for Breach of
Contract
| 9.1 |
If
any statement or warrants made by any Party in this Agreement is
untrue or
false, it shall be deemed as breach of contract by the
Party.
|
| 9.2 |
Any
Party to this Agreement changes minds on purpose and cause the failure
of
the equity transfer, it shall be deemed as breach of contract by
the
Party.
|
7
| 9.3 |
The
breaching party shall, in addition to performance of other obligations
under this Agreement, compensate the observant party all losses,
damages,
expenses suffered by the observant party due to breach of contract
caused
by breaching party.
|
| 9.4 |
If
the Transferor changes minds on purpose and cause that the shares
can not
be transferred to the Transferee or the shares is forfeited after
transfer, the Transferee shall have the right to terminate the Agreement,
and The Transferor shall return the equity transfer price or the
shares
and assume liabilities under Article 9.3 of this
Agreement.
|
Article
10 Force Majeure and Change of
Circumstances
| 10.1 |
If
any Party to this Agreement can not perform any part or all of the
terms
hereto directly or indirectly because of events such as fire, flood,
earthquake or other unforeseeable, unavoidable and/or uncontrollable
events, the party shall be exempted from liabilities to the extent
as
affected by force majeure.
|
| 10.2 |
If
any Party or Parties lose(s) its/their interests under this Agreement
because of legislation, or administration order or specific administration
act of government, any Party shall have the right to terminate this
Agreement and to restore to the conditions before the execution of
this
Agreement.
|
| 10.3 |
Any
party affected by force majeure shall deliver the other Party the
written
notice regarding the occurrence of force majeure within 12 days after
the
occurrence of the force majeure
event.
|
| 10.4 |
After
the occurrence of force majeure event, the Parties to this Agreement
shall
immediately consultant and decide whether to delay the performance
of this
Agreement to a day in the future or to terminate this
Agreement.
|
| 10.5 |
If
any party delay or unable to perform all or part of the terms of
this
Agreement for more than 30 days as a result of force majeure, the
other
Party shall have the right to rescind this Agreement, and the Parties
shall take all necessary actions to restore the rights and obligations
of
all parties to their respective original
positions.
|
Article
11 Miscellaneous
| 11.1 |
This
Agreement and its involved relevant documents constitute the full
understanding of the Parties regarding the equity transfer, and replace
any previous intention, expression and understanding of the
Parties.
|
8
| 11.2 |
If
any term of this Agreement is regarded as illegal, invalid or enforceable
at any time, the validity, effectiveness and enforceability of other
terms
of this Agreement shall not affected or impaired in any way and shall
remain the full validity.
|
| 11.3 |
This
Agreement shall bind the Parties and their respective successors
and
assignees. The interests of this Agreement shall be assigned to the
Parties hereto and their respective successors and assignees. Without
the
permission of the Parties in writing, any Party shall not amend,
modify or
revise this Agreement.
|
| 11.4 |
This
Agreement shall be effective upon
signatures.
|
| 11.5 |
Without
the permission of the Parties in writing (the relevant permission
shall
not be withheld without reasonable reasons), the Parties hereto shall
not
transfer any right or obligation under this
Agreement.
|
| 11.6 |
The
Parties agree to bear all the cost and expense in respect of the
negotiation, preparation, execution and performance of the Agreement
and
the taxes arising from the transfer of Shares for Transfer. The stamp
tax
and all other tax and expenses arising out of the transfer of Shares
for
Transfer (including, but not limited to, arising out of China or
any other
areas), shall be borne and paid by the
Transferor.
|
| 11.7 |
Unless
provided and required by laws, regulations, order or judgments by
the
authorities or courts (including, but not limited to, applicable
regulation of security exchanges), without the previous permission
of the
other Party in writing (the relevant permission shall not be withheld
without reasonable reasons), any Party shall not make or distribute
any
related press statement or
announcement.
|
| 11.8 |
Without
the prior permission of the other Party in writing, any Party shall
not
disclose the Agreement or any content or material in connection with
any
transaction of this Agreement, excluding the following
disclosure:
|
| (1) |
the
disclosure is made according to the provisions of applicable laws,
regulations and rules (including, but not limited to, regulations
of
security exchanges) or requirements of relevant government authorities
or
supervision authorities, or court
orders;
|
| (2) |
the
disclosure is made to Chain Star, Hongtianzhi, or its higher competent
authorities or approval and examination authorities, or to contacted
bank
or professional consultant of the disclosing
Party;
|
| (3) |
the
disclosure is made by the Transferor to the company of its company
group
or senior management thereof.
|
| 11.9 |
If
any term of this Agreement is or becomes illegal, invalid or unenforceable
at any time in respect, other terms of this Agreement shall not be
affected or impaired.
|
9
| 11.10 |
Any
notice required to be sent under this Agreement shall be sent in
writing.
