Exhibit 10.2

 
 
 
 
Dated the 27th day of September 2005
 
ADMIRE FAME INVESTS LIMITED
 
GAIN HUGE INVESTMENTS LIMITED
 
SPLENDID FORTUNE INVESTMENTS LIMITED
 
AND
 
GLOBAL INNOVATIVE SYSTEMS INC.
 
AND
 
KO YIN
 
   
DEED
FOR THE GRANT OF OPTIONS OVER THE SHARES OF HK$1 EACH IN
BEIJING ILLUMINATION (HONG KONG) LIMITED
   
 
 
 
 
 
 
 
PSE logo [preston_logo.jpg]
Solicitors
 

 
 
 
35th Floor, Two International Finance Centre,
8 Finance Street,
Central, Hong Kong
 
Tel: (852) 2511 5100 Fax: (852) 2511 9515
Website: www.prestongates.com
 
Our ref: 53520-00001/NKA/CWF

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CONTENTS
Clause
Heading
Page
     
1.
INTERPRETATION
2
2.
CALL OPTION
2
3.
EXERCISE OF THE CALL OPTION
3
4.
PUT OPTION
3
5.
EXERCISE OF THE PUT OPTION
3
6.
ADDITIONAL OPTION
3
7.
CONSIDERATION
4
8.
COMPLETION
4
9.
CONDUCT OF BUSINESS PENDING COMPLETION
5
10.
GRANTORS WARRANTIES AND INDEMNITIES
6
11.
GIS WARRANTIES
8
12.
POWER OF ATTORNEY
9
13.
FURTHER ASSURANCE
9
15.
CONFIDENTIALITY
9
16.
TIME AND WAIVER
10
17.
PARTIAL INVALIDITY
10
18.
AMENDMENTS
10
19.
NOTICES
10
20.
COSTS AND STAMP DUTY
11
21.
ASSIGNMENT
11
22.
ENTIRE AGREEMENT
11
23.
GOVERNING LAW, JURISDICTION AND PROCESS AGENTS
11
     
SCHEDULE 1
DETAILS OF THE GRANTORS’ HOLDINGS OF SHARES AND OPTION SHARES
13
     
SCHEDULE 2
GRANTORS WARRANTIES
14
     
SCHEDULE 3
GIS WARRANTIES
15
     
EXECUTION
 
16

 
 

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THIS DEED is made on the 27th day of September 2005

BETWEEN:

(1)
ADMIRE FAME INVESTS LIMITED, a company incorporated in the British Virgin
Islands and having its registered office at P.O. Box 957, Offshore
Incorporations Centre, Road Town, Tortola, British Virgin Islands (“Admire
Fame”);

(2)
GAIN HUGE INVESTMENTS LIMITED, a company incorporated in the British Virgin
Islands and having its registered office at P.O. Box 957, Offshore
Incorporations Centre, Road Town, Tortola, British Virgin Islands (“Gain Huge”);

(3)
SPLENDID FORTUNE INVESTMENTS LIMITED, a company incorporated in the British
Virgin Islands and having its registered office at P.O. Box 957, Offshore
Incorporations Centre, Road Town, Tortola, British Virgin Islands (“Splendid
Fortune”, together with Admire Fame and Gain Huge are referred to as the
“Grantors”);

(4)
GLOBAL INNOVATIVE SYSTEMS INC., a company incorporated under the laws of the
State of Nevada, the United States and having its correspondence office at
16/F., Hang Seng Mongkok Building, 677 Nathan Road, Mongkok, Kowloon, Hong Kong,
the common shares of which are traded on OTCBB (“GIS”); and

(5)
KO YIN (holder of Hong Kong Permanent Identity Card No. P330688 (0)) and whose
correspondence address is at House No. 5, Mantex Villa, Hang Lok Lane, Tung Lo
Wan Hill, Tai Wai, New Territories, Hong Kong (the “Guarantor”).

WHEREAS:

(A)
Beijing Illumination (Hong Kong) Limited (the “Company”) is a company
incorporated in Hong Kong with limited liability and has an authorised share
capital of HK$10,000 divided into 10,000 shares (the “Shares”) of HK$1.00 each,
of which 1,250 Shares have been issued and allotted and are fully paid.

(B)
As at the date of this Deed, the Grantors are the legal and beneficial owners of
the Option Shares (as defined herein).

(C)
By an agreement (the “Share Purchase Agreement”) dated 27 September 2005 and
made by Glory Goal Investment Limited, GIS and the Guarantor, GIS has agreed to
acquire 325 Shares from Glory Goal Investment Limited, subject to the terms and
conditions therein contained. Pursuant to Clause 13.7 of the Share Purchase
Agreement, the Guarantor has agreed to procure the Grantors, and GIS has agreed,
to enter into a duly executed option deed in the form of this Deed.

