Complementary Agreement To The Equity Purchase Agreement
Complementary
Agreement
To The Equity Purchase Agreement
The
Complementary Agreement to the Equity Purchase Agreement (hereinafter referred
to as the “Complementary Agreement”) is entered into between the following two
parties in Shenzhen on January 9, 2008.
Transferor:
Shenzhen Pengsangpu Solar Industrial Products Corporation.
Address:
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ District,
Shenzhen
Legal
representative: Qiu Renzheng
Transferee:
Deli
Solar Technology Development Company.
Address:
Building 3 ▇▇. ▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
Legal
representative: Du Deli
Either
of
the Transferor or Transferee is named as “one party” and altogether “both
parties.”
1.1
This
Complementary Agreement is entered into between the two parties to the original
Equity Purchase Agreement that had been entered into between them, in order
to
ensure the execution of the Equity Purchase Agreement as well as the fast
development of Shenzhen Pengsangpu Solar Industrial Products Corporation.
This
Complementary Agreement has the equal legal effect as the Equity Purchase
Agreement because it is an integral part of the Equity Purchase Agreement.
Should there be any inconsistency between the Complementary Agreement and
the
Equity Purchase Agreement, the Complementary Agreement shall
prevail.
1.2
The
transferor is willing to transfer 100% of its equity interest (i.e. the
stockholders rights of the target company) for the Transferee according to
the
provisions and conditions of the Complementary Agreement, and the Transferee
is
willing to accept the target stockholder's rights according to the similar
provisions and the conditions.
1.3
As a
subsidiary wholly owned by China Solar & Clean Energy Solutions, Inc.
(“China Solar”) in China, Deli Solar Technology Development Company is a duly
incorporated and wholly foreign-owned enterprise. China Solar is a listed
company on the OTCBB market of NASDAQ, under the stock symbol of DLSL.OB.
This
company is hereinafter referred to as the Listed Company.
1.4
The
Listed Company plans to directly accept 100% of the stockholder's rights
from
the target company. Because the Listed Company is an alien corporation, in
order
to carry on the Equity Interest Transfer, it has to go through the related
Chinese Government’s long and complex examination and approval procedures. The
two parties agree as follows: in order to avoid the above examination and
approval procedures, the wholly owned subsidiary Deli
Solar Technology Development Company
is
responsible for this Equity Interest Transfer.
Art.2
Operation and Management
2.1
In
order to stabilize the management and operation team and guarantee the
realization of management target, Transferee agrees that under a condition
that
Pengsangpu’s management and operation team can achieve an operation target which
has been provided in this Complementary Agreement, the existing management
and
operation team has the complete management authority.
Art.3
The Consideration of the Equity Interest Transfer
3.1
The
Transferor agrees to transfer the its equity interest in Shenzhen PengSangPu
Corporation to the Transferee according to this agreement regulated provision
and condition, and the Transferee agrees to accept the target stockholder's
rights according to the similar provisions and the conditions.
3.2
Depending on the price of the equity interest of the target company Shenzhen
PengSangPu Coporation, the Transferee will pay to the Transferor: 1) the
after-audit 100% cost of the target company’s net assets; and 2) the 100%
expenses (i.e. the transfer expenses) of the target company’s brand and
trademark that is consulted between the two parties based on the evaluated
price.
3.3
Both
parties have decided that the target company’s brand and trademark are together
valued as 20,000,000
RMB.
Art.
4 Payment Method
and Timing
4.1
Both
parties agree that the net-asset part of the consideration to the equity
interest shall be 20,000,000
RMB
in cash
(If the net assets are valued less than 20,000,000
RMB,
the
amount of cash payable shall be reduced to the amount calculated in the audit
report). The excess of the net assets of 20,000,000 RMB, as well as the part
of
brand and trademark shall be completely paid by means of the common stock.
The
cash is used as the working capital of the target company. 50% of the cash
shall
be reimbursed to the Transferor upon one year after the date of the
Complementary Agreement; and after two years, the remaining balance shall
be
paid off.
4.1.1
Of
the consideration to the equity interest, both the stock payment and the
net-asset remaining sum are paid completely by the common stock. The Transferee
assures that after one year, 50% of the stock shall be transferable. Two
years
later, the stock shall all go public (with dealing with the legal procedures
and
the notarization procedure). The stock price is that when this agreement
is
signed, it is the average price of the Listed Company’s market prices in the
immediate 30 trading days proceeding to the date of the Complementary Agreement.
(If the stock price is lower than the above mentioned price a year later
when
the stock goes public, the Transferee agrees to make up the fixed price when
the
agreement is signed). The transfer will be completed within 180 days after
the
agreement is signed.
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4.2
Both
the parties agree that the payment shall be scheduled as follows: The auditing
of the target company starts within 10 days after the agreement is signed.
