Document:

ex10-1.htm

EXHIBIT 10.1

Zhongshan City Weihe Appliances Co. Ltd. and Zhongshan Sanfan Electrical Appliance Co., Ltd. Equity Transfer Agreement

Party A: Zhongshan City Weihe Appliances Co., Ltd.

 

Party B: Zhongshan Sanfan Electrical Appliance Co., Ltd.

 

Party C: All Shareholders of Zhongshan Sanfan Electrical Appliance Co., Ltd.

 

Basic Information about All Parties in the Agreement

 

1.  Zhongshan City Weihe Appliances Co. Ltd (in the agreement referred as “Party A”, “acquirer” or “Weihe Electronics Appliances”) is a registered and legitimate existence of the limited liability company in Zhongshan City of Shandong Province. It is mainly engaged in household decorative fans, energy saving lighting and other product development, production and sales. The ultimate shareholder of Zhongshan City Weihe Appliances is a public company “Home System Group”, which is incorporated as a Nevada corporation. Home System Group is currently listed on OTCBB and the ticker is HSYT.

 

2.  Zhongshan Sanfan Electrical Appliance Co., Ltd.(in the agreement referred as “Party B”, “Sanfan Electronics Appliances” or “target company”) is a registered and legitimate existence of the limited liability company in Zhongshan City of Shandong Province. It is mainly engaged in household fans development, production, marketing and sales. It was founded on April 1, 2009. The net sales for 2009 was $ 11,000,000 and the net income was $ 1,600,000. The net sale for twelve months ended March 31, 2010 was $ 15,000,000 and the net income was $ 2,250,000.

 

3.  Party C is all shareholders of Zhongshan Sanfan Electrical Appliance Co., Ltd.(in the agreement referred as “Party C”, “Shareholders of Sanfan Electronics Appliances” or “shareholders of Target Company”). Party C holds 100% shares of Zhongshan Sanfan Electronics Appliances Co. Ltd.

 

According to Party A and Party B respective advantages in product manufacture and marketing, in order to lead better cooperation, enhance cooperation and efficiency and improve market competitiveness, all parties reached the agreement on the fact that Party A will acquire 90% shares of Party B.  All parties should follow the agreement in future cooperation.

 

Article 1 Definition

 

1.1 U.S. securities regulation:  U.S. Securities and Exchange Commission (SEC)

 

1.2 Accounting Standards: U.S. Generally Accepted Accounting Principles (US GAAP)

 

1.3 Year: 12 consecutive months, rather than a full calendar year or fiscal year

 

1.4 PCAOB: Public Company Accounting Oversight Board

 

1.5 All financial statement in the agreement is audited financial data given by PCAOB registered accounting firm under US GAAP.

 

  

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Article 2 Acquisition Mode

 

2.1 Party C agrees to transfer 90% of its shares held (in the agreement referred as “target shares”) of Sanfan Electronics Appliances to Party A.

 

2.2 Party A agrees to acquire the target shares by cash payment at the specific price and specific payment method in Article 3.

 

Article 3 Target Share Price and Payment Method

 

3.1 Target Share Price

 

(1) Party B’s revenue and net income were approximately $ 15,000,000 and $ 2,250,000, respectively. Its total valuation is $ 13,500,000, based on the valuation of Target Company of approximately six times of the net income for the twelve-month period ended March 31, 2010. Party A will acquire 90% shares by cash and pay Party C $ 12,000,000.

 

(2) The target price above is based on the net income of $ 2,250,000 for the period from April 1st, 2009 to March 31, 2010 in the audit report under US GAAP by PCAOB registered accounting firm which is hired by Party A. If the audit results show that Party B's actual profits less than $2,250,000, Party A’s final acquisition price should be adjusted by the percentage of the difference. (If the audit results show that Party B's actual net income is more than $2,250,000, the acquisition price will be maintained unchanged.)

 

3.2 Payment Method

 

(1) First Installment: 600,000 U.S. dollars will be paid to Party C by Party A within 15 business days upon agreement effective date.

 

(2) Second Installment:  1,800,000 U.S. dollars will be paid to Party C by Party A within 15 business days after completion of transfer of business registration process of target shares.

 

(3) Third Installment:  2,400,000 U.S. dollars will be paid to Party C by Party A within 15 business days upon the completion of March 31, 2010 financial audit and final acquisition price is determined based on audit result.

 

(4)  Fourth Installment:  3,600,000 U.S. dollar will be paid to Party C by Party A upon the completion of audit on financials of fiscal year 2010 of Sanfan.

 

(5)  Final Installment: 3,600,000 U.S. dollar will be paid to Party C by Party A by December 31, 2011.

 

(6) If the purchase price of the stock acquisition is reduced according to the relevant agreement, the differences will be adjusted proportionally from payment procedure mentioned above.