(D)
Each of the Grantors has jointly and severally agreed to grant to GIS the Call
Option (as defined herein) to acquire the Initial Option Shares subject to and
upon the terms and conditions of this Deed.

(E)
GIS has agreed to grant to the Grantors the Put Option (as defined herein) to
require GIS to acquire the Initial Option Shares subject to and upon the terms
and conditions of this Deed.

(F)
Admire Fame and GIS have agreed that either of them shall have the Additional
Right to require the other to sale or acquire the Additional Option Shares
 subject to and upon the terms and conditions of this Deed.

(G)
In consideration of GIS agreeing to enter into this Deed, the Guarantor has
agreed to guarantee, among other matters, the due and punctual performance by
the Grantors of their obligations under this Deed subject to and upon the terms
and conditions of this Deed.

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NOW IT IS HEREBY AGREED AS FOLLOWS:

1.
INTERPRETATION

1.1
Unless otherwise expressed or required by the context herein, capitalised terms
and expressions used herein shall have the same meanings as those used or
defined in the Share Purchase Agreement.

1.2
In this Deed (including the Recitals), the following expressions shall have the
following meanings except where the context otherwise requires and in addition
to the definitions in the Share Purchase Agreement:

 

 
“Additional Option Shares”
72 Shares which shall be sold by Admire Fame and equivalent to 5.76% of the
issued share capital of the Company upon Completion;
         
“Additional Right”
the right to require the sale or acquisition of the Additional Option Shares by
either GIS or Admire Fame pursuant to Clause 6;
         
“Call Option”
the option to require the sale by the Grantors of the Initial Option Shares to
GIS subject to and upon the terms and conditions of this Deed;
         
“Completion”
completion of the sale and purchase of the Option Shares in accordance with the
terms and conditions of this Deed;
         
“Initial Option Shares”
313 Shares, which shall be (i) as between the Grantors, in the proportion of the
number of Option Shares set against their respective name in Schedule 1 and (ii)
in aggregate equivalent to 25.04% of the issued share capital of the Company
upon Completion;
         
“Option Period”
a period of nine (9) months commencing from the expiry of the sixth month of the
Completion Date (within the meaning assigned thereto in the Share Purchase
Agreement);
         
“Option Shares”
the Additional Option Shares and the Initial Option Shares;
         
“Put Option”
the option to require the purchase by GIS of the Initial Option Shares from the
Grantors subject to and upon the terms and conditions of this Deed; and
         
“this Deed”
this deed for the grant of the Call Option and the Put Option, as amended from
time to time.

1.2
References herein to Clauses are, unless the context otherwise requires, to
clauses in this Deed

1.3
The headings are inserted for convenience only and shall not affect the
construction of this Deed.

2.
CALL OPTION

2.1
The Grantors hereby irrevocably and unconditionally grants to GIS the Call
Option to purchase the Initial Option Shares from the Grantors subject to and
upon the terms and conditions of this Deed.

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2.2
The Call Option can only be exercised in respect of all the Initial Option
Shares and can be exercised once only.

2.3
Upon exercise of the Call Option, the Grantors shall as beneficial owners sell
and GIS shall purchase all, but not any portion thereof, of the Initial Option
Shares free from all Encumbrances and together with all rights attaching thereto
as at the date of exercise of the Call Option.

3.
EXERCISE OF THE CALL OPTION

3.1
The Call Option may be exercised by GIS at its sole discretion at any time
within the Option Period.

3.2
GIS may exercise the Call Option to require the Grantors to sell all, but not
any portion thereof, of the Options Shares to GIS. The Call Option may be
exercised by GIS pursuant to the terms of this Deed by serving a Call Option
notice on each of the Grantors and the date of exercise of the Call Option shall
be the date on which the Call Option notice is received by each of the Grantors.

4.
PUT OPTION

4.1
GIS hereby irrevocably and unconditionally grants to the Grantors the Put Option
to require GIS to purchase the Initial Option Shares subject to and upon the
Terms and conditions of this Deed.

4.2
The Put Option can only be exercised in respect of all the Initial Option Shares
and can be exercised once only.

4.3
Upon exercise of the Put Option, the Grantors shall on as beneficial owners sell
and GIS shall purchase all, but not any portion thereof, of the Initial Option
Shares free from all Encumbrances and together with all rights attaching thereto
as at the date of exercise of the Put Option. GIS shall not be obliged to (but
may) any Initial Option Shares unless all the Grantors complete their sale of
the Initial Option Shares in accordance with this Deed.

5.
EXERCISE OF THE PUT OPTION

5.1
The Put Option may be exercised by the Grantors at any time within the Option
Period, PROVIDED THAT in each of any two months during the Option Period, the
profit before taxation and extraordinary items of the Group as shown in the
unaudited combined balance sheet of the Group as at the last calendar date of
each such month and the unaudited combined profit and loss accounts of the Group
ending such date as reviewed by the Independent Accountants or the auditors of
the Group for the time being in accordance with the generally accepted
accounting practice, standards and principles of Hong Kong shall not be less
than HK$3,000,000 and FURTHER THAT the Call Option has not been exercised by
GIS.

