Exhibit 10
Equity Interest Exchange Agreement
Between
Honking International Limited
And
Labor Union Staff Shareholding Committee of
Jiangmen Gold Crown Hardware and Lock Manufactory Co., Ltd.
This Agreement has been entered into by Honking International Limited [A
wholly-owned subsidiary of Asian Star Development, Inc.] (hereinafter referred
to as "Party A" and Labor Union Staff Shareholding Committee of Jiangmen Gold
Crown Hardware & Lock Manufactory Co. Ltd. (hereinafter referred to as "Party
B") upon friendly negotiations and subject to the Company Law of the People's
Republic of China and other relevant laws and regulations as well as the
principles of equality, mutual benefit and reciprocal complements of respective
advantages. Whereas Party A intends to accept Party B's assignment of part of
its equity interest in Jiangmen Gold Crown Hardware & Lock Manufactory Co. Ltd.
in consideration of stocks, the two parties have reached the following
Agreements:
I. PARTIES TO THE AGREEMENT:
1. Party A: Honking International Limited (A wholly-owned subsidiary of
Asian Star Development, Inc.) Address: Rm. 930, Block B, East Wing, New
World Office Building, T.S.T., Kowloon, Hong Kong
Representative: Chow Shue Tong, Stephen
2. Party B: Labor Union Staff Shareholding Committee of Jiangmen Gold
Crown Hardware & Lock Manufactory Co. Ltd. Address: 11 Longwan Rd.,
Jiangmen City, Guangdong Province, P.R.C.
Representative: Huang Qiaoliang
II. PURPOSE OF EQUITY INTEREST EXCHANGE:
It is the intention of both parties that through the proposed equity interest
exchange, Party A will be involved in the operation of Jiangmen Gold Crown
Hardware & Lock Manufactory Co. Ltd., and that by taking advantages of the
mechanism and market contact networks of Party A's parent company listed in the
U.S., Jiangmen Gold Crown Hardware & Lock Manufactory Co. Ltd. will be able to
promote its reputation and market share in the international market. Jiangmen
Gold Crown Hardware & Lock Manufactory Co. Ltd. will gradually reform its system
as Party A begins to participate in its operation. The ultimate objective is to
enable Jiangmen Gold Crown Hardware & Lock Manufactory Co. Ltd. to become an
international player and get listed abroad.
III. MEANS AND CONDITIONS OF EQUITY INTEREST EXCHANGE
1. Both parties hereby confirm that the total assets of Jiangmen Gold
Crown Hardware & Lock Manufactory Co. Ltd. amount RMB 78,000,000, of
which RMB 8,000,000 is for goodwill. The total liability amount RMB
46,000,000. The net assets amount RMB 32,000,000. Party B agrees to
assign 30% of its equity interest, which is RMB 9,600,00 in terms of
net assets, to Party B.
2. Party A accepts the assignment by Jiangmen Gold Crown Hardware & Lock
Manufactory Co. Ltd., such assignment accounting for 30% of its equity,
at an exchange rate of US$ 1 to RMB 8.59, and at a price of US$ 4.00
per share based on Party A's parent company (Asian Star Development,
Inc.), which is listed in the United States.
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3. Party A is responsible for transferring the shares of Asian Star to
Party B within twenty-one days after the effective date this Agreement.
After Party B has held the shares of Asian Star for twelve months,
Party A shall assist Party B in disposing of the shares held by Party B
in accordance with NASDAQ rules (one hundred and fifty thousand shares
shall be assigned for every ninety days) and realize the shares. Party
A agrees that if the price of Party A's shares is below US$ 4.00 per
share, the difference between US$ 4.00 and the average share price in
the first month after one year shall be supplemented with shares of
Asian Star, and if the share price is above US$ 4.00, Party B shall
return the surplus in the form of shares or cash, not subject to the
market value of the shares at the time. Party B shall open a capital
account within twelve months after the effective date of this
Agreement. The sum realized from the shares of Party A held by Party B
shall be transferred through this account to Party A as investment
fund. In the meantime, Party B shall apply with authorities such as the
Committee of Foreign Trade and Economy for the renaming Hong Kong JMB
Industrial Co. as Asian Star Development Inc. The foreign capital ratio
of Jiangmen Jinguan Nonferrous Metal Co., Ltd. shall be 30%. Party A
shall provide assistance in relevant procedures.