The notice shall be delivered to the following address or fax number
or
other address or fax number that the recipient designates according
to
this Agreement:
|
| (1) |
The
Transferor: XXXXX
Xxxxx
|
|
Address: Unit
31, 5/F, Sing Win Xxxxxxx Xxxxxxxx, Xxx.00-00 Xxxxx Xxx Xxxxxx, Xxxxxxx,
Xxxx Xxxx
|
| Telephone:(00) 00000000000 |
| Fax: (00-000) 00000000 |
| (2) |
The
Transferee: CHINA
SAFETECH HOLDINGS LIMITED
|
| Address: Xxxxx 00, Xxxxx Xxxxx, Xxxxxxx Xxxxxx Special Zone, Futian District, Shenzhen |
| Telephone: (00-000) 00000000 |
| Fax: (00-000) 00000000 |
| (3) |
Party
C: CHINA
SECURITY & SURVEILLANCE TECHNOLOGY,
INC.
|
| Address: Xxxxx 00, Xxxxx Xxxxx, Xxxxxxx Xxxxxx Special Zone, Futian District, Shenzhen |
| Telephone: (00-000) 00000000 |
|
Fax: (00-000)
00000000
|
| 11.11 |
Any
notice can be sent by mail with postage pre-paid, personal delivery,
courier with good reputation or by facsimile, and shall be deemed
as
delivered at the following time:
|
| (1) |
two
days (seven days if sending by airmail with postage prepaid) after
post
(the date of postmark is the posting date) for those sent by mail
with
postage prepaid;
|
| (2) |
the
next business day for those sent by
fax;
|
| (3) |
the
receiving time for those sent by courier or personal
delivery.
|
|
Any
notice to the Transferee, when properly delivered to any Transferee,
shall
be regards as delivered to the other
Transferee.
|
| 11.12 |
This
Agreement shall be written in Chinese in three copies with each Party
holding one copy.
|
10
IN
WITNESS WHEREOF,
this
Agreement has been executed by the Parties on the date first above written
and
the Parties confirm that the Parties have carefully read and fully understand
all the content of the Agreement.
| The Transferor | |||
|
Xxxxx
Xxxxx
|
|||
| Signature: /s/ Xxxxx Xxxxx | |||
|
Place
of Signature: Shenzhen
|
Witness:
Xxxx Xxxxxxxx
| The Transferee | |||
|
TU
Guoshen
for and on behalf of
CHINA
SAFETECH HOLDINGS
LIMITED
|
|||
| Signature: /s/ Tu Guoshen | |||
|
Place
of Signature: Shenzhen
|
Witness: Luo Ganqi
|
Party
C
To
execute, stamp and deliver
TU
Guoshen
for and on behalf of
CHINA
SECURITY & SURVEILLANCE TECHNOLOGY, INC.
|
|||
| /s/ Tu Guoshen | |||
|
(Corporate Seal) Place of Signature: Shenzhen |
Witness:
Luo
Ganqi
11
Exhibit
I
Information
of Chain Star
Name
in
Chinese: 创星投犼有榰公司
Name
in
English: CHAIN
STAR INVESTMENTS LIMITED
Place
of
Registration: Hong
Kong
Registered
Address: Xxxx
X0,
0/X, Xxxxxx Xxxxx Xxxxxxxxxx Xxxxxxxx, 000-000 Xxxxxxxx Xxxx, Xxxxxxx, Xxxx
Xxxx
Date
of
Registration and Establishment: October
13, 2006
Company
Form: Limited
Liability Company
Registered
No.: 1080227
Director: Xxxxx Xxxxx
Company
Secretary: CHARACTERS
CORPORATE SERVICES LIMITED
Shares: Legally:
HKD10,000, divided into 10,000 shares with face value of HKD1.00 per share
Issued
and fully paidæHKD1,
divided into 1 share with face value of HKD1.00 per share
12
Exhibit
II
Part
A
Information
of Share for Transfer
|
Company
|
Registered
Shareholder
|
Quantity
of Common Shares
|
Face
Value Per Share
|
Issued
Shares
|
||||
|
Chain
Star
|
Xxxxx Xxxxx
|
1
|
HKD
1 yuan
|
100%
|
Part
B
Information
of Share for Transfer
|
The
Transferee
|
Amount
of Share to Be Transferred
|
|
|
CHINA
SAFETECH HOLDINGS LIMITED
|
1
|
13
Exhibit III
Information
of Hongtianzhi
|
Name
|
:
Shenzhen Hongtianzhi Electronics Co., Ltd.
|
|
|
Legal
Address
|
:
0X, Xx. 000 Xxxxxxxx Xxxxxxxx Xxxx, Xxxx Industry Region of Huaqiao
City,
Nanshan District, Shenzhen, PRC
|
|
|
Enterprise
Type
|
:
Wholly Foreign Owned Enterprise
|
|
|
Date
of Establishment
|
:
April 18, 2001
|
|
|
Business
License No.