5.2
The Grantors may exercise the Put Option to require GIS to purchase from the
Grantors all, but not any portion thereof, of the Initial Option Shares by
serving a Put Option notice on GIS and the date of exercise of the Put Option
shall be the date on which the Put Option notice is received by GIS.

6.
ADDITIONAL OPTION

 
GIS and Admire Fame further agree that upon the exercise of the Call Option or
the Put Option (whichever occurs first), either GIS (in the event that the Call
Option has been exercised by GIS pursuant to Clause 3) or Admire Fame (in the
event that the Put Option has been exercised by the Grantors pursuant to Clause
5) shall have the Additional Right to require the other to sell (in the event
that the Call Option has been exercised by GIS pursuant to Clause 3) or acquire
(in the event that the Put Option has been exercised by the Grantors pursuant to
Clause 5) the Additional Option Shares. The following provisions shall apply in
respect of the Additional Right:

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(a)
the Additional Right shall be exercisable by either GIS (in the event that the
Call Option has been exercised by GIS pursuant to Clause 3) and Admire Fame (in
the event that the Put Option has been exercised by the Grantors pursuant to
Clause 5), in its absolute discretion, simultaneous upon the exercise of the
Call Option or the Put Option and, subject thereto, can only be exercised in
respect of all the Additional Option Shares and can be exercised once only; and

 
(b)
the exercise of the Additional Right shall be made by giving written notice from
either GIS or Admire Fame to the other (which notice, once given, shall be
irrevocable) simultaneous with the giving of notice of the Call Option or the
Put Option (as the case may be).

7.
CONSIDERATION

7.1
The consideration for the sale and purchase of the Initial Option Shares shall
be an aggregate amount of HK$70,200,000 (equivalent to US$9,000,000) which shall
be satisfied by GIS on Completion by the issue and allotment of an aggregate
7,200,000 common shares (each an “Option Consideration Share” and collectively
the “Option Consideration Shares”) of US$0.0001 each in the share capital of GIS
to each of the Grantors (in proportion to the number of the Initial Option
Shares set out against their respective names in Schedule 1 as nearly as
practicable), credited as fully paid at the agreed valuation of US$1.25 per
Option Consideration Share.

 

7.2
The consideration for the sale and purchase of the Additional Option Shares
subject to the Additional Right shall be an aggregate amount of HK$16,148,242.50
(equivalent to US$2,070,287.50) which shall be satisfied by GIS on Completion by
the issue and allotment of an aggregate 1,656,230 Option Consideration Shares to
Admire Fame, credited as fully paid at the agreed valuation of US$1.25 per
Option Consideration Share.

7.3
The Option Consideration Shares to be issued and allotted to the Grantors as
consideration for the Option Shares pursuant to Clauses 7.1 and 7.2 shall rank
pari passu among themselves and with all other common shares of GIS then in
issue.

8.
COMPLETION

8.1
Each of the Grantors and GIS shall be bound to complete the sale and purchase of
the Initial Option Shares within seven (7) Business Days after the date of
exercise of the Call Option or the Put Option (as the case may be) and in the
event that the Additional Right has been exercised, each of Admire Fame and GIS
shall be bound to complete the sale and purchase of the Additional Option Shares
simultaneous with the sale and purchase of the Initial Option Shares.

8.2
Completion shall take place at the offices of Preston Gates & Ellis, legal
advisers to the Grantors and the Guarantor at 35th Floor, Two International
Finance Centre, 8 Finance Street, Central, Hong Kong at or before 5:00 p.m. on
the date of completion of the Call Option or the Put Option (as the case may be)
and the Additional Right.

8.3
At Completion, each of the Grantors shall deliver or cause to be delivered to
GIS:

 
(1)
instrument(s) of transfer in respect of the transfer of the Initial Option
Shares and/or the Additional Option Shares duly executed by the relevant Grantor
in favour of GIS or its nominee(s);

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(2)
share certificate(s) in respect of the Initial Option Shares and/or the
Additional Option Shares;

 
(3)
copy, certified as true and complete by a director of the relevant Grantor, of
resolutions of the board of directors of the relevant Grantor approving this
Deed and authorising the execution of the same; and

 
(4)
copy, certified by a director of the Company as true and complete, of the
resolutions in such form to the satisfaction of GIS passed by the directors of
the Company approving the transfer of the Initial Option Shares and/or the
Additional Option Shares to GIS and the registration of such transfer subject to
the relevant instrument of transfer being duly presented for registration.