Within 5 working days after the report of audit is finished, the Transferee’s
board of directors will decide whether it approves the report or not depending
on the reported results. Within 2 months after the Transferee’s board of
directors approves the report, the Transferee has to pay the transfer sum
according to the provision 4.1. Of the price paid by means of stock, the
payment
time is subject to the provision 4.1.1.
4.3
After
the Transferor receives the consideration stipulated in the above provision
4.1,
both the parties shall immediately make the registration of the change of
shareholder’s right at the industry and commerce institution within 5 working
days.
4.4
Both
parties hereby confirm that the Transferor has not received the consideration
of
the agreement from the Transferee, even if the transfer related to the target
stockholder's rights has obtained the change authorization of industry and
commerce institution on the stockholder's rights, parts of the target
stockholder's rights that do not consist with the agreement still belong
to the
Transferor, and then the Transferee has no right to execute any rights and
interests related to the stockholder's rights of the target company. Only
when
the Transferor receives the full consideration of the equity interest from
the
Transferee, can the Transferor enjoy the stockholder's rights in the target
company and the complete property ownership. And according to the target
company's contract and regulations, the Transferor shall enjoy the corresponding
right and shall undertake the corresponding duty.
Art.
5 Independent Auditing on Equity Interest Transfer
5.1
For
the audit of the target company’s net assets, both parties agree to choose a
Hong Kong accounting firm that is consistent with the Transferor’s request and
is approved by U.S. Securities Exchange Commission.
5.2
For
the evaluation of the target company’s brands and trademarks, both parties agree
to choose an assessment company of Shenzhen that has the quality according
to
the Transferor’s request.
5.3
If
the Equity Interest Transfer is accomplished, the above expenses shall be
paid
by the new Shenzhen PengSangPu. Otherwise, the expenses shall be paid by
both
parties with a ratio of 50%, respectively.
Art.6
Representations
and Warranties
6.1
When
the agreement is signed and effective, the
Transferor makes the representations and warranties to Transferee as follows:
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6.1.1
The
Transferor is authorized to carry on the transaction, stipulated in this
agreement, and it has obtained essential corporate authorizations and has
adopted necessary corporate actions for signing and fulfilling this
agreement.
6.1.2
The
Transferor has duly obtained the stockholder's approval right legitimately
when
the agreement is signed up;
6.1.3
The
target company's property and the stockholder's rights shall not set with
any
mortgage or pawn, and the target company has not provided any warranty for
a
third party. In addition, it has this property and the target stockholder's
rights legitimately with the origin.
6.1.4
There is no lawsuit or arbitration in view of the target company.
6.2
When
the agreement is signed up and effective, the Transferee gives the Transferor
the statement and warranty as follows:
6.2.1
The
Transferee is authorized to carry on this agreement stipulated transaction,
and
it has adopted all of the essential corporation authorities and the legal
acts
for signing and fulfilling this agreement.
6.2.2
The
source of the capital used by the Transferee for paying the transfer sum
is
legitimate.
6.3
In
order to guarantee the execution of the Agreement, after the agreement is
signed, the Transferee shall make this agreement content reported to the
Listed
Company’s board of directors, and it must obtain the approval of the Listed
Company’s board of directors.
Art.
7 The bilateral further agreement and warranty
7.1
Both
parties agree: After the Equity Interest Transfer is completed; the target
company's board of directors will be composed by 5 directors, in which the
Transferor will designate 2 directors and a supervisor and the Transferee
will
designate 3 directors and a supervisor. The Transferee shall have the right
designate the chairman of the board, and the Transferor shall have the right
to
designate the legal representative and the general manage. (The Transferor’s
trustees who have not entered the board of directors will attend the directorate
as the non-voting delegates).
7.2
Both
parties agree: After the Equity Interest Transfer is completed, by taking
the
achievement as the foundation, in order to guarantee the achievements are
made
smoothly, the Transferee does not directly take part of the corporation
management and operation work.
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7.3
Both
parties agree: After the Equity Interest Transfer is completed, if needing
to
expand the scale of production or increase the new management project, then
the
board of directors will determine whether needing to increase the capital
while
exceeding the target company’s fund raising ability. For the later three years,
the company does not present the melon cutting in order to make the company
become greatly strong.
7.4
The
Transferee carries on this Equity Interest Transfer and finally has the target
company’s 100% stockholder's rights aiming to: The target company has the good
achievements and has the profit-earning ability and the profit growth
anticipation.
Therefore,
when the Transferor is the target company’s original shareholder with the
original management and operation team, herein the following warranty is
given
to the target company's achievements: (Note: This achievement guarantee is
that
when it does not need the Transferee to invest again, the foundation has
a
bigger development and the separate increase. For three years, it does not
the
melon cutting and the profit is used for expanding the scale of production
as
well as the realization of achievement guarantee.)