4. Party A shall become a shareholder of Jiangmen Gold Crown Hardware &
Lock Manufactory Co. Ltd. since 18 September 2000 when Asian Star
transfers the shares to Party B, and hold 30% equity of Jiangmen Gold
Crown Hardware & Lock Manufactory Co. Ltd.
5. As a shareholder of Jiangmen Gold Crown Hardware & Lock Manufactory Co.
Ltd., Party A will be responsible for the equity and obligations as per
the share proportion. Any legal prosecution obligations arising before
18 September 2000 shall be undertaken by former shareholders of the
company.
6. The land use right of Jiangmen Gold Crown Hardware & Lock Manufactory
Co. Ltd. has been included in the total assets and net assets
recognized by both parties. Costs arising from land use shall be
reimbursed by Party B to Party A after Party A becomes a shareholder of
the company.
7. During the three years after this Agreement takes effect, Party B shall
not assign to any individual or organization its equity in Jiangmen
Gold Crown Hardware & Lock Manufactory Co. Ltd. Natural person
shareholders of Jiangmen Gold Crown Hardware & Lock Manufactory Co.
Ltd. shall not reduce their holding by disposal until three years after
the holding proportion of Party A reaches 80% of the total shares of
the company. The natural person shareholders shall not be subject to
this restriction in the case of unusual occasions such as retirement,
resignation of the natural person and with the approval of the
directors of the company. In such unusual cases that the natural person
shareholders have acquired the directors' approval to dispose of their
equities in the company, the company and other shareholders are
entitled the privilege to acquire such equities. Natural person
shareholders shall not undertake industries relevant to or similar in
nature to the business of Jiangmen Gold Crown Hardware & Lock
Manufactory Co. Ltd. within three years after disposing of their
equities in the company out of unusual occasions.
8. Within one year from the effective date upon execution of this
Agreement, the operating profit of "Jiangmen Gold Crown Hardware & Lock
Manufactory Co. Ltd.", compared to that of the corresponding period
from January to August in 2000 (on the basis of no loss to be
incurred), shall increase by more than 5%, and the requirements of
Party A in other aspects shall also be satisfied. Party A shall be able
to hold more equity interest of Jiangmen Gold Crown Hardware & Lock
Manufactory Co. Ltd. until up to fifty-one percent (51%) by means of
cash investment. Within one year after Party A has held 51% of the
equity interest, Party A shall further be entitled to take up more
equity interest of Party B at the consideration of part of cash or
shares until Party holds eighty percent (80%) equity interest of the
company.
9. Within one week from the effective date of this Agreement, Jiangmen
Gold Crown Hardware & Lock Manufactory Co. Ltd. shall call a meeting of
shareholders, at which modification is made to the contract and
constitution of the company in accordance with this Agreement.
<PAGE>
IV. RIGHTS AND OBLIGATIONS OF BOTH PARTIES
Party A shall:
1. from the day on which Party A becomes a shareholder of Jiangmen Gold
Crown Hardware & Lock Manufactory Co. Ltd. upon the entry in force of
this Agreement, be entitled to appoint two staff members as directors
to be on the Board of Directors of the company and another one
personnel as the chief accountant, who will participate in the
operation and management of the company. When Party A has taken up
fifty-one percent (51%) of the equity interest of the company, Party A
is entitled to assign additional two staff members to be on the Board,
whereas there will be seven directors on the Board by the time. In
addition, other staff members will also be so assigned by Party A to
get involved in the operation and management of "Jiangmen Gold Crown
Non-Ferrous Manufactory Co. Ltd.", a subsidiary of the company.