 

  

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Article 4 The Transfer of Shareholder’s Right

 

4.1 After the agreement is signed and Party A completes the payment of USD$600,000, Party C must cooperate with Party A to transfer the targets shares and business title to Party A.

 

4.2 After Party A completes the third payment of USD$2.4 million, Party C is no longer obligated or responsible for any shareholder obligation. This includes but is not limited to debts or any further possible debts and liabilities. After completion of USD$2.4 million, Party A is fully responsible for the shareholder obligation. Company would not have an obligation to pay any amounts that might be due to Party C.

 

Article 5 Covenants

 

Party C Covenants

 

	
1.  

	
Party C promises that the revenue and net income for twelve months ended March 31, 2010 were at least $15 million and $2.25 million, respectively.

 

	
2.  

	
 Party C guarantee that all documents are signed voluntarily and therefore acquire by legal authorization.   Each of the parties hereto agrees to cooperate with the other parties in taking, or causing to be taken.

 

	
3.  

	
Upon the agreement, Party C will transfer its 90% shares held (in the agreement referred as “target shares”) of Sanfan Electronics Appliances to Party A.

 

	
4.  

	
The Company shall not, and (as applicable) shall not permit any of its Subsidiaries to:

 

(1) Incur, assume or pre-pay any indebtedness for borrowed money or enter into any agreement to incur, assume or pre-pay any indebtedness for borrowed money.

 

(2) Establish any property mortgage; encumber guarantees or any of third-party interests or provide security for others.

 

(3) Make or forgive any loans, advances or capital contributions to, guarantees for the benefit of, or investments in, any party, other than loans between or among the Company and any of its Subsidiaries.

 

(4) Change any of the material policies, practices or procedures in the contract is not allow unless agreement has been made between parties.

 

(5) Make any substantive changes within the management team and employees that may cause significant impact on the company.

 

(6) Conduct any abnormal business purposes or enter into any substantive contract or capital commitments.

 

(7) Declare, set aside or pay any dividends on (whether in cash, stock or property), or make any other distributions in respect of any of its capital stock. 

(8) Chang company’s basic business.

  

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(9) Make any substantive purchases of any type of non-cash assets.

 

(10) Make any substantive changing company’s investment plan, or

 

(11) Make any other possible behaviors or actions might cause above-mentioned items.

 

5. After the effective date of the contract, any type of debt that is found or occurred before the agreement, and has not been notify to Party A prior to the agreement, Party C will be responsible for the debt. 

 

6. Party B and its subsidiary (if) do not have any incomplete lawsuit or any other legal action. If any incomplete lawsuit or legal action hasn’t been notified to the Party A before the agreement has been made, Party C is fully responsible for it.

 

5.2 Party A Covenants

 

1. Party A is a legally established and validly existing limited company, with all the necessary capacity to provide civil rights and power and perform all obligations of this agreement and responsibility.

 

2. The signing of this agreement and have been or will be fulfilling All the necessary authorization without violating the constitution of party.

 

Article 6 Liability for Breach of Covenant

 

6.1 Fine for breach of contract will be USD$1 million.

 

6.2 Neither party are allow to contravene, conflict with, or result in any violation or breach of any provision of the certificate of incorporation or bylaws of the Company,

 

Article 7 Confidentiality

 

7.1 During the implementation of the agreement, all information exchanged among all parties is commercially confidential. All parties under the agreement holding confidential obligation should not disclose or distribute to outsiders.

 

7.2 The confidential obligation period for all parties is two years after the agreement is fulfilled.

 

Article 8 Controversy

 

During the implementation of the agreement, if there is controversy, all parties should settle it by friendly negotiation. If agreement cannot be reached, any party has the right of Litigation.

 

Article 9 Law Applicability

 

The Agreement applies to the laws of People's Republic of China.

 

  

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Article 10 Effect

 

This Agreement will be immediate effect after sealed and signed by all parties.

 

 

(Below of the agreement is blank.)

 

 

 

 

(This page is signing page)

 

Party A:

 

 

 

Party B:

 

 

 

Party C:

 

 

 

 

The agreement signing date: May 31, 2010

 

The agreement signing location: Zhongshan City, Guangdong Province

 

 

5exhibit10.htm - Generated by SEC Publisher for SEC Filing

 

Exhibit 10.1

PhytoMedical Technologies, Inc.

100 Overlook Drive, 2nd Floor

Princeton, NJ 08540

June 3, 2010

 

Mr. Amit S. Dang

2000 Town Center, Suite 1900

Southfield, MI 48075

 

Re: Contract Interim Executive-Services Agreement

 

Dear Mr. Dang: 

 

This letter sets forth the terms and conditions of your Contract Interim Executive-Services Agreement (the “Agreement”) with Phytomedical Technologies, Inc. (the “Company").

