To: Beijing HollySys Co. Ltd.
Exhibit
10.13
August
18, 2006
| To: | Beijing HollySys Co. Ltd. |
| Xx.00, Xxxxxxxxxxxx Xxxxx Xx, | |
| Xxxxxxx, Xxxxxxx Xxxxxxxx | |
| Xxxxxxx, Xxxxx | |
| Gifted Time Holdings Limited | |
| British Virgin Island |
Re
: The
Stock Purchase Agreements and the Reorganization Agreement
Dear
Sirs,
We
are
lawyers qualified in the People's Republic of China ("PRC") and are qualified
to
issue an opinion on the laws and regulations of the PRC.
1
We
have
acted as PRC counsel to Beijing HollySys Co., Ltd. in connection with the
Reverse Merger of Chardan North China Acquisition Corporation (“Chardan”) and
Gifted Time Holdings Limited (“GT”). We are retained to give advice on the PRC
legal issues with respect to Beijing HollySys Co., Ltd. (“BJ HLS”) and Hangzhou
HollySys Automation Co., Ltd. (“HZ HLS”).
We
have
been requested to give this legal opinion on the validity and enforceability
of
the following Stock Purchase Agreements and the Reorganization
Agreements:
| (i) |
The
Stock Purchase Agreement entered into by and between Team Spirit
Industry
Limited (“Team Spirit”), a company incorporated in British Virgin Islands
with limited liability, holding 30% of the outstanding capital stock
of HZ
HLS and GT, a company incorporated in British Virgin Islands with
limited
liability on January 12, 2006.
|
| (ii) |
The
Stock Purchase Agreement entered into by and between OSCAF International
Co. Limited (“OSCAF”), a company incorporated in British Virgin Islands
with limited liability, holding 30% of the outstanding capital stock
of HZ
HLS and GT, a company incorporated in British Virgin Islands with
limited
liability on January 12, 2006.
|
| (iii) |
The
Reorganization Agreement entered into by and among Wang Changli,
Cheng
Wusi, Luo An and Shanghai Jinqiaotong Industry Development Co.
Ltd.(“Jinjiaotong”), respectively holding 14.23%, 30%, 9.88% and 20% of
the outstanding capital stock of BJ HLS, Team Spirit and OSCAF,
respectively holding 30% and 30% of the outstanding capital stock
of HZ
HLS on September 20, 2005.
|
| (iv) |
The
Reorganization Agreement entered into by and among Wang Changli,
Cheng
Wusi, Luo An and Shanghai Jinqiaotong Industry Development Co.
Ltd.(“Jinjiaotong”), respectively holding 14.23%, 30%, 9.88% and 20% of
the outstanding capital stock of BJ HLS, Team Spirit and OSCAF,
respectively holding 30% and 30% of the outstanding capital stock
of HZ
HLS on December 30, 2005.
|
2
In
such
capacity, we have examined such documents, as we have considered necessary
for
the purpose of giving this opinion. For the purpose of rendering this opinion,
we have assumed the authenticity of all the documents provided by the parties,
and the completeness and accuracy of all the information provided by all
the
parties.
Based
on
the foregoing Stock Purchase Agreements, the Reorganization Agreements and
relevant laws and regulations, we are of the opinion that:
1.
The
Stock
Purchase Agreements
HZ
HLS
was founded in 2003 and reorganized as a sino-foreign equity joint venture
company in 2006 in accordance with the Chinese law. HZ HLS has an authorized
stock capital of US$ 5 million. Team Spirit, OSCAF and BJ HLS are the registered
stockholders of HZ HLS, respectively holding 30%, 30% and 40% of the ownership
interests in HZ HLS as the date of the execution of the Stock Purchase
Agreements.
In
accordance with the terms and conditions of the Stock Purchase Agreements,
Team
Spirit and OSCAF respectively sold to GT, and GT respectively purchased from
Team Spirit and OSCAF, 30% and 30% of the ownership interests of HZ HLS.
The
consideration payable by GT to Team Spirit and OSCAF for the ownership interests
of the sale stocks would be RMB 60,474,000.00 respectively. The Parties agree
that GT shall pay the consideration by issuance of common stocks to Team
Spirit
and OSCAF or any third party designated them. GT shall respectively issue
7,966
shares of common stocks, representing 15.932% of the outstanding total capital
stocks to Team Spirit and OSCAF.
Upon
and
after all of the following conditions have been satisfied and fulfilled,
the
Stock Purchase Agreements shall come into effective: (i) The Stock Purchase
Agreements have been signed by the Parties’ legal representatives or authorized
persons; (ii) The transactions in the Stock Purchase Agreements have been
approved by the Board of HZ HLS; (iii) The Stock Purchase Agreements have
been
approved by the original PRC government authorities.
3
The
Stock
Purchase Agreements were entered into and executed by the authorized persons
of
the parties on January 12, 2006. On the execution date of the Stock Purchase
Agreements, BJ HLS and GT made and concluded an agreement modifying the Equity
Joint Venture Contract and Articles of Association of HZ HLS in relation
to the
stock sale and purchase transactions under the Stock Purchase Agreements.