Operational
Term
Total
Investment
Registered
Capital
Investor
Legal
Representative
Directors
Business
Scope
|
:
Qi Du Xxx Xxxx Zi No. 320855
:
10 years
:
RMB18,500,000Yuan
:
RMB13,000,000Yuan
:
HONG KONG CHAIN STAR INVESTMENTS LIMITED
:
XXXXX Xxxxx
:
XXXXX Xxxxx, XXXXX Xxxxxxx, LI Shengnian, ZHANG Qinqin, QU
Fengxia
:
To manufacture and operate computer equipment, office automatic equipment,
camera and video distribution amplifier and to engage in wholesale
and
import and export business of relevant products (go through procedures
according to State relevant regulations for goods involved in quota
and
license administration)
|
14
Exhibit
IV
Representation
and Warranties
| 1. |
Chain
Star and Hongtianzhi are companies legally established and validly
existing under the laws of their respective places of
establishment.
|
| 2. |
Chain
Star and Hongtianzhi have been authorized and qualified to conduct
business within the jurisdiction of their existing
businesses.
|
| 3. |
The
operation businesses and their operation of Chain Star and Hongtianzhi
have been materially in compliance with the relevant
laws.
|
| 4. |
Accounts
of Chain Star and Hongtianzhi have been properly recorded in
accordance
with the account categories and the generally accepted account
principles,
standards and laws of their establishment place, which have truly
represented and reflected the status of Chain Star and Hongtianzhi
respectively for the fiscal year or the period ending on the
date of the
relevant book account.
|
| 5. | (a) |
Exhibit
I has listed all the directors and company secretaries of Chain Star
before the completion of the transaction as of the Closing
Date.
|
| (b) | Exhibit III has listed all the directors and company secretaries of Hongtianzhi before the completion of the transaction as of the Closing Date. |
| (c) | There has not been any shareholder resolution adopted to liquidate Chain Star or Hongtianzhi before the completion of the transaction as of the Closing Date. |
| 6. |
The
register of shareholders of Chain Star has truly and correctly
recorded
the date and the changes of shareholders from the establishment
to the
completion date and before the completion of the
transition.
|
| 7. |
Any
share warrant has not been sent or given to any person in respect
of any
share of Chain Star and Hongtianzhi by the Transferor, Chain
Star and
Hongtianzhi.
|
| 8. | (a) |
Chain
Star has not conducted any business activities other than holding
shares
of Hongtianzhi.
|
| (b) | Chain Star has Hongtianzhi as its only one subsidiary company. Hongtianzhi has two subsidiary companies, associated companies or branches which are Guangzhou Shixing Digital Electronic Co., Ltd and Shenzhen Tongxing Shixun Technology Co., Ltd. |
| 9. |
Articles
of associations of Chain Star and Hongtianzhi have been delivered
to
Transferee, which shall be true and
complete.
|
| 10. |
If
any thing conflicts or is inconsistent with foregoing warrants before
the
closing date, the Transferee agrees to immediately notify the Transferor
in writing.
|
15
| 11. |
Chain
Star has fully paid the issued shares. Hongtianzhi has fully
contributed
the registered capital.
|
| 12. |
The
Transferor shall be the solely and legal beneficial owner of
the shares
for transfer. The shares for transfer shall not be imposed of
any
mortgage, lien or property
encumbrances.
|
| 13. |
Chain
Star owns 100% of equities of Hongtianzhi. Chain Star shall be
the solely
and legal beneficial owner of the shares. The shares shall not
be imposed
of any mortgage, lien or property
encumbrances.
|
| 14. |
The
Transferor shall have the authority to execute the Agreement
and can sell
any shares for transfer without any third party’s permission. The
Agreement shall be legally binding on the
Transferor.
|
| 15. |
Except
for the ongoing litigations disclosed to the Transferee, Chain
Star and
Hongtianzhi have not currently been involved in any material
litigation or
a party to any litigation and/or any unexecuted verdict, and
have not been
subject to any ongoing material injunction or
order.
|
| 16. |
Up
to the Closing Date, all or part of the assets or businesses of Chain
Star
and Hongtianzhi have not been entrusted to take over by any person,
and
there are not any orders or applications before court or adopted
solutions
to close down Chain Star and
Hongtianzhi.
|
| 17. |
Except
for debts (including the outstanding tax fees)disclosed by the Transferor,
the Agreement or accounts of Chain Star and Hongtianzhi, Chain Star
and
Hongtianzhi shall not have any other debts and/or outstanding tax
fees as
of the Closing Date, which shall be assumed by the Transferor (if
any).