 

            1. Duties. Under terms of the Agreement, you shall be contracted by the Company as its President and Chief Executive Officer, and become a Member of the Board of Directors, or in any executive or non-executive position(s) as the Company, from time to time, may deem appropriate. In performance of your duties, you shall be subject to the direction of, and be reporting directly to, the Company's Board of Directors (the “Board”); provided that, if requested by the Board, you will immediately resign your position(s) of the Company. You shall be available to travel as the needs of the business require. You agree to devote such amount of your business time, energy and skill to the duties assigned to you by the Board as maybe reasonably necessary to fulfill your obligations hereunder. The Company acknowledges and understands that your services hereunder are provided on a part-time basis. 

 

2. Termination of Agreement. Anything herein to the contrary notwithstanding, the Company may terminate the Agreement at any time, with or without cause, and for any reason whatsoever, upon immediate written notice.  You may terminate the Agreement with or without cause, and for any reason whatsoever, upon written notice of no fewer than 90 days; your notice to the Company may be waived upon mutual consent of the Company.  In the event of termination by either party, with or without cause: (i) you shall not be entitled to any form of contract cancellation fees, non-performance fees, or monthly fees; (ii) you shall no longer be eligible for reimbursement of expenses not previously approved or within the terms of the Agreement under Paragraph 5; (iii) any and all unexercised Options, whether vested or not, shall expire and shall no longer be exercisable as of the date of termination of the Agreement, except under the conditions detailed in Paragraph 4(b); (iv) you will not be entitled to any financial compensation beyond the terms provided for in the Agreement, and (v) neither party hereto shall have any further rights or obligations hereunder, except obligations expressly stated to survive the termination of the Agreement.  Nothing shall limit your right to be indemnified by the Company, subject to its indemnification policies then in effect, and subject to the conditions detailed in Paragraph 3; for your actions as a director or officer of the Company, provided such indemnification would otherwise have been available to you.

 

3. Indemnification. During the term of the Agreement you shall be included as an “officer” of the Company under such policy and (b) you shall be provided reasonable and customary indemnification provisions as per the Company’s By-laws and Certificate of Incorporation that are at least as protective of you as the laws of the state in which the Company is then incorporated. 

 

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          4. Financial Terms. You shall be compensated by the Company for your services as follows: 

 

(a) Monthly Fee. Commencing June 3, 2010, you shall be paid a monthly fee of $5,000. You shall be responsible for withholding all applicable taxes. You will not be eligible for health benefits, vacation time, or other employee benefits.

 

            5. Expenses. You shall be entitled to reimbursement for reasonable travel and other out-of-pocket expenses necessarily incurred in the performance of your duties hereunder, upon submission and approval of written statements and bills in accordance with the then regular procedures of the Company. Expenses exceeding $500.00 for travel and $100 for meals and other incidentals must be approved in writing by the Company prior to your seeking reimbursement for the same.

 

              6. Your Representations and Warranties. You represent and warrant to the Company that (a) you are under no contractual or other restriction or obligation which is inconsistent with the execution of the Agree­ment, the performance of your duties hereunder, or the other rights of the Company hereunder, and (b) you are under no physical or mental disability that would hinder your performance of duties under this Agreement, and (c) you are not party to any ongoing civil or criminal proceedings, and have not been party such proceedings within the past five years, and do not know of any such proceeding that may be threatened or pending against you, and (d) you are not currently engaged in activities and will not knowingly engage in future activities that may cause embarrassment to the Company or tarnish the reputation or public image of the Company, including but not necessarily limited to association with or party to: any criminal behavior(s) such as drug use, theft, or any other potential or active violation of law; political controversy, civil disobedience, or public protest; lewd, lascivious behavior.

 

7. Non Competition; Non Solicitation.  (a)     In view of the unique and valuable services it is expected that you will render to the Company, your knowledge of its trade secrets, and other proprietary information relating to the business of the Company and in consideration of the compensation to be received hereunder, you will not, during the term of this Agreement, engage in, or otherwise directly or indirectly, be employed by, or act as a consultant or lender to, or, without the prior written approval of the Board, be a director, officer, owner, or partner of, any other business or organization that is engaged in the same field of research and development as is the Company. Nothing herein shall be deemed to preclude you from being an officer, director, owner, investor in, or partner of, any business or organization which is not competing with the Company, provided the same does not in any manner whatsoever impair your ability to perform your duties under the Agreement.

 

                        (b) During the term of the Agreement, and for a period of one year following termination of the Agreement, you will not directly or indirectly reveal the name of, solicit or interfere with, or endeavor to entice away from the Company any of its suppliers, customers, or employees.

 

                        (c) During the term of the Agreement and thereafter following the termination of the Agreement, you shall not make any critical or disparaging statements about the Company or any of its employees, directors or products to any other person or entity.