2. be responsible to promote and publicize the image and products for
"Jiangmen Gold Crown Hardware & Lock Manufactory Co. Ltd." and its
subsidiary "Jiangmen Gold Crown Non-Ferrous Manufactory Co. Ltd.".
3. be responsible to attract overseas investment and promote the listing
after system reform and share enlargement for the "Jiangmen Gold Crown
Hardware & Lock Manufactory Co. Ltd."
4. be responsible for matters such as international material and equipment
purchasing (price should be approved by the parties).
Party B shall:
1. together with other Chinese shareholder(s), be responsible for all
procedures required by Chinese authority related to operation and
investment of Jiangmen Gold Crown Hardware & Lock Manufactory Co. Ltd.
and its subsidiary company Jiangmen Gold Crown Non-Ferrous Manufactory
Co. Ltd.
2. together with other Chinese shareholder(s), be responsible for
development and promotion of various domestic businesses and programs
of Jiangmen Gold Crown Hardware & Lock Manufactory Co. Ltd. and its
subsidiary company Jiangmen Gold Crown Non-Ferrous Manufactory Co. Ltd.
3. together with other Chinese shareholder(s), participate or delegate
staff to participate the business and management of Jiangmen Gold Crown
Hardware & Lock Manufactory Co. Ltd. and its subsidiary company
Jiangmen Gold Crown Non-Ferrous Manufactory Co. Ltd.
V. OBLIGATION FOR BREACH OF THE AGREEMENT
Any party to the Agreement failing to perform any of its duty under the
Agreement, causing the inability to execute Agreement, shall be considered
having breached the Agreement. The party breaching the Agreement shall assume
the obligations for breaching the Agreement and compensate the other party
economic loss resulted directly or indirectly by such breach of the Agreement.
<PAGE>
VI. MISCELLANEOUS
1. After the Agreement is signed, accountant will be assigned by the two
parties to audit the financial status of Jiangmen Gold Crown Hardware &
Lock Manufactory Co. Ltd. and make financial report . The report and its
notes are part of the Agreement.
2. The Agreement is binding upon both parties for their interests. The
Agreement shall not be altered orally and it shall not be altered until in
written documents signed by both parties and parties in respect and
examined and approved by the original notarial authorities.
3. After the Agreement takes effect, disputes about this Agreement by the
relevant parties, will have China (Beijing) International Economic & Trade
Arbitration Commission as final arbitration authority, no demurral should
hold by the parties.
4. The Agreement is made in ten copies, singed and sealed by both parties,
approved with written consent by the other shareholders of Jiangmen Gold
Crown Hardware & Lock Manufactory Co. Ltd., and takes effect after being
notarized by the notarial authority. Part A and B each has two copies, the
other shareholders who signed and approved each has one copy and the
notorial authority has one copy put on record. Each copy has equivalent
legal effect.
5. Matters not included in the Agreement shall be covered by written
supplement agreement upon discussions between the two parties, and such
supplementary agreement shall have equivalent legal effect upon being
examined, approved and recorded by the original notorial authority,.
6. Jiangmen Gold Crown Hardware & Lock Manufactory Co. Ltd. shall present its
shareholders identity as approved by shareholders certificate to be valid
identity certificate of the parties in respect of the Agreement, which
shall constitute a necessary appendix to the Agreement.
Signature (Seal) by other shareholders:
Party A:Honking International Limited Party B:Labor Union Staff Shareholding
Committee of Jiangmen Gold
Crown Hardware & Lock
Manufactory Co. Ltd.
Representative: Chow Shue Tong, Stephen Representative: Huang Qiaoliang
Position : Chairman of the Board Position : Chairman of the Board
For and on behalf of
Honking International Limited
Sign: (Seal) Sign: (Seal)
Authorized Signature(s)
2000 / 9 / 18