8.4
At Completion, GIS shall:

 
(1)
deliver to the Grantors duly issued definitive certificate in board lots (as far
as is practicable) for trading on OTCBB for the Option Consideration Shares
issued and allotted to the Grantors under Clauses 7.1 and 7.2 for the Option
Shares in favour of the Grantors (or as it may direct); and

 
(2)
produce to the Grantors duly executed instrument(s) of transfer in respect of
the Option Shares duly executed by GIS.

9.
CONDUCT OF BUSINESS PENDING COMPLETION

 
Each of the Grantors hereby undertakes jointly and severally with GIS that it
shall until Completion take all steps necessary to ensure that except with the
consent of GIS, no resolution of the board of directors of the Company or of the
Company in general meeting shall be passed and the Company shall not carry out
any actions, which shall include, but not limited to, the following:

 
(1)
the creation or issue of any shares in any member of the Group or the grant of
any options over any shares or the uncalled capital of any member of the Group
or the issue of any warrant, debentures, securities or other obligations
convertible into shares in any member of the Group or enter into any agreement
to do any of the same;

 
(2)
the capitalisation, repayment or other from of distribution of any amount
standing to the credit of any reserve of any member of the Group on the
redemption or purchase of any shares in any member of the Group or any other
reorganisation of share capital;

 
(3)
the winding-up or liquidation of any member of the Group;

 
(4)
the alteration of the rights attaching to any of the Sale Shares or the shares
or registered capital in any member of the Group;

 
(5)
the acquisition or disposal of any lease or any other interests in real property
owned or occupied by each member of the Group or the creation of any Encumbrance
over such property;

 
(6)
the acquisition or disposal of any property or other asset by each member of the
Group if the aggregate sum involved exceeds (or, in the case of a disposal, if
the book value exceeds) HK$2,000,000;

5

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(7)
the acquisition or formation by any member of the Group of any subsidiary or the
acquisition of any share in any other company or the participation by any member
of the Group in any partnership or joint venture;

 
(8)
the sale or disposal of the whole or a substantial part of the undertaking or
the assets of any member of the Group;

 
(9)
the entering into of any material contract by any member of the Group other than
in its usual and ordinary course of business;

 
(10)
except in the usual and ordinary course of business of the relevant member of
the Group, the lending of any moneys (otherwise than by way of deposit with a
bank or other institution the normal business of which includes the acceptance
of deposit), the granting of any credit or the giving of any guarantee or
indemnity;

 
(11)
the amalgamation or merger of any member of the Group with any other company or
concern;

 
(12)
the alteration of the composition of any board of directors of any member of the
Group;

 
(13)
the making of any capital commitment by any member of the Group;

(14)
the borrowing of any moneys or acceptance of credit facilities by any member of
the Group from banks, financial institutions and any other third parties other
than in its usual and ordinary course of business; or

 
(15)
the making, declaration or payment of any dividend or distribution.

10.
GRANTORS WARRANTIES AND INDEMNITIES

10.1  
Each of the Grantors and the Guarantor hereby represents, warrants and
undertakes to GIS and its successors and assigns that the warranties (the
“Grantors Warranties”) set out in Schedule 2 are true and accurate in all
material respects on the date of this Deed and will continue to be so up to and
including the date of Completion with reference to the facts and circumstances
from time to time applying.

10.2  
Each of the Grantors Warranties is without prejudice to any other Grantors
Warranty and, except where expressly or otherwise stated, no provision in any
Grantors Warranty shall govern or limit the extent or application of any other
provision in any Grantors Warranty. Each of the Grantors and the Guarantor
hereby agrees that GIS shall treat each of the Grantors Warranties as a
condition of this Deed.

10.3  
Each of the Grantors and the Guarantor hereby agrees to fully indemnify and
keeps GIS and its assigns fully indemnified on demand from and against any
depletion of assets, all losses, costs and expenses (including legal expenses)
which GIS and its assigns may incur or sustain from or in consequence of any of
the Grantors Warranties not being correct or fully complied with. This indemnity
shall be without prejudice to any of the rights and remedies of GIS and its
assigns in relation to any such breach of Grantors Warranties and all such
rights and remedies are hereby expressly reserved.

10.4  
If it shall be found at any time after Completion that any of the Vendor
Warranties is not true, correct and accurate or is not as represented, warranted
or undertaken, without prejudice to any other provisions of this Deed, each of
the Grantors and the Guarantor shall indemnify GIS on demand on a full indemnity
basis, and holds it harmless from and against all liabilities, damages, costs,
claims, reduction in net consolidated assets or increase in net consolidated
liabilities and all reasonable expenses which GIS may sustain, suffer, or incur
as a result of any of the foregoing and each of the Grantors and the Guarantor
shall pay to GIS on demand the full amount of any such loss as aforesaid in
immediately available funds.