|
| 18. |
Except
for the information disclosed by the Transferor, the Agreement or
accounts
of Chain Star’s and Hongtianzhi, Chain Star and Hongtianzhi shall not have
other unperformed material
contracts.
|
| 19. |
The
net assets in 2006 financial statements audited by the US auditor
and
verified by a third party appraiser shall be more than RMB 41,000,000
without including the reappraised value-added part of buildings in
the
industry park, and the net profits shall be no less than RMB15,000,000,
and the net profits with refunded taxes shall be no less than
RMB20,000,000.
|
| 20. |
The
shareholders and the meeting of board of directors according to the
Company Law, have reached a resolution to approve the equity transferor
the issue of the equity transfer under the
Agreement.
|
| 21. |
The
existing and outstanding legal liabilities of Chain Star and Hongtianzhi
before the Closing Date such as labor compensation disputes, bad
debts and
losses of bad assets, debt disputes and risks of contingent debts
shall be
assumed by the Transferor. For the losses which can be calculated
into
money, if the net assets of the target company are less than
RMB41,000,000, the Transferor shall be obliged to make it up to
RMB41,000,000.
|
16
| 22. |
The
Transferor shall be fully responsible for all civil and criminal
liabilities of Chain Star and Hongtianzhi before and on the Closing
Date.
|
| 23. |
The
Transferor shall not manipulate any adverse change to the operations
of
Chain Star and Hongtianzhi on purpose (excluding the normal operation
and
force majeure) as of execution of this Agreement. The Transferor
shall
immediately inform the Transferee if there is any thing causing the
material change to the operation of Chain Star and
Hongtianzhi.
|
| 24. |
The
Transferor undertakes to be the CEO of Chain Star and Hongtianzhi
for
another five years and maintain the stability of Chain Star and
Hongtianzhi.
|
| 25. |
The
Transferor undertakes that the Transferor and its direct relatives
(parents, spouse or children) shall not engage in security and protection
industry or operation in similar industry in five
years.
|
17
Exhibit
V
Provisions
for the Closing
| 1. |
Liabilities
of the Transferee
|
| (i) |
The
Transferee shall pay the Balance of the total price to the Transferor
according to Article 3.2.1 (2) of the Agreement and submit the proof
document of payment to the
Transferor.
|
| (ii) |
The
Transferee shall provide a consent letter executed by two persons
to be
the directors of Chain Star and a
consent letter executed by three persons to be the directors of
Hongtianzhi.
|
| 2. |
Liabilities
of the Transferor
|
| After the transferor confirms that its bank account under Article 3.2.2 of the Agreement has received all the payment by the Transferee under Article 3.2.1, the Transferor shall deliver the following to the Transferee: |
| (i) |
The
transfer documents and instruments for sale along with shares
in
connection with the Shares for
Transfer;
|
| (ii) |
The
original copy of resignation executed by three current directors
of
Hongtianzhi with stating that there are not any claims against
Hongtianzhi;
|
| (iii) |
All
account books, registration certificates, business registration
certificates, articles of association, meeting records, statutory
books,
application forms, seals, offset printing, steel seals and all
documents
relevant to the company businesses (if any) of Chain Star controlled
by
the Transferor;
|
| (iv) |
The
Transferor shall incentive Chain Star and Hongtianzhi to hold a
board
meeting to approve (1) the transfer of the Shares for Sale relevant
to
Chain Star, and registration after payment of appropriate stamp
taxes; (2)
appointment of the persons nominated by the Transferor according
to law as
the two new directors of Chain Star and the three new directors
of
Hongtianzhi under the written instruction of the Transferee; (3)
after the
completion of the foregoing (2), acceptance of resignation of the
three
directors of the Hongtianzhi under the above (ii); and (4) suspension
and
change of the operation of the bank accounts of Chain Star and
Hongtianzhi, and appointment of the person nominated by the Transferee
as
the authorized person to execute the bank accounts of Chain Star
and
Hongtianzhi;
|
| (v) |
The
original copy of records of the boarding meeting held for the issue
of the
above (iv) executed and confirmed by the directors of Chain Star
and
Hongtianzhi;
|
| (vi) |
The
documents controlled by Hongtianzhi (refer
to the list of Exhibit C);
|
| (vii) |
The
original copy of the resignation properly executed by the legal
representative of Hongtianzhi; and
|
| (viii) |
Legal
opinion reports issued by Hong Kong law firms and China law
firms.
|
|
3.
|
The
Transferor and the Transferee shall make obvious marks on the
seals and
enter into the delivery memorandum to present the differences
between the
new and the
old.
|
18