7.4.1
If
the sales volume of Target Company as of 2008 is higher than 99,000,000 RMB,
the
after-tax net profit will not be lower than 9,430,000 RMB.
7.4.2
If
the sales volume of Target Company as of 2009 is higher than 143,900,000
RMB,
the after-tax net profit will not be lower than 12,130,000 RMB.
7.4.3
To
adapt the company's fast development, the production management plan is
formulated once every two years. (After the first year ends, the third year
achievement plan is formulated)
7.4.4
The
company’s general manager and deputy general manager see an appointment contract
that is signed every three years, guaranteeing the continuity of management
and
operation.
7.4.5
The
target company’s original shareholders remain in office for three
years.
7.4.6
The
treatment of Target Company’s original shareholder and the original management
and operation team is still maintained by the original level, with the way
that
the original achievement and the salary are linked up.
7.4.7
The
company will withdraw 5% of its profit for bonus after the above achievements
are made. If it fulfills the above guaranteed achievements, company will
withdraw 10% of the exceeding quota for bonus. The bonus assignment plan
is made
by the general manager and the deputy general manager jointly and then it
is
submitted to the board of directors for the approval of the reward to the
company staff.
7.5
If
the company is not be able to realize the above guaranteed annual achievements,
the differential part will be deducted from the floating bonus that the
Transferor lends to the target company. If the part cannot be equal to the
deduction, then the Transferor’s listed-company stock is taken to make up the
differential part that has not achieved the profit for the year by means
of a
price given to the Transferor at the meantime.
5
7.6
Both
parties agree: An office building which the target company leases for the
present work sees a rent of the current price on market, with the monthly
payment whose time is counted after the Equity Interest Transfer is
finished.
Art.
8 Related fees
8.1
The
registration fee related to the Equity
Interest Transfer is at the target company’s cost.
8.2
The
tax money that occurs because of the target Equity Interest Transfer will
be
handled according to the stipulation of Chinese relevant laws. If the laws
have
not stipulated the money explicitly, this money will be equally at both parties’
cost.
Art.9
The breach payment
9.1
Both
parties agree: If a party breaches the statement or the guarantee that it
gives
thereof in this agreement and then make another party suffer any loss, the
breaching party must compensate all direct losses for the innocent
party.
Art.10
Effectiveness
10.1
This
agreement is effective since being signed (on the effective date).
Art.11
Applied laws
11.1
The
establishment, effectiveness and interpretation of agreement are all subject
to
the laws of People’s
Republic of China.
Art.12
Arbitration and settlement
12.1
All
disputes in connection with this agreement or the terms therefore may be
submitted for arbitration to Shenzhen Arbitration Commission in accordance
with
the provisional Rules of Procedures promulgated by the said Arbitration
Commission. The decision of the Arbitration Commission shall be final and
binding upon both parties.
Art.13
Others
13.1
Any
revision to this agreement must adopt the written form and be signed up by
the
bilateral representatives of legitimate authorization.
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13.2
Both
parties should treat the opposite party’s commercial material that this
agreement involves as confidential data. This security service will be still
effective for 5 years after this agreement is fulfilled.
13.3
Within this agreement’s term of validity, a party may honor the other party a
delay for any breach or the delay of fulfillment. However, this delay cannot
affect, harm or limit any of the innocent party’s rights and interests that
under this agreement’s terms and conditions, the innocent party has as the
creditor depending on the related laws and regulations. This does not mean:
The
innocent party gives up the right it carries on the investigation to the
breaching party’s behaviors. It also does not mean: The innocent party gives up
the right it carries on the investigation to the breaching party’s future
similar behaviors.
13.4
For
the smooth fulfillment of agreement, both parties shall join forces with
each
other on principle of honesty and credit. And for the unsettled issues of
agreement, both parties shall make resolutions with friendly, fair and
reasonable negotiation.
13.5
This
agreement is written in 6 copies each in Chinese. Both the Transferor and
the
Transferee hold three of these copies, respectively.
Transferor:
Shenzhen
Pengsangpu Solar Industrial Products Corporation
(seal)
|
Shareholder’s
name
|
Stock
proportion
|
Shareholder’s
signature
|
Signing
date
|
|
Qiu
Renzheng
|
43.334%
|
/s/
Qiu Renzheng
|
1/9/2008
|
|
▇▇▇▇
▇▇▇▇▇▇
|
28.333%
|
/s/
▇▇▇▇ ▇▇▇▇▇▇
|
1/9/2008
|
|
Luo
Bin
|
28.333%
|
/s/
Luo Bin
|
1/9/2008
|
Transferee:
Deli
Solar Technology Development Company
(Seal)
Legal
representative’s
signature: /s/ Du Deli
Signing
date: January 9, 2008
7