6

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10.5  
The Grantors Warranties shall survive Completion and the rights and remedies of
GIS in respect of any breach of the Grantors Warranties shall not be affected by
Completion, or GIS failing to exercise or delaying the exercise of any right or
remedy, or by any other event or matter whatsoever, except a specific and duly
authorised written waiver or release and no single or partial exercise of any
right or remedy shall preclude any further or other exercise.

10.6  
Each of the Grantors and the Guarantor undertakes in relation to any Grantors
Warranty which refers to the knowledge, awareness, information or belief of each
of the Grantors and the Guarantor that it/he has made due and careful enquiry
into the subject matter of that Grantors Warranty and that it/he does not have
the knowledge, awareness, information or belief that the subject matter of that
Grantors Warranty may not be correct, complete or accurate.

10.7
The liability of each of the Grantors and the Guarantor in respect of any breach
of the Grantors Warranties shall be limited as provided in this Clause 10.7:

 
(1)
the Grantors and the Guarantor shall be under no liability in respect of a
breach of any of the Grantors Warranties or to indemnify pursuant to this Deed
unless the Grantors and the Guarantor shall have received written notice from
GIS prior to the date falling on the sixth anniversary of the date of Completion
in respect of the Grantors Warranties or the indemnity as aforesaid giving full
details of the relevant claim and any such claim shall (if not previously
satisfied, settled or withdrawn) be deemed to have been waived at the expiration
of three (3) months after the sixth anniversary of the date of Completion unless
proceedings in respect thereof shall then have been commenced against the
Grantors and the Guarantor;

 
(2)
the Grantors and the Guarantor shall be under no liability in respect of any
breach of the Vendor Warranties or to indemnify as aforesaid:

 
(i)
if such liability would not have arisen but for something voluntarily done or
omitted to be done (other than pursuant to a legally binding commitment created
on or before Completion) by GIS or the Company or any member of the Group after
Completion and otherwise than in the usual and ordinary course of business;

 
(ii)
to the extent that such liability arises or is increased as a result only of an
increase in rates of taxation made after Completion with retrospective effect;
or

 
(iii)
to the extent that in accordance with applicable law (whether of Hong Kong, the
PRC or elsewhere) a note, provision, allowance or reserve in respect thereof was
made in the management accounts of the Company provided that, for the avoidance
of doubt, to the extent any such note, provision, allowance or reserve is not in
accordance with applicable law, the liability of the Grantors and/or the
Guarantor in respect thereof shall not be limited or excluded by this sub-Clause
(iii).

10.8
The aggregate amount of the liability of the Grantors and the Guarantor in
respect of any claim for breach of any of the Grantors Warranties or to
indemnify as aforesaid shall not exceed the aggregate amount of the
consideration payable pursuant to Clause 7 (or the equivalent thereof).

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11.
GIS WARRANTIES

11.1
Subject to Clause 11.7, GIS represents, warrants and undertakes to the Grantors
and the Guarantor and their respective successors and assigns that the
warranties (the “GIS Warranties”) set out in Schedule 3 set out in are true and
accurate in all material aspects on the date of this Deed and will continue to
be so on up to and including the date of Completion with reference to the facts
and circumstances from time to time applying.

11.2
GIS agrees that the Grantors and the Guarantor may treat each of the GIS
Warranties as a condition of this Deed.

11.3
GIS shall indemnify and keep fully and effectively indemnified the Grantors and
the Guarantor on demand from and against all losses, costs and expenses which
may be incurred by them or any of them in connection with any breach of any of
GIS Warranties or their successfully enforcing any claim for any such breach.

11.4
GIS shall be under no liability in respect of a breach of any of the GIS
Warranties or to indemnify pursuant to this Deed unless GIS shall have received
written notice from the Grantors and the Guarantor prior to the date falling on
the sixth anniversary of the date of Completion in respect of the GIS Warranties
or the indemnity as aforesaid giving full details of the relevant claim and any
such claim shall (if not previously satisfied, settled or withdrawn) be deemed
to have been waived at the expiration of three (3) months after the sixth
anniversary of the date of Completion unless proceedings in respect thereof
shall then have been commenced against GIS.

11.5
The indemnity provided for under Clause 11.4 is without prejudice to any other
rights and remedies of the Grantors and the Guarantor in relation to any breach
of any of the GIS Warranties and all other rights and remedies are expressly
reserved to the Grantors and the Guarantor.

11.6
Each of the GIS Warranties is without prejudice to any other GIS Warranty or
other agreements or indemnities entered into between the parties or any of them
and, except where expressly stated otherwise, no provision contained in this
Deed or other agreements or indemnities shall govern or limit the extent or
application of any other provision of this Deed or such other agreements.

11.7
All of the GIS Warranties are deemed to be qualified by GIS’s filings with the
Securities and Exchange Commission of the US published up to the date of this
Deed.