 

                        (d) Since a breach of the provisions of this Paragraph 7 could not adequately be compensated by money damages, the Company shall be entitled, in addition to any other right and remedy available to it, to an injunction restraining such breach or a threatened breach, and in either case no bond or other security shall be required in connection therewith, and you hereby consent to the issuance of such injunction. You agree that the provi­sions of this Paragraph 7 are necessary and reasonable to protect the Company in the conduct of its business. If any restriction contained in this Paragraph 7 shall be deemed to be invalid, illegal, or unenforceable by reason of the extent, duration, or geographical scope thereof, or 

 

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otherwise, then the court making such determination shall have the right to reduce such extent, duration, geographical scope, or other provisions hereof, and in its reduced form such restriction shall then be enforceable in the manner contemplated hereby. This Paragraph 7 shall survive the termination of the Agreement.

 

            8. Intellectual Property. Any interest in patents, patent applications, inventions, copyrights, developments, and processes (“Intellectual Property”) which you now, or hereafter during the period for which this Agreement is in effect, may own or develop relating to the fields in which the Company may then be engaged shall belong to the Company; and forthwith upon request of the Company, you shall execute all such assignments and other documents and take all such other action as the Company may reasonably request in order to vest in the Company all your right, title, and interest in and to such Intellectual Property free and clear of all liens, charges, and encumbrances. This Paragraph 8 shall survive the termination of the Agreement.

 

            9. Confidential Information. All confidential information which you may now possess, or may obtain or create prior to the such time as the Agreement is terminated, relating to the business of the Company, or any customer or supplier of the Company, or any agreements, arrangements, or understandings to which the Company is a party, shall not be disclosed or made accessible by you to any other person or entity either during or after the termination the Agreement or used by you except during the term of the Agreement in the business and for the benefit of the Company. You shall return all tangible evidence of such confidential information to the Company prior to or at the termination of the Agreement. This Paragraph 9 shall survive the termination of the Agreement.

10. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. In view of the personal nature of the services to be performed under this Agreement by you, you shall not have the right to assign or transfer any of your rights, obligations or benefits under this Agreement, except as otherwise noted herein.

11. No Reliance on Representations. You acknowledge that you are not relying, and have not relied, on any promise, representation or statement made by or on behalf of the Company which is not set forth in this Agreement. 

12. Entire Agreements; Amendments. This Agreement sets forth the entire understanding for the parties with respect to the terms of the Agreement, supersedes all existing agreements between you and the Company concerning matters in the Agreement, and may be modified only by a written instrument duly executed by each of you and Company. 

            13. Waiver. Any waiver by either party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing.

 

            14. Construction. You and the Company have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by you and the Company and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word “including” shall mean including without limitation. The headings in this Agreement are solely for the convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.

 

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            15. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

 

            16. Notices. All notices, demands or requests made pursuant to, under or by virtue of this Agreement must be in writing and sent to the party to which the notice, demand or request is being made by (i) certified or registered mail, return receipt requested, (ii) nationally recognized overnight courier delivery, (iii) by facsimile transmission provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party or (iv) hand delivery as follows:

 

                        To the Company:

 

PhytoMedical Technologies, Inc.

Attention: Mr. Joseph Sierchio, Legal Counsel

430 Park Avenue, 7th Floor

New York, NY  10022

 

                        To you:

 

Mr. Amit S. Dang

2000 Town Center, Suite 1900

Southfield, MI 48075

 

or to such other address, facsimile number, or email address, as is specified by a party by notice to the other party given in accordance with the provisions of this Paragraph 15. Any notice given in accordance with the provisions of this Paragraph 16 shall be deemed given (i) three (3) Business Days after mailing (if sent by certified mail), (ii) one (1) Business Day after deposit of same with a nationally recognized overnight courier service (if delivered by nationally recognized overnight courier service), or (iii) on the date delivery is made if delivered by hand or facsimile.

 

            17. Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  

 

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18. Governing Law. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, County of New York for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

            19. Date of Agreement. The date of this Agreement shall be June 3, 2010 regardless of the date it is signed by you. 

 

If you find the foregoing acceptable, please acknowledge your acceptance of, and agreement with, the terms and conditions set forth above by signing the enclosed copy of this letter in the space provided and returning the same to the undersigned. 

Sincerely, 

 

PhytoMedical Technologies, Inc.

/s/ Ray Krauss

Ray Krauss, Chief Financial Officer and Director

On this 3rd day of June, 2010, I agree to and accept the terms of the Agreement with PhytoMedical Technologies, Inc. on the terms and conditions set forth in this Agreement. 

Dated: June 3, 2010

 

/s/ Amit S. Dang

Mr. Amit S. Dang

 

 

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