HZ HLS
held the 4th Session of the 2nd meeting of the Board of Directors on January
12,
2006 which approved the Stock Purchase Agreements after discussion.
HZ
HLS
has submitted all necessary legal documents to the competent Commerce Bureau
for
approval in January and got the approval from the Commerce Bureau of Hangzhou
Economic and Technology Development Zone, which approved the amendment of
the
equity joint venture contract and the articles of association of HZ HLS.
On
February 13, 2006, Zhejiang Provincial Government issued a new PRC Approval
Certificate for Foreign-invested Enterprises to HZ HLS, on which the investors
of HZ HLS and their capital contribution amounts are respectively recorded
as:
BJ HLS, USD 2 million; GT, USD 3 million. On March 3rd, 2006, HZ HLS has
completed the re-registration of the equities alteration in Hangzhou
Administrative Bureau of Industry & Commerce.
The
transactions shall be governed by Provisions on Equities Alteration of Foreign
Investment Enterprise (“Provisions”) which is promulgated by MOFTEC on May 28,
1997. In accordance with the Article 20 of the Provisions, “stock transfer
agreement and agreement on the modification of equity joint venture contract
and
articles of association shall take effect on the date of issuance of new
approval certificate for foreign-investment enterprises. After effectiveness
of
these agreements, investors in the enterprise shall enjoy stockholders’ rights
and assume stockholders’ obligations in line with stipulations in these modified
equity joint venture contract and articles of association.”
Based
on
the aforesaid facts and relevant PRC laws, we believe that
4
The
Stock
Purchase Agreements embody the true and consistent intentions and decisions
of
Team Spirit, OSCAF and GT. The Stock Purchase Agreements have complied with
and
fully satisfied all the essential conditions for taking effect and thus are
valid, legal binding, and enforceable against the parties from February
13,2006.
HZ
HLS
has obtained the approval of its Board of Directors for the stock sale and
purchase transactions. The examination and approval authorities who originally
approved the establishment of HZ HLS have approved the Stock Purchase Agreements
and issued a new Approval Certificate for Foreign-invested Enterprises. GT
has
been registered as the stockholders of HZ HLS, lawfully holding 60% of the
total
capital stocks of HZ HLS, and is, subject to the equity joint venture contract
and Articles of Association of HZ HLS, entitled to enjoy the stockholders’
rights and assume the stockholders’ obligations of HZ HLS.
2.
The
Reorganization Agreement
The
Reorganization Agreement entered into by and among the stockholders of BJ
HLS,
totally holding 74.11% of the outstanding capital stocks of BJ HLS, and the
stockholders of HZ HLS, totally holding 60% of the outstanding capital stocks
of
HZ HLS on September 20, 2005, is substantially a Letter of Intend. Subject
to
the terms and conditions thereof, the parties of the Reorganization Agreement,
in principle, agree to reorganize BJ HLS and HZ HLS to set up an offshore
holding company by the means of reorganizing all their respective equity
interests they hold in BJ HLS and HZ HLS to the offshore company. All parties
agree to determine their respective stockholding proportion in the offshore
company in accordance with the principle of fairness. The Reorganization
Agreement entered into by and among the parties on December 30, 2005, has
clearly and definitely stipulated that the parties shall reorganize BJ HLS
and
HZ HLS to set up GT by the means of reorganizing all their respective equity
interests they hold in BJ HLS and HZ HLS to GT (including by means of nominee
arrangements, consignment agreements or similar arrangement.).
Based
on
the aforesaid facts and relevant PRC laws, we believe that:
Each
of
the stockholders which are parties to the Reorganization Agreements has the
capacity and authority to dispose its ownership interests or equity interests
derived from the stocks it held and to execute the Reorganization Agreement.
The
Reorganization Agreements embody the true and consistent intentions and
decisions of the parties and the proposed reorganization is not prohibited
and
limited by any existing Chinese laws, rules and regulations as at the date
of
this Legal Opinion. The Reorganization Agreements are valid, legal binding,
and
enforceable against the parties from the effective date.
5
This
opinion is limited to the relevant matters under the law of the PRC (other
than
the laws of the Hong Kong Special Administrative Region and Macau Special
Administrative Region) in effect on the date hereof, and the matters concerning
the laws of other jurisdictions are not subject of this opinion.
This
opinion is given solely for the benefit of the persons to whom it is addressed.
It may not, except with our prior written permission, be relied upon by anyone
in connection with this opinion or used for any other purpose.
We
hereby
consent to the filing of this opinion as an exhibit to the Registration
Statement on Form S-4 filed by HLS Systems International Ltd. (the "Registration
Statement"). We also consent to the references to our firm name in the
Registration Statement. By giving this consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of
the Securities Act or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder (the “Rules”), nor do we hereby admit that we
are experts with respect to any part of the Registration Statement within
the
Securities Act or the Rules.
|
Yours
faithfully
|
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|
Guantao
Law Firm
|
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6