11.8
No claim by the Grantors or the Guarantor shall be prejudiced, nor shall the
amount of any claim by them be reduced, in consequence of any information
relating to GIS or its affairs which may at any time have come to the knowledge
of any of the Grantors or the Guarantor, and it shall not be a defence to any
claim against GIS that any of the Grantors or the Guarantor knew or ought to
have known or had constructive knowledge or any information relating to the
circumstance giving rise to such claim, subject, in each case, to Clause 11.7.

11.9
The rights and remedies of the Grantors and the Guarantor in respect of any
breach of the GIS Warranties shall not be affected by investigations made by or
on behalf of them into the affairs of GIS.

11.10
The GIS Warranties shall survive Completion insofar as the same are not fully
performed on Completion.

11.11
The aggregate amount of the liability of GIS in respect of any claim for breach
of any of the GIS Warranties or to indemnify as aforesaid shall not exceed the
aggregate amount of the agreed valuation of the Consideration Shares pursuant to
Clause 7 (or the equivalent thereof)

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12.
POWER OF ATTORNEY

12.1
As continuing security for the due performance of the Grantors’ obligations in
this Deed, each of the Grantors hereby irrevocably and by way of security
appoints GIS (the “Grantor’s Attorney”) with full power of substitution and with
full power to act alone to be the lawful attorney of each of the Grantors and on
its behalf to execute and do any such instrument, act or thing which in the
opinion of such Grantor’s Attorney, the Grantors ought to do under the covenants
and provisions contained in this Deed. Each of the Grantors agrees to ratify and
confirm and covenant to ratify and confirm whatever such Grantor’s attorneys
shall lawfully do by virtue of this Clause 12.1.

12.2
As continuing security for the due performance of GIS’s obligations in this
Deed, GIS hereby irrevocably and by way of security appoints the Guarantor (the
“GIS’s Attorney”) with full power of substitution and each with full power to
act alone to be the attorney of GIS and on its behalf to execute and do any such
instrument, act or thing which in the opinion of such GIS’s Attorney, GIS ought
to do under the covenants and provisions contained in this Deed. GIS agrees to
ratify and confirm and covenant to ratify and confirm whatever such GIS’s
attorney shall lawfully do by virtue of this Clause 12.2.

13.
FURTHER ASSURANCE

 
Each party hereto shall, at the costs and expenses of the other party hereto
execute, do and perform or procure to be executed, done and performed by other
necessary parties all such further acts, agreements, assignments, assurances,
deeds and documents as the other party may require effectively to vest the full
benefit of this Deed.

14.
GUARANTEE

In consideration of GIS agreeing to purchase the Option Shares, the Guarantor
hereby unconditionally and irrevocably guarantees the due and punctual
performance and observance by the Grantors of all their obligations and, if and
wherever any of the Grantors defaults for any reason whatsoever in the
performance of any such obligations, the Guarantor shall forthwith upon demand
perform (or procure the performance of) and satisfy (or procure the satisfaction
of) such obligations with regard to which such default has been made. As a
separate and independent stipulation, the Guarantor hereby covenants and agrees
that, subject as is stated herein, any obligation expressed to be undertaken by
each of the Grantors which may not be enforceable against it by reason of any
legal limitation, disability or incapacity on or of the Grantors or any other
fact or circumstance shall nevertheless be enforceable against and recoverable
from the Guarantor as though the same had been incurred by him, and the
Guarantor was the sole or principal obligor in respect thereof and shall be
performed or paid by the Guarantor on demand.

15.
CONFIDENTIALITY

Except in compliance with an order or requirement of a competent court or
authority, no general public disclosure regarding this Deed or the terms hereof
shall be made by any of the Grantors and GIS without the prior written consent
of the other. Each of the Grantors and GIS further agree that they will not, and
will procure that their respective directors, officers, employees,
representatives and agents not to, disclose to any person who is not a direct
participant in discussions concerning the grant of the Call Option and the Put
Option, the status of the discussions or negotiations taking place or any of the
terms, conditions or other facts with respect to the grant of the Call Option
and Put Option.

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16.
TIME AND WAIVER

Time shall in every respect be of the essence of this Deed but no failure on the
part of any party hereto to exercise, and no delay on its part in exercising any
right hereunder shall operate as a waiver thereof, nor will any single or
partial exercise of any right under this Deed preclude any other or further
exercise of it or the exercise of any other right or prejudice or affect any
right against any other parties hereto under the same liability, whether joint,
several or otherwise. The rights and remedies provided in this Deed are
cumulative and not exclusive of any rights or remedies provided by law.

17.
PARTIAL INVALIDITY

If at any time one or more provisions of this Deed is or becomes invalid,
illegal, unenforceable or incapable of performance in any respect under the laws
of any relevant jurisdiction, the validity, legality, enforceability or
performance of the remaining provisions hereof in that jurisdiction or the
validity, legality, enforceability or performance under the laws of any other
relevant jurisdiction of any provisions of this Deed shall not in any way be
effected or impaired thereby.

18.
AMENDMENTS

This Deed shall not be amended, supplemented or modified except by instruments
in writing signed by all parties hereto.

19.
NOTICES

19.1
Any notice claim, demand, court process, document or other communication to be
given under this Deed (collectively “communication” in this Clause 19) shall be
in writing in the English language and may be served or given personally or sent
to the telex or facsimile numbers (if any) of the relevant party and marked for
the attention and/or copied to such other person as specified in Clause 19.5.

19.2
A change of address or telex or facsimile number of the person to whom a
communication is to be addressed or copied pursuant to this Deed shall not be
effective until five (5) days after a written notice of change has been served
in accordance with the provisions of this Clause 19 on all other parties to this
Deed with specific reference in such notice that such change is for the purposes
of this Deed.

19.3
A party may not designate a non Hong Kong address for the service of
communications to it.

19.4
All communications shall be served by the following means and the addressee of a
communication shall be deemed to have received the same within the time stated
adjacent to the relevant means of despatch:

 

 
Means of despatch
 
Time of deemed receipt
             
Local mail or courier
 
24 hours
   
Telex
 
on despatch
   
Facsimile
 
on despatch
   
Air courier/speedpost
 
3 days
   
Airmail
 
5 days
 

19.5
The initial addresses and facsimile numbers of the parties for the service of
communications, the person for whose attention such communications are to be
marked and the person to whom a communication is to be copied are as follows:

 
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To the Grantors:
       
Address:
c/o House No. 5, Mantex Villa, Hang Lok Lane, Tung Lo Wan Hill, Tai Wai,
New.Territories, Hong Kong
   
Facsimile:
(852) 2759 8811
   
Attention:
Mr. Ko Yin
         
To GIS:
Name:
Global Innovative Systems Inc.
   
Address:
16/F., Hang Seng Mongkok Building, 677 Nathan Road, Mongkok, Kowloon, Hong Kong
   
Facsimile:
(852) 2546 6878
   
Attention:
Board of Directors
         
To the Guarantor:
Address:
House No. 5, Mantex Villa, Hang Lok Lane,
     
Tung Lo Wan Hill, Tai Wai,
     
New.Territories, Hong Kong
   
Facsimile:
(852) 2759 0282

 
19.6
A communication served in accordance with this Clause 19 shall be deemed
sufficiently served and in proving service and/or receipt of a communication it
shall be sufficient to prove that such communication was left at the addressee’s
address or that the envelope containing such communication was properly
addressed and posted or despatched to the addressee’s address or that the
communication was properly transmitted by telex, facsimile or cable to the
addressee. In the case of communication by telex, such communication shall be
deemed properly transmitted upon the receipt by the machine sending the telex
the telex answerback of the addressee; in the case of facsimile transmission,
such transmission shall be deemed properly transmitted on receipt of a report of
satisfactory transmission printed out by the sending machine.

19.7
Nothing in this Clause 19 shall preclude the service of communication or the
proof of such service by any mode permitted by law.

20.
COSTS AND STAMP DUTY

20.1
Each party shall bear its own costs and expenses (including legal fees) incurred
in connection with the preparation, negotiation, execution and performance of
this Deed.

20.2
All stamp duty (if any) payable in connection with the sale and purchase of the
Option Shares shall be borne equally by the Grantors (as between them, in
proportion to the number of the Option Shares sold by each of them as nearly as
practicable) and GIS.

21.
ASSIGNMENT

This Deed shall be binding upon each party’s successors and assigns and personal
representatives and none of the parties hereto may assign or transfer any of its
rights and obligations under this Deed.

22.
ENTIRE AGREEMENT

This Deed constitutes the entire agreement between the parties hereto with
respect to the matters dealt with herein and supersedes all previous agreements,
arrangements, statements, understandings or transactions between the parties
hereto in relation to the matters hereof.
  
23.
GOVERNING LAW, JURISDICTION AND PROCESS AGENTS

23.1
This Deed shall be governed by and construed in accordance with the laws of Hong
Kong.

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23.2
The parties hereto hereby irrevocably submit to the non-exclusive jurisdiction
of the courts of Hong Kong.

23.3
Each of the Grantors hereby irrevocably appoints the Guarantor whose
correspondence address is at House No. 5, Mantex Villa, Hang Lok Lane, Tung Lo
Wan Hill, Tai Wai, New.Territories, Hong Kong as its service agent to accept
service or process out of the courts of the Hong Kong in connection with this
Deed. Such appointment cannot be revoked and each of the Grantors hereby
confirms that any process, writ of action or summonses out of the courts of Hong
Kong served either personally on or sent by post (postal prepaid) to the service
agent referred to in this Clause 23.3 at the then current address of such
service agent shall be and shall be deemed to be served on each of the Grantors
and that the failure of the service agent to give any notice of such service of
process to each of the Grantors shall not impair or affect the validity of such
service or of any judgment based thereon.

23.4
GIS hereby irrevocably appoints Mr. Bondy Tan, holder of Hong Kong Permanent
Identity Card No. D 500769 (1)) and whose correspondence address is at 16/F.,
Hang Seng Mongkok Building, 677 Nathan Road, Mongkok, Kowloon, Hong Kong as its
service agent to accept service or process out of the courts of the Hong Kong in
connection with this Deed. Such appointment cannot be revoked and GIS hereby
confirms that any process, writ of action or summonses out of the courts of Hong
Kong served either personally on or sent by post (postal prepaid) to the service
agent referred to in this Clause 23.4 at the then current address of such
service agent shall be and shall be deemed to be served on GIS and that the
failure of the service agent to give any notice of such service of process to
GIS shall not impair or affect the validity of such service or of any judgment
based thereon.

 

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SCHEDULE 1

DETAILS OF THE GRANTORS’ HOLDINGS OF SHARES AND OPTION SHARES

Name of Grantors
Number of Shares held
Number of Initial Option Shares
Number of Additional Option Shares
Admire Fame
215
143
72
Gain Huge
125
125
-
Splendid Fortune
45
45
-

 

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SCHEDULE 2

GRANTORS WARRANTIES

1.
Recitals

The matters stated in the Recitals to this Deed (save for Recital (E)) are true
and correct in all material respects.

2.
The Grantors, the Guarantor and the Company

2.1
Each of the Grantors and the Guarantor has the full power to enter into and
perform this Deed and this Deed will, when executed, constitute binding
obligations on each of them in accordance with its terms.

2.2
Save as disclosed to GIS, there is no outstanding indebtedness or other
liability (actual or contingent) owing by any member of the Group to the
Grantors or the Guarantor, any director of a member of the Group or any person
connected with the Grantors or the Guarantor nor is there any indebtedness owing
to a member of the Group by any such person.

2.3
The Option Shares are issued fully paid and are beneficially owned by the
Grantors free from all Encumbrances and the same are freely transferable by the
Grantors without the consent, approval, permission, licence or concurrence of
any third party.

 

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SCHEDULE 3

GIS WARRANTIES

1.
The audited condensed consolidated financial statements of GIS and its
subsidiaries for the year ended 31 March 2005 have been prepared in accordance
with generally accepted accounting principles and practice consistently applied
and give a true and fair view of the results of operations and assets and
liabilities of GIS and its subsidiaries for the year ended and as at the date to
which such financial statements have been made up.

2.
GIS has been duly incorporated and is validly existing under the laws of its
place of incorporation (namely, the State of Nevada, the US) and has full power,
authority and legal right to own its assets and carry on its business.

3.
The Option Consideration Shares represent about 44.44% of the common shares of
GIS in issue on the date of this Deed, and about 29% of the common shares of GIS
in issue on Completion as enlarged by the issue of the Consideration Shares and
the Option Consideration Shares.

4.
The Option Consideration Shares shall, upon issue, rank pari passu among
themselves and with all other common shares of GIS then in issue and are free
from all Encumbrances.

5.
Since 30 June 2005, there has been no material adverse change to the financial
position of GIS and its subsidiaries (taken as a whole).

6.
All information contained in this Deed or in the documents referred to herein
and therein and all other information concerning GIS and/or any part or parts of
its business operations assets and liabilities (actual or contingent) supplied
in the course of the negotiations leading to this Deed to each of the Grantors
or its agents was when given true, complete and accurate in all material
respects and there is no fact or matter which has not been disclosed which
renders any such information or documents untrue, inaccurate or misleading in
any material respect at the date of this Deed or which if disclosed might
reasonable be expected to influence adversely any of the Grantor’s decision to
accept the Option Consideration Shares on the terms of this Deed.

 

15

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IN WITNESS WHEREOF this Deed has been executed on the day and year first above
written.

SEALED with the COMMON SEAL of
)
 
)
and SIGNED by
)
 
)
for and on behalf of
)
ADMIRE FAME INVESTS LIMITED
)
in the presence of:
)
           
SEALED with the COMMON SEAL of
)
 
)
and SIGNED by
)
 
)
for and on behalf of
)
GAIN HUGE INVESTMENTS
)
LIMITED
)
in the presence of:
)
           
SEALED with the COMMON SEAL of
)
 
)
and SIGNED by
)
 
)
for and on behalf of
)
SPLENDID FORTUNE
)
INVESTMENTS LIMITED
)
in the presence of:
)
           
GIS
     
SIGNED by
)
 
)
for and on behalf of
)
GLOBAL INNOVATIVE
)
SYSTEMS INC. 
)
in the presence of:
)
           
THE GUARANTOR
     
SIGNED, SEALED and DELIVERED by
)
KO YIN
)
in the presence of:
)

 